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Herbalife problem doesn’t look good for LA Galaxy, Major League Soccer

Mar 13, 2014, 4:31 PM EDT

Galaxy

Herbalife’s business model has always been a bit controversial. Late in 2012, billionaire investor Bill Ackman called their “multi-level marketing” model a pyramid scheme and proceeded to put his money where his mouth is. The Pershing Square hedge fund manager shorted the company’s stock with a $1 billion bet, contending the company was destined to go bust.

Yesterday was a big day for Ackman, with Herbalife stock closing down 7.4 percent after news the company is being investigated by the Federal Trade Commission. The term “pyramid scheme” is being thrown around.

Even if nothing comes of the investigation, this isn’t good news for Major League Soccer; or, more specifically, the LA Galaxy. The Cayman Islands-based company has been a long-time shirt sponsor of the four-time champions, with the partners’ latest 10-year, $44 million sponsorship deal only in its second year. But, as Bloomberg’s Kavitha Davidson explains, that sponsorship becomes a burden for both club and league if Herbalife’s perception goes in the tank:

This isn’t just any soccer club caught up in a potential fiscal fiasco – this is the face of the league. The Galaxy’s success has been a primary booster for the national and global MLS brand …

Herbalife is the official jersey sponsor of the Galaxy, who have several players on the list of the top-selling MLS jerseys. The partnership had only grown stronger in recent months, highlighted by the October launch of the “Be a Pro” Web series …

It would be a hard pill to swallow for both the Galaxy and MLS if these accusations ultimate prove to hold water.

That’s why the FTC’s involvement is so scary. Whereas Herbalife has always been surrounded by ifs, a federal investigation bolsters those hypotheticals.

Perhaps, as the company implies, the investigation could turn into a positive, allowing the brand to clear up any misconceptions about their model’s legality. Until then, though, both MLS and the Galaxy are stuck in the debate’s crossfire.

From Bloomberg:

“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace,” the Cayman Islands-based company said today in a statement. “We are confident that Herbalife is in compliance with all applicable laws and regulations.”

In the mean time, the league’s most recognizable franchise has a problem literally written across its chests. Should Herbalife go away, a brand as strong as the Galaxy’s would surely be able to replace it. In the interim, though, MLS and one of its marquee franchises will have to ride it out.

  1. mlsconvert88888 - Mar 13, 2014 at 4:59 PM

    “Should Herbalife go away, a brand as strong as the Galaxy’s would surely be able to replace it.”

    This pretty much sums uphow concerned I would be as the Galaxy/MLS. If Herbalife’s business model doesn turn out to be illegal, the biggest impact to the soccer fans would probably be that any jersey with the “Herbalife” branding will become a collectors item.

  2. fat2plant - Mar 13, 2014 at 5:49 PM

    Xango on Salt Lakes jersey has had the same issues plus FDA warnings about their product since 2006 and no body seems too worried about it…

  3. mdac1012 - Mar 13, 2014 at 5:57 PM

    What brand is on the front of a teams jersey is real low on the list of things a fan is concerned about.

  4. talgrath - Mar 13, 2014 at 6:55 PM

    Anyone with an ounce of sense already knew Herbalife is garbage, I doubt any MLS fans would really be upset over this.

  5. geojock - Mar 14, 2014 at 10:39 AM

    This is why i hate shorting. People can bet against a company then try and make it fail.

  6. lyleoross - Mar 14, 2014 at 10:59 AM

    Think about the brands that could go on that jersey and drive it well. Charmin, Geritol, Depends, Polydent, Pampers, Dr. Scholes, Tinactin. All of which are better brands than Herbalife.

    I think LA, and MLS will be fine…

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