Seems that Herbalife walked and quacked a bit too much like a pyramid scheme for the Federal Trade Commission’s liking. Per the Los Angeles Times:
Herbalife Ltd. has agreed to pay $200 million to consumers and change its business practices to settle a two-year federal investigation triggered by allegations by activist investor Bill Ackman.
The Federal Trade Commission announced the settlement Friday, saying the Los Angeles company’s compensation practices were unfair.
In a complaint filed in U.S. District Court in Los Angeles, the agency said Herbalife rewarded distributors of its weight-loss shakes and nutritional products for recruiting others to join the company and buy products instead of basing compensation on “actual retail demand for the product.”
“This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” said FTC Chairwoman Edith Ramirez.
“Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make, and it will have to compensate consumers for the losses they have suffered as a result of what we charge are unfair and deceptive practices,” she said.
Your North Carolina angle: Last year the state, Winston-Salem, and Forsyth County all gave Herbalife incentive money coming to over $3.5 million to expand its Winston-Salem manufacturing plant.
