Herbalife Drops After FTC Reveals Complaints
By Kevin Orland and James Callan - Feb 4, 2013
Herbalife Ltd. (HLF) fell after the Federal Trade Commission disclosed that the supplement maker was the subject of multiple complaints and the New York Post reported that the company was the target of law-enforcement action.
The shares dropped 7.2 percent to $32.56 at 11:03 a.m. in New York after earlier falling as much 12 percent. The Cayman Islands-based company tumbled 39 percent in the 12 months through Feb. 1.
Herbalife has been fighting allegations from hedge fund manager Bill Ackman, who said in December that the company uses inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme. In response to a Freedom of Information Law request from the New York Post, the FTC released 729 pages of complaints against the company.
The Post reported that the FTC had redacted some sections of documents it was provided, saying the agency didn’t have to provide “information obtained by the commission in a law enforcement investigation.”
Herbalife has repeatedly denied the allegations that it operates a pyramid scheme, saying it is a retail-oriented business that sells products with unique ingredients.
Barbara Henderson, a spokeswoman, didn’t immediately reply to a voicemail seeking comment today. Frank Dorman, a Federal Trade Commission spokesman, didn’t immediately respond to a request for comment.
In one complaint posted on the FTC’s website, an unidentified individual spoke of being pitched on Herbalife products after expecting to be given a job interview to be a nutrition coach, according to the documents. The person spoke with a representative and was pressured to sign up. After giving credit card information and a $59.99 payment, the individual wanted to cancel the payment and was denied a refund, according to the documents.
Sales Tactics “I was tricked into thinking I was going to be a nutrition coach, when it was really a distributor position for Herbalife products that costs $59.99 to be part of,” the individual said in the documents.
In other instances, an unidentified individual said the company used “bait and switch tactics and is refusing to issue a refund” while another said Herbalife resorted to “deceptive marketing practices.”
To contact the reporters on this story: Kevin Orland in Chicago at korland@bloomberg.net; James Callan in New York at jcallan2@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net |
