FTC Launches Civil Probe Into Herbalife

The nutrition supplement company has been under attack by billionaire investor William Ackman, who's been pressing regulators to look into the way Herbalife operates.

Copyright © 2014 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

DAVID GREENE, HOST:

Federal regulators said yesterday that they have started investigating the nutritional supplement company Herbalife. The company has been under attack by billionaire hedge fund manager William Ackman, who's been pressing regulators to look into the way Herbalife operates.

NPR's Jim Zarroli has more.

JIM ZARROLI, BYLINE: The Federal Trade Commission confirmed that it has launched a preliminary investigation of Herbalife. If the commission finds that the company did anything deceptive, it could lead to civil charges. Herbalife is a multilevel marketing company, like Avon or Amway. It has more than 3 million distributors who buy its products and sell them, usually to people they know. Lately, regulators and legislators have been looking into charges that Herbalife operates as a kind of pyramid scheme.

David Balto is a former policy director at the commission.

DAVID BALTO: The FTC, you know, cares a lot about what Congress thinks about what's going on in the marketplace. And if the - you know, congressmen express a lot of concern on a matter, oftentimes that will lead the FTC to open an investigation.

ZARROLI: Much of the attention being focused on Herbalife is because of Ackman. The billionaire investor has shorted the company's stock, which means he's betting that it will go down. And he stands to earn many millions of dollars if the stock falls enough. Ackman has enlisted civil rights groups and politicians to launch an extraordinary public campaign against Herbalife.

The company said yesterday that it welcomed the FTC's investigation as an opportunity to combat some of the misinformation spread by Ackman. And it promised to cooperate with investigators.

Jim Zarroli, NPR News.

Copyright © 2014 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.