Hispanic Federation Asks FTC to Investigate Herbalife
The Hispanic Federation is requesting the Federal Trade Commission (FTC) that the regulator investigate Herbalife, a multi-level marketing firm that sells nutrition products, claiming its marketing materials promise "richness for a few hours of work from home."
"You can imagine for immigrants, particularly those who are underemployed or have no papers, this promise can seem like their ticket to achieving the American Dream," José Calderón, president of the Hispanic Federation, wrote in a letter dated May 17, 2013 and addressed to FTC Chairwoman Edith Ramirez.
The letter, which was first published by Business Insider, continues: "A particular concern to us about Herbalife is whether distributors make money selling products or recruiting others to sell products. The latter is an indicator of a pyramid scheme."
In a statement sent to Portada, Los Angeles-based Herbalife said: "We regret that the Hispanic Federation has permitted itself to be the mechanism by which [hedge fund] Pershing Square continues its attack on Herbalife. No one from the Federation contacted Herbalife to ask questions about our business or express any concerns and the statements in the letter cause harm to our consumers and investors, and indeed all consumers and investors. Herbalife does not pay to recruit. All compensation paid to Herbalife distributors is related to the sale of product to consumers. Herbalife maintains close ties to the Hispanic community and values its relationship with Hispanic distributors."
Pershing Square is a hedge fund founded by Bill Ackman, who has reportedly been short selling Herbalife stock.
Los Angeles-based Herbalife last month reported 1Q net sales of $1.1 billion, a 17% increase from the same period the year before. In announcing the results on April 29th, Michael O. Johnson, Herbalife's chairman and CEO, said: "We continue to deliver record results in sales and profitability as our independent distributors successfully execute numerous growth strategies that enable deeper market penetration, developing customers using our weight management and targeted nutrition products every day."
Calls to the Hispanic Federation Wednesday morning were not immediately returned.