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FTC Launches Civil Investigation into Herbalife

Mar 12, 2014
Jing Chen

Herbalife, the weight management product company that has been the accused by hedge fund manager Bill Ackman of shady business, has disclosed that the U.S. Federal Trade Commission has started a civil investigation into its practices.

Bloomberg reported that the civil investigation is not an indication of wrongdoing, but a subpoena requesting information. Robert Chapman, founder of hedge fund Chapman Capital, told the news outlet that the investigation will most likely “end with Herbalife intact while paying a palatable fine and agreeing to stricter controls on its multilevel marketing structure.”

Shares in Herbalife fell by more than 2% on Tuesday after Ackman, the founder and CEO of New York-based Pershing Square Capital Management, accused it of carrying illegal operations in China. Chinese laws prohibit multilevel marketing and direct marketing.

In 2012, Ackman made a $1 billion bet against Herbalife’s shares, calling it a pyramid scheme and criticized the company for inflating the suggested retail price of its products and overstating its retail sales in public filings.

Founded in 2004, New York-based Pershing Square manages $10 billion in assets.


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