Herbalife Claims Victory From Court Ruling

In its statement, Herbalife claimed that the ruling also “rejects Bill Ackman’s fundamental thesis against Herbalife.” Ackman, who is the CEO of Pershing Square Capital Management, charged Herbalife with being an illegal pyramid scheme in late 2012. The FTC has begun a civil probe into Herbalife’s business practices and there have been reports of an FBI criminal investigation, but Herbalife denies any knowledge of any FBI action.

In the BurnLounge case, the court said that BurnLounge violated FTC rules against pyramid schemes because the company’s distributors had to pay for the right to sell products and that the distributors were primarily driven by payments from BurnLounge for recruiting new members.

Because the ruling did not say it is illegal for a company to pay commissions generated by goods sold to the sales force rather than to customers who are not distributors, Herbalife is claiming vindication for its practices.

Ackman has not commented on the court decision as of early Tuesday morning.

Herbalife shares were inactive in premarket trading Tuesday, having closed at $64.79 on Monday in a 52-week range of $42.09 to $83.51.

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