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Latina advocacy group asks FTC to investigate Herbalife

September 11, 2013|By Stuart Pfeifer
  • Herbalife distributor Jaime Ayala picks up some products at a distribution center in Carson earlier this year.
Herbalife distributor Jaime Ayala picks up some products at a distribution… (Mark Boster / Los Angeles…)

A national Latina advocacy group has asked the Federal Trade Commission to investigate the business practices of Los Angeles nutritional products company Herbalife Ltd.

MANA, a Washington-based group that advocates for Latinas, is the latest organization to call for an investigation of Herbalife. The company has been under fire since December, when billionaire hedge fund manager Bill Ackman said he believed the company operates a pyramid scheme that victimizes its independent sales force, many of them Latinos.

Alma Morales Riojas, MANA's president, echoed Ackman's concerns in a letter to the FTC. She said Herbalife irresponsibly promotes the opportunity to sell its products when very few of its distributors make a livable wage. She cited Herbalife data showing that more than 80% of its distributors did not receive any commissions in 2012.

"Herbalife is very popular among Latinas throughout the U.S. and throughout Latin America, and has historically won distributors over with the guarantee of an exciting business opportunity, by
making unattainable promises of wealth and success," Riojas said in her Aug. 29 letter. "Herbalife claims it is both a product company and a business opportunity, but clearly this is a deceptive claim since the majority of Herbalife distributors make little or no income."

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Herbalife, which recently hired former Los Angeles Mayor Antonio Villaraigosa as a consultant, insists that its business model is legal and similar to many other multi-level marketing companies. The company said most of its distributors sign up to receive discounts on products they personally consume, not to make a living selling its meal replacement shake mixes, vitamins, snacks, drinks and personal care products.

"It's disappointing to see this kind of letter from MANA, especially when Herbalife's North America region, its largest and oldest region in the world, is actually run by a Latina," Herbalife spokeswoman Barb Henderson said Wednesday. "Herbalife empowers our Latina employees and distributors and we look forward to an opportunity for MANA to understand who we are."

Investors have stood by Herbalife, driving its shares up more than 100% this year. Billionaire Carl Icahn has taken a highly public stance in support of the company, buying more than 15% of its shares and saying he believes that Ackman is mistaken about the business model.

Ackman has not backed down, and he's now drawing support from Latino organizations. In July, a national Latino advocacy group accused Herbalife of misleading people about the prospect of making money selling its products.

"I absolutely think they're being victimized, and I think it's a really bad idea to become a distributor," Brent Wilkes, national executive director of the League of United Latin American Citizens, said at the time.

LULAC was one of the five groups that met with the FTC in July to discuss concerns about Herbalife.

The agency has declined to say whether it's investigating the company.

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