Herbalife has agreed to make some major changes to avoid being classified as a pyramid scheme.
The company’s settlement with the Federal Trade Commission includes a $200 million payment for certain consumers.
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Herbalife avoids being labeled a pyramid scheme
The FTC accused Herbalife of focusing on bringing new recruits into the company who were deceived into thinking they could earn a substantial income selling diet and nutritional products.
But the FTC said many recruits made little or nothing and some actually lost money.
Now, the company has agreed to restructure its business so it puts a greater focus on retail sales, but it will still be a direct-selling business.
Activist investor William Ackman led the charge against Herbalife and bet $1 billion of his venture capital firm’s money against the company’s stock, predicting the price would fall dramatically.
But after news of the settlement broke, shares of Herbalife were up as much as 19% at one point Friday morning.
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