FTC Now Helping Herbalife Recover From $200M FTC Fine

The Passion of Bill Ackman continues.
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Thanks, Bill! By Glunahfl (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Thanks, Bill! By Glunahfl (Own work) [CC BY-SA 4.0], via Wikimedia Commons

To say that Bill Ackman’s four-year crusade against Herbalife has been frustrating would be rather to understate things.

Set aside the hundreds of millions in losses, the fact that his damning presentations send share prices up as often as down, the host of adjacentscandals that have failed to dent the diet-shake purveyor, the use of Herbalife as a proxy for his many, many enemies to take shots at him. Forget even the Federal Trade Commission’s finding that HLF was a pyramid scheme in all but name and had to fork over $200 million to its hundreds of thousands of victims.

If ever there were a sign that this was just not meant to be, here it is:

Many of the people receiving money from the FTC don't appear to be victims at all. In fact, of those who received the checks, the largest of which are more than $9,000, many are actually happy customers who still use the meal supplements…. What's more, some check recipients say they plan to "flip" their settlement payout, i.e. use the money to buy more products from Herbalife.

That’s right: Rather than let President Trump’s adviser-at-large, who also happens to be HLF’s largest investor as you may have heard, decide to spend that $200 million installing Herbalife shake machines in every federal office building, the FTC decided it needed a quick-and-dirty way to get rid of the money before inauguration day. It’s formula: $1,000 spent as a distributer + roughly $0 in commissions = VICTIM! The only problem is that a lot of those “victims” weren’t victims in the traditional sense: They were just trying to get a break on their diet shares. Which they love, BTW.

Part of the FTC agreement mandates that Herbalife distributors who were just in it for the discount, now convert to a status called "preferred member." So far, more than 200,000 of the total 500,000 Herbalife distributors in the U.S. have switched over to preferred members, according to the company. Given that the FTC mailed almost 350,000 checks, it's conceivable that many of those 200,000 discount buyers received them.

Of course, Ackman doesn’t have much to complain about there, since he doesn’t believe those 200,000 people actually exist. Still, lots of them are getting checks, and then sending them right back to Herbalife. Which is helping turn it from an alleged pyramid scheme into one very happy round-tripping scheme. Hell, it’s a new recruitment tool.

The company has been running promotions allowing those who let their membership with the company lapse to reactivate for free, using the settlement disbursal as an opening to re-recruit old customers and distributors. Current Herbalife distributors have taken up the mantra, encouraging those who received unexpected checks to cash them and "Buy more product!" "That's the beauty of it!!," April Gilson, a health and wellness coach in Michigan, wrote on Facebook. "Someone tried to take out Herbalife and now what they had to 'pay' out is coming back to them!!! MOST ppl are doing just that."

Ignore the intermittent muffled screams and mournful cries echoing down Seventh Avenue this afternoon.

Herbalife Paid a $200 Million Fine. Then the FTC Screwed it Up [Fortune]

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