During his conference call this morning, Bill Ackman (Trades, Portfolio) presented on Herbalife’s settlement with the Federal Trade Commission. After summarizing background information of the case, Ackman discussed the implications of the settlement based on three complaint categories.
On July 15, the FTC filed a complaint for a permanent injunction and relief against Herbalife Ltd. (NYSE:HLF), a company in which Ackman has a large short position, charging the company with several illegal business operations. The FTC categorized these complaints into three groups: unfair practices to customers, income misrepresentation and false or unsubstantiated claims from retail sales. According to the presentation, Ackman believes the company promoted an unrealistic compensation structure: Several “distributors” claimed in their testimonials that by working at Herbalife, their monthly salaries allowed them to live an extraordinary lifestyle. Continue Reading »