Regulators Respond to Senator’s Herbalife Queries

Both the U.S. Securities and Exchange Commission and the Federal Trade Commission have responded to Sen. Edward Markey’s letters concerning global nutrition company Herbalife. The Massachusetts Democrat questioned Herbalife’s business practices and requested further investigation in the wake of investor Bill Ackman’s ongoing campaign against the company.

FTC Chairwoman Edith Ramirez communicated in her letter of response that Markey’s concerns are being “carefully considered” at this time; however, rules prohibit the disclosure of any particular actions. The letter outlines the commission’s history of protecting consumers from deceptive practices, as well as the factors considered in each case. Those factors include the type of violation alleged, the likelihood of future prevention and redress, and the number of consumers affected.

Markey’s January request received a similar response from SEC Chairman Mary Jo White, who stated that the agency is giving “every consideration” to the senator’s concerns. The chairman could not comment on Herbalife, but noted that in the case of MLM companies or pyramid schemes “each investigation depends on its particular facts and circumstances.”

As veteran MLM attorney Kevin Thompson writes in his recent New Perspectives feature, the FTC’s past evaluation of particular facts and circumstances has gone beyond raw sales data, such as Markey requests, to the more complex question of buyer motivation.

Read the full responses from the FTC and SEC.

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Direct Selling News Magazine has been serving direct selling and network marketing executives since 2004. Each issue of Direct Selling News offers content on topics that shape the dynamics of our industry.

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