Read Tony Hetherington’s case files at thisismoney.co.uk/hetherington

INTERNATIONAL nutritional supplements company Herbalife has reached a legal settlement with the watchdog Federal Trade Commission in the USA, sidestepping charges that its business is actually an unlawful pyramid scheme.

I warned in April that Herbalife had set up a recruiting stall inside a London bank. Staff thought the bank was helping a local business sell products, but in fact those manning the stall were trying to sign up bank customers as new distributors of Herbalife’s vitamin supplements and shakes. The recruiters would then earn commission, while the new distributors would be rewarded if they signed up yet more people. According to the Commission, Herbalife had recruited distributors by claiming they could quit their job and even become rich. In fact, many made losses after spending large sums on stocks of Herbalife goods.

Under a settlement agreement, the company must pay $200million to compensate customers and it will revamp its structure so distributors are rewarded for what they sell – not for recruiting yet more distributors. Commission head Edith Ramirez said: ‘It will have to start operating legitimately, making only truthful claims about how much money its members are likely to make. It will have to compensate customers for losses they have suffered as a result of what we charge are unfair and deceptive practices.’