Shares of Herbalife Ltd. rose on Tuesday after an appeals court in Belgium handed the Los Angeles supplements company a victory in its battle against charges it runs an unlawful pyramid scheme.
Herbalife sells its weight loss shakes, sports supplements and other products through a multilevel marketing distributor system that has often come under fire. The company markets its products in more than 90 countries.
A Belgian consumer group called Test-Aankoop sued Herbalife, accusing it of operating a pyramid scheme that defrauded distributors further down the distribution chain. After a lower court ruled in Test-Aankoop’s favor, the company appealed, arguing that the judgment contained factual errors and was based on misinterpretations of its direct-selling sales method.
The company was pleased by the victory.
“Herbalife continues to focus on supporting its independent distributors and their customers in Belgium, and the company remains committed to an open and transparent relationship with those distributors and customers, as well as regulatory authorities and all other stakeholders,” the company said in a statement.
The Belgian court ruling comes nearly a year after Wall Street hedge fund manager Bill Ackman accused Herbalife of operating a pyramid scheme and said he had been shorting shares. That triggered a decline in the company’s stock. Other fund managers have championed the stock however, leading to a rebound.
Shares closed up $4.89, or 6.7 percent, to $76.65 on the New York Stock Exchange.