Hispanic consumer groups and politicians met with the Federal Trade Commission this week, expressing concerns that Herbalife operates as a pyramid scheme. They specifically charged Herbalife with targeting Hispanic communities. The FTC later described Herbalife's business practices as "disturbing."
The meeting included top FTC consumer fraud officials, among them Jessica Rich, who directs the Bureau of Consumer Protection. Activists at the discussion voiced particular alarm over Herbalife's reported 65 percent Hispanic distributor base, a majority of whom, they asserted, lose money.
Brent Wilkes, a national executive, stated the FTC officials found this statistic especially troubling. The agency told activists it was "looking into" the company. This marks the most direct negative commentary from a US regulator on Herbalife's operations to date.
A significant challenge for the FTC in regulating the multi-level marketing industry became clear during the meeting: a question of resources. An activist present told The Post that the regulator felt it might be difficult to launch a full investigation alone.
The specific reasons for this resource constraint, whether jurisdictional issues or the sheer financial scale required for an investigation and legal action against a company like Herbalife, remain unclear. But the FTC appears to take the concerns about Herbalife's business model seriously.
One possible solution discussed involved a state attorney general assisting the FTC, similar to how the Kentucky Attorney General convinced the FTC to join his case against Fortune Hi-Tech Marketing, a pyramid scheme that was eventually shut down. This collaboration model could offer a path forward for federal action regarding Herbalife's practices.