Herbalife under FTC scanner

Nutrition and weight-loss firm Herbalife is under the scanner of the US Federal Trade Commission (FTC), which has launched an investigation into its operations.

FTC took the action following various allegations which were levelled against the company about its shady operations.

Reports have surfaced about Herbalife operating a ‘pyramid scheme’ of making money from recruiting new distributors, rather than sales.

The company has denied these allegations and said it would "cooperate fully" with the FTC inquiry.

In a statement to the press, the company said, "Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace."

"We are confident that Herbalife is in compliance with all applicable laws and regulations."

The federal action will further exacerbate the tensions between the company and Wall Street, which have been vociferous in its disproval of the company’s business practices.

Fifteen months ago, hedge-fund manager Bill Ackman accused Herbalife of running a pyramid scheme in which salespeople make more money recruiting new sales agents than selling products.

He alleged that only those at the top of the company make money, while more than 90% of distributors earn nothing or even lose money.

The company has a business model of selling nutritional and health products through independent salespeople in more than 80 countries. Its products are not available in stores.

Ackman recently accused the company’s China business of violating direct-selling laws in the country, which is being denied by Herbalife.