PORTLAND, Ore. (AP) — Herbalife Ltd. says that it is facing an inquiry from the Federal Trade Commission.
The
nutrition and supplement company’s shares initially plunged more than
12 percent following a brief halt in trading pending the announcement.
Herbalife
said that it received the civil investigative demand from the FTC on
Wednesday. The FTC’s website says that these are used to investigate
possible "unfair or deceptive acts or practices." A representative from
the FTC was not immediately available to elaborate.
The company,
which has faced accusations of operating a pyramid scheme, said that it
welcomes the inquiry given "tremendous amount of misinformation in the
marketplace" about its business.
Herbalife says it believes it is in compliance with all laws and regulations and plans to cooperate
fully.
The
company, which is incorporated in the Cayman Islands and based in Los
Angeles, uses a network of distributors to sell its nutritional
supplements and weight-loss products globally.
The FTC inquiry comes just a day after hedge fund manager William Ackman renewed his attacks on the
company.
Ackman
has bet against the company and said repeatedly that he believes it
operates as a pyramid scheme, which is when a company makes most of its
money by recruiting new salespeople rather than on the products that
they sell.
The head of Pershing Square Capital Management resumed
this effort Tuesday, holding a public event to detail his firm’s claims
of how its Herbalife is operating as a pyramid scheme in China,
violating laws there. Pershing declined to comment Wednesday on the FTC
investigation.
Herbalife has repeatedly denied the claims and
rival investor Carl Icahn has disagreed as well, taking his fight
against Ackman public and increasing his stake in the company.
Its
shares fell $3.81, or 5.8 percent, to $61.58 in midafternoon trading
after falling as low as $54.59 earlier. Its shares had fallen almost 17
percent so far this year through Tuesday’s close.
Copyright 2014 The Associated Press. All rights
reserved. This material may not be published, broadcast, rewritten or
redistributed.
