SHANGHAI, March 24 China has fined NU Skin
Enterprises Inc more than $500,000 for illegal product
sales and misleading local consumers, the country's watchdog
said in a statement on Monday, adding it would strengthen
regulation of the country's direct sales market.
NU Skin sold items outside the permitted range and
overstated the potential results from using some of its
products, China's State Administration for Industry & Commerce
(SAIC) said in a statement on its website, adding some employees
had also engaged in unsanctioned sales and misled consumers.
Direct sales firms have come under fire in China, with the
official People's Daily newspaper saying in January NU Skin had
organised "brainwashing" gatherings, prompting SAIC to launch a
probe. This dragged down NU Skin's shares, as well as rivals
Herbalife Ltd and USANA Health Science Inc.
NU Skin has been fined $540,000, while six sales staff will
also face individual fines totalling $241,000, the U.S. firm
said in a written statement. The company has previously said it
has taken steps to resolve the matter and said last week it
expected to face a fine in China.
"The company is already taking steps to correct the issues
raised in the SAIC reviews, and is not aware of any other
material enforcement investigations currently pending in China,"
NU Skin said in the statement.
The company added it would seek direction from the
government about restarting normal business activities in China.
It previously suspended promotional meetings and accepting
applications from prospective new sales representatives.
SAIC will also look to increase regulation of the direct
sales sector, an area analysts said was a regulatory grey area
in China. This could pose a headache for rivals such as
Herbalife, currently under investigation in the United States.
"For the next step, SAIC will work with other departments to
increase the level of regulation of the direct sales market and
sternly investigate and prosecute any illegal behaviour in the
direct sales sector," the SAIC statement said.
Chinese laws allow direct sales under limited conditions,
but there are laws banning so-called pyramid selling, when
members make more money recruiting new members than selling the
(Reporting by Adam Jourdan; Editing by Kazunori Takada and Matt