OK, endgame might be premature, this Herbalife saga has plenty of life in it yet. But after more than a year of debate, and with stirrings of interest on Capitol Hill, we want to offer some conclusions and an actual solid prediction in this, the first of three posts.
The second will look at how the multi-level marketing industry walked its legal position out onto sand, and the third will deal directly with Herbalife’s claims of legitimacy. But this one is about the Federal Trade Commission and that forecast: we think the regulator, at some point this year, will rewrite its guidance to the industry on the way it analyses pyramid schemes.
Why it will, and the significance of such a move, is going to take a bit of explaining. Read more
Up until now the FTC has been the ghost in the machine as the debate about Herbalife’s business model has raged. Often invoked and implored, the direct seller’s share price has in many ways been a referendum on any ultimate action or inaction from the regulator.
However, the debate has expanded beyond Herbalife to look at practices across the whole direct sales industry, and pressure is rising on the FTC to pick a side.
Indeed, on Thursday a significant coalition of consumer activists, economists, lawyers, entrepreneurs and former participants in mutli-level marketing programmes will submit a petition to the Federal Trade Commission calling on it to take enforcement action and set new rules for the industry. Read more
Which was your favourite Herbalife moment this year? The billionaire playground spat, an inside trading auditor, the dubious surveys and unanswered questions, George Soros, angry Latinas, the whistleblower, or the high profile departures and appointments?
Yet the fun has also obscured the underlying issues. While there have been some great pieces looking at parts of the story – the Verge on online scammers pitching the Herbalife business opportunity, or the NY Post on the departure of top Herbalife salesman, Shawn Dahl, for instance – there was little that got to the heart of accusations that Herbalife is a pyramid scheme.
We want to change that, starting with this post about why the question for Herbalife investors should be less about whether the FTC will investigate Herbalife and more about what the Federal Trade Commission has already said and done. Read more
There have been several letters this year to the FTC urging it to investigate claims that Herbalife is a dastardly pryamid scheme, from consumer groups, congress people and others. Most have leant on the arguments made by short seller Bill Ackman, but today’s from MANA, a National Latina Organisation, has some of the strongest and most specific language we have seen.
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. According to Herbalife’s own 2012 data, 88 percent of their participants received no payments from the company at all. Read more
William Baer, whose legal firm worked on AT&T’s bid for T-Mobile USA, is the White House’s prime candidate to head the Justice Department’s antitrust division, Bloomberg reports. Baer’s colleagues at Arnold & Porter counselled AT&T on its takeover plans, which were ultimately thwarted by the Justice Department. Baer’s background with the Federal Trade Commission might heal differences between the FTC and Justice on antitrust issues.
The Federal Trade Commission weighed into the intensifying debate in Washington about oil-market speculation, saying supply-and-demand forces drive gasoline prices, not speculative oil traders, the WSJ reports. The FTC didn’t investigate speculation independently, but reviewed the available research and found it inconclusive. The agency also looked at competition in the oil industry and whether it affected gasoline prices from 2005 to early 2011 in the report published on Thursday. The commission also said that gas prices rise faster than they fall, a phenomenon known as “asymmetric pricing” or “rockets and feathers,” an ABC consumer report adds.
BHP Billiton has cleared the first regulatory hurdle in its bid for Canada’s PotashCorp but any potential deal still faces regulatory obstacles, particularly in Canada, reports Reuters. The Angl0-Australian miner said on Thursday it had received antitrust clearance from the US Federal Trade Commission to proceed with its $39bn bid for PotashCorp. However, BHP stressed, the offer is still contingent on other regulatory approvals. Separately, reports Bloomberg, BHP and joint-venture partner Apache Corp said on Friday they would develop the $1.5bn Macedon natural gas project in Western Australia to meet rising fuel demand from the state’s mining industry.
Intel, the US chipmaker, is close to settling a long-running antitrust suit with the US Federal Trade Commission, bringing to a close a legal battle that has dogged the world’s largest chipmaker for more than 10 years, the FT reports. The settlement will include concessions on its business practices, but will not include fines because the FTC does not have the authority to issue civil penalties.
Intel and the US Federal Trade Commission indicated on Monday they may soon reach an out-of-court settlement of their antitrust case, filing a a joint motion to suspend administrative trial proceedings until July 22, the FT reports. If agreement is accepted, it will head off a September trial that would have likely put the spotlight on Intel’s relationships with Dell, IBM and Hewlett Packard, the WSJ adds.