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FTC Launches Civil Probe Into Herbalife


Federal regulators said yesterday that they have started investigating the nutritional supplement company Herbalife. The company has been under attack by billionaire hedge fund manager William Ackman, who's been pressing regulators to look into the way Herbalife operates.

NPR's Jim Zarroli has more.

JIM ZARROLI, BYLINE: The Federal Trade Commission confirmed that it has launched a preliminary investigation of Herbalife. If the commission finds that the company did anything deceptive, it could lead to civil charges. Herbalife is a multilevel marketing company, like Avon or Amway. It has more than 3 million distributors who buy its products and sell them, usually to people they know. Lately, regulators and legislators have been looking into charges that Herbalife operates as a kind of pyramid scheme.

David Balto is a former policy director at the commission.

DAVID BALTO: The FTC, you know, cares a lot about what Congress thinks about what's going on in the marketplace. And if the - you know, congressmen express a lot of concern on a matter, oftentimes that will lead the FTC to open an investigation.

ZARROLI: Much of the attention being focused on Herbalife is because of Ackman. The billionaire investor has shorted the company's stock, which means he's betting that it will go down. And he stands to earn many millions of dollars if the stock falls enough. Ackman has enlisted civil rights groups and politicians to launch an extraordinary public campaign against Herbalife.

The company said yesterday that it welcomed the FTC's investigation as an opportunity to combat some of the misinformation spread by Ackman. And it promised to cooperate with investigators.

Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.