Herbalife Says Chinese Business Model Based On Ethical Practices - Quick Facts

(RTTNews) - Herbalife Ltd. (HLF) said Tuesday it remains confident in its business in China and that it will continue to invest in this key market and collaborate with the Chinese government to deliver its nutrition supplements through lawful direct selling practices.

The statement was in response to a presentation by hedge fund manager Bill Ackman's Pershing Square, which said Herbal Life is operating in violation of Chinese law. Ackman has been a critic of Herbal Life and has all along said that the company's practises are that of a pyramid scheme.

But Herbalife shot back, saying that the presentation reflects Ackman's continued failure to fundamentally understand Herbalife's business model.

Herbalife said it has implemented a business model unique to China that is in compliance with Chinese direct-selling and anti-pyramid regulations, and includes strict rules of conduct that prohibit illegal recruitment, "pyramid" activities and conduct that is deemed illegal under Chinese laws.

Herbalife also said its Chinese operations is committed to the protection of the Chinese consumer and protecting the integrity of the direct-selling channel.

To date, Herbalife China has obtained direct-selling licenses in 25 provinces and regional municipalities, which collectively service 97 percent of the Chinese consumer population.

Currently, Herbalife China has almost 150,000 Preferred Customers, who purchase products for self-consumption, not for distribution, and there are nearly 3,000 Nutrition Clubs throughout China, the company said.