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Originally published Monday, February 4, 2013 at 5:30 PM

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FTC corrects Herbalife investigation statement as shares rebound

The report sent Herbalife’s shares down as much as 12 percent Monday. The shares recovered the loss to close up 1.3 percent at $35.54.

Bloomberg News

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The Federal Trade Commission on Monday corrected a statement that erroneously said Herbalife was the subject of a law-enforcement probe after a report about the nonexistent investigation sent the supplement maker’s shares down the most in a month.

The FTC, in responding to a Freedom of Information Law request from The New York Post, should have said that it withheld some information from documents posted online because it can’t disclose consumer complaints obtained from foreign sources if they request confidentiality, said Frank Dorman, an agency spokesman.

The FTC’s correspondence with the newspaper, posted on the agency’s website, originally explained the redaction by erroneously citing an exemption for information obtained in a law-enforcement investigation.

The report sent Cayman Islands-based Herbalife’s shares down as much as 12 percent Monday. The shares recovered the loss to close up 1.3 percent Monday at $35.54.

Herbalife has been fighting allegations from hedge-fund manager Bill Ackman, who said in December that the company uses inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme.

Ackman said he thought the FTC or the U.S. Securities and Exchange Commission would look into allegations he made about the company during a Dec. 20 presentation in New York.

Dorman declined to comment on whether the agency is investigating Herbalife. Any such investigation wouldn’t be public, he said.

In one complaint posted on the FTC’s website, an unidentified individual spoke of being pitched on Herbalife products after expecting to be given a job interview to be a nutrition coach, according to the documents.

The person spoke with a representative and was pressured to sign up. After giving credit-card information and a $59.99 payment, the individual wanted to cancel the payment and was denied a refund, according to the documents.

“I was tricked into thinking I was going to be a nutrition coach, when it was really a distributor position for Herbalife products that costs $59.99 to be part of,” the individual said in the documents.

In other instances, an unidentified individual said the company used “bait and switch tactics and is refusing to issue a refund” while another said Herbalife resorted to “deceptive marketing practices.”

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