Herbalife in talks with FTC, outcome “uncertain”
Despite a report in The Wall Street Journal claiming ‘government investigations cleared the company of allegations of having a fraudulent business model‘ earlier this month, Herbalife has revealed otherwise in its latest public filing.
As announced by Herbalife, regulatory investigations into the company are still very much open.
Herbalife Ltd is in talks with government regulators regarding a probe of the company’s business practices and said that the outcome of the talks was uncertain, the company said in a filing on Thursday.
Herbalife indicated in its filing that the FTC probe could be drawing to a close. “The company is currently in discussions with the FTC regarding a potential resolution of these matters,” Herbalife said.
But Herbalife said that it could not say how the talks would end.
“Potential resolution” strongly suggests Herbalife, on some level, have something to answer for.
“The possible range of outcomes include the filing by the FTC of a contested civil complaint, further discussions leading to a settlement which could include a monetary payment and other relief or the closure of these matters without action,” the company said.
“At the present time, the company is unable to estimate a range of potential loss, if any, relating to these matters,” the filing said.
Till the FTC investigation is concluded and the outcome known, I’m trying not to read too much into Herbalife’s statement.
What I will say though is this is the first time the company hasn’t sugar-coated regulatory investigations. Usually we get some crap about how regulatory investigations are welcomed and the outcome will no doubt vilify the company, but here we’re looking at “potential losses”, relief and monetary payment (a fine).
All of those would have to do with Herbalife running a pyramid scheme, and either settling with the FTC and/or having a Vemma-style lawsuit dropped on them.
Back in 2013, the FTC claimed they found Herbalife’s business practices “disturbing“.
I think at this point it’s likely Herbalife have a sense of what they’re going to be done for. It’s the outcome they’re not certain of.
Clearly the company knows more than it provided in its filing, as evidenced by the supplied possible outcomes. The outcomes provided have to be based on violations, that would have been made known to Herbalife (or at the very least hinted at) by the FTC during the talks.
As always, we won’t get any information from the FTC until a conclusion is reached and they’re ready to make a public announcement.