The Breakdown

Explaining Southern California's economy

Herbalife investigated by the FTC (Updated)

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Herbalife said Wednesday it is being investigated by the Federal Trade Commission.

“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace,” the company said in a statement. "We are confident that Herbalife is in compliance with all applicable laws and regulations."  

Shares in the company fell by as much as 17.5 percent during the day on Wednesday. The stock closed at $60.57 a share, down about 7 percent.

The stock will continue to be depressed during the course of Herbalife’s investigation, said Kerry Fields, a professor of business law and ethics at USC’s Marshall School of Business. He said he doesn’t think Herbalife’s revenues would be impacted by the investigation because a good portion of its sales is in developing countries.

“Their revenue might not be affected, by their overall corporate image will take a hit over the next six months while the investigation proceeds in earnest,” Fields told KPCC. 

Herbalife made the announcement just a day after hedge fund manager William Ackman renewed his attacks on the company. Ackman repeatedly has bet against the company and says he believes it operates as a pyramid scheme.

Ackman's hedge fund, Pershing Square, declined to comment on the FTC's investigation.

FTC spokesman Frank Dorman confirmed to KPCC that there is an investigation, but declined further comment.

With contributions from AP

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