Recently, Senator Markey from Massachusetts called upon the FTC to investigate Herbalife. His full letter is included below. Click here to read if you’re reading via email. It’s worth mentioning that that the letter was likely originated by someone at Pershing Square, as observed by John Hempton. Markey has useful letterhead, being a U.S. Senator and all. I digress…
These are my predictions:
- The FTC will respond. While Markey’s letter called for a response by February 28, I’m guessing they’ll respond after the deadline but by late April.
- The FTC is not going to respond specifically about Herbalife. Three points worth mentioning here: (1) The FTC lacks the data to provide any meaningful commentary about Herbalife; (2) If the FTC had a problem with Herbalife, they’re not going to announce same at the behest of a Senator; and most importantly (3) Herbalife is not a pyramid scheme. Ackman is playing another confidence game, and the market has grown immune to his tricks.
- The FTC is going to take this as an opportunity to start a broader discussion about the network marketing space. There’s an ocean of gray that separates legitimate network marketing companies from illegal pyramid schemes. As a result of this ambiguity, fraudulent programs are flying under the guise of network marketing, claiming legitimacy because they’re “just like Amway.” In my opinion, this is the underbelly of the space that the FTC needs to address, not companies like Herbalife. What will these guidelines look like in the future? That’s a different set of predictions for another time.
The video is a short one. I hope you find it informative. If you’re reading this via email, please click here to view the video.
Update: Herbalife’s CEO, Michael Johnson, personally wrote a response to Senator Markey. It’s also included below.