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article imageU.S. regulators probe allegations of 'pyramid scheme' at Herbalife

By Kev Hedges     Mar 12, 2014 in Business
The Federal Trade Commission in the United States is to look into allegations that Herbalife, the nutrition and weight loss firm, is operating some form of "pyramid scheme."
The allegations, which Herbalife strenuously deny, are that the U.S. firm is making money from new distributors, rather than from sales. The allegations stem from billionaire investor William Ackman, who has long demanded regulators probe deeper into Herbalife's distribution ethic, which he calls a "pyramid scheme," where a company makes most of its money by recruiting new distributors rather than selling products to real customers.
Herbalife denied the allegations and said it would cooperate fully with the FTC enquiry. However, on the news of the probe the share price dropped by 15 percent but did recover to an 8.5 percent drop by late afternoon.
A company statement reported in the Los Angeles Times stated that the nutrition giant "welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC. We are confident that Herbalife is in compliance with all applicable laws and regulations.”
More about Federal trade commission, pyramid schemes, FTC, Nutrition, Weight loss
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