Herbalife has been in the news consistently this year after hedge fund manager, stock trader, short seller, Bill Ackman publicly proclaimed that Herbalife was an illegal pyramid scheme.
While Ackman caused the stock to decline initially, it soared when other investors realized what a buy the company really was and caused “the mother of all short squeezes.”*
Now, a new group is claiming the same? Or perhaps, just more short sellers are trying to recover something out of their losing trade?
FTC urged to investigate multilevel marketing firms such as Herbalife
By Stuart Pfeifer
October 24, 2013, 9:36 a.m.
Dozens of people have called on the Federal Trade Commission to investigate multilevel marketing, a controversial industry that includes companies such as Herbalife Ltd., Amway, Avon and others.
In a letter delivered to the FTC’s Washington offices Thursday, the group, led by Massachusetts attorney Douglas M. Brooks, urged the agency to crack down on an industry it says preys on low-income and unemployed workers with false hopes of easy wealth.
“The MLM industry has proved incapable of regulating itself, is rife with fraudulent and deceptive earnings claims and has caused — and will continue to cause — untold financial harm and misery to the poorest and most vulnerable of the consumers whom the commission was formed to protect,” the group’s letter said.
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In addition to an investigation of the industry, the group asked the FTC to implement rules that would require multilevel marketing companies to disclose the past earnings and attrition rates of its salespeople.
The company has denied Ackman’s allegations, noting it has been in business since 1980 and its business model is legal…
The call for an FTC crackdown follows several other complaints, including some from Latino rights groups, that Herbalife victimizes its distributors by selling false hopes of easy wealth when most of them fail.
The full article can be read at the LATimes.com.
*Here’s the Herbalife stock price chart since before the middle of December, 2012, when Ackman made his play . . . judge for yourself if it was a good move.
Did you note this in the Times article, “The MLM industry has proved incapable of regulating itself, is rife with fraudulent and deceptive earnings claims and has caused — and will continue to cause — untold financial harm and misery to the poorest and most vulnerable of the consumers…”?
What do you think? Do you agree or disagree?
Does the article make any points that all networkers and MLM companies should think about?
Leave your comments below.