Explaining Southern California's economy

Is the federal government investigating Herbalife?

Herbalife Meeting

SUSAN GOLDMAN

A worker cleans the logo on the Herbalife sign as finishing touches are put on the company's building in Torrance, Calif. A report from the New York Post about an FTC investigation of the company is being questioned.

It initially looked as if the New York Post had broken a story this morning about the Federal Trade Commission (FTC) investigating L.A-headquartered Herbalife for possibly breaking some laws.

The basis of the NYPost story was a Freedom of Information Act (FOIA) request the paper submitted last year, after hedge fund manager Bill Ackman made a massive presentation accusing Herbalife of running a pyramid and announcing a $1 billion-plus bet against the company's stock. 

The NYPost was attempting to determine how many complaints had been submitted to the government involving so-called "multi-level marketing" companies, of which Herbalife is one. Something interesting happened when the request came back:

The FTC redacted some sections, saying it didn’t have to divulge “information obtained by the commission in a law enforcement investigation, whether through compulsory process, or voluntarily ...”

Other complaints contained a note referring to a “pending law enforcement action.” The FTC did not say whether the action was civil or criminal.

Read More...

Why are Dan Loeb and Bill Ackman fighting over the future of Herbalife?

Hedge fund manager Bill Ackerman says Herbalife is a pyramid scheme and has bet $1 billion on its fall. Hedge fund manager Dan Loeb begs to differ and has bet $350 million that the stock will rise in value.

Herbalife has a headquarters in downtown Los Angeles, is incorporated in the Cayman Islands, is run by CEO Michel Johnson, a former Disney executive, and has been in business for more than 30 years. It did $3.5 billion — yes, that's billion — in net sales in 2011, has 6,000 staff employees and three million — that's million — independent distributors worldwide.

And since late last year, it's been under assault by Bill Ackman, who runs Pershing Square Capital Management, a New York hedge fund. Just before Christmas 2012, Ackman conducted a three-hour presentation is which he worked through 343 PowerPoint slides (see it here and add to Business Insider's over three million page views for the post) and laid out the case that Herbalife is a pyramid scheme. Ackman has set a target price for the company's price of zero. 

Read More...

Google's antitrust win and the perfect monopoly on search

Google Opens New Berlin Office

Adam Berry/Getty Images

A visitor uses a cell phone in front of the Google logo. The search giant isn't operating a search monopoly, according to the Federal Trade Commission.

UPDATE: Google offers its own take at the Google blog.

The big news out of Washington on Thursday morning isn't yet another installment in the fiscal cliff melodrama — it's that Google isn't breaking antitrust laws, the Federal Trade Commission concludes.

The investigation zeroed in on the thrumming heart of Google's business, which has rewarded the California tech colossus with a whopping $239 billion market capitalization: search. This is from the New York Times:

Companies that rely on Google to drive traffic to their sites have complained that Google adjusts its search algorithm to favor its own growing number of commerce sites — including shopping, local listings and travel.

But the [FTC] faced an uphill battle in proving malicious intent — that Google changes its search algorithm to purposely harm competitors and favor itself. Antitrust lawyers say anticompetitive behavior cannot be proved simply by showing that a change in the algorithm affects other Web sites and causes sites to show up lower in results, even though studies have shown that users rarely look beyond the first page of search results.

Read More...