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TheStreet Open House

Herbalife Not A Pyramid Scheme: Belgian Appeal Court

Stock quotes in this article: HLF

The debate about whether Bill Ackman is right about Herbalife Ltd. (HLF) continues today. Now an appeals court in Belgium has weighed in, ruling that the nutritional supplements company is not a pyramid scheme at all.

Herbalife operates within Belgium law

Herbalife Ltd. (HLF) issued a press release today announcing the judgment from the appeals court in Belgium. The court said that the company fully complies with the law in Belgium. This is a turnaround from the previous ruling in a Belgian lower court. Test-Aankoop, a consumer organization in Belgium, had brought claims against Herbalife saying that it was a pyramid scheme, and the lower court ruled in favor of the organization.

Officials at Herbalife provided the following statement after the decision was handed down:

“Herbalife always believed that the first judgment contained factual errors and was based on misinterpretations of its direct-selling sales method, and was confident that the original judgment would be overturned on appeal.”

Herbalife’s problems in Belgium date back years

A commercial business court in Belgium ruled Herbalife Ltd. (HLF) to be a pyramid scheme y ears ago. The nutritional supplements company has been especially battling accusations that it is a pyramid scheme since activist investor Bill Ackman announced that he was shorting the company and called it such.

After today’s ruling in Belgium, shares of Herbalife rose more than 4%. The stock has been on a roller coaster ride for much of the year, but Ackman has lost millions on his short bet against the company. Meanwhile other investors who took long positions have been raking in the profits. U.S. regulators have kept quiet on the subject in spite of numerous calls from lawmakers and organizations to investigate the company as a possible pyramid scheme.

Herbalife denied reports earlier this year that the Federal Trade Commission was investigating it as a possible pyramid scheme.

-By Michelle Jones

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