Jan 21 Skincare products maker Nu Skin
Enterprises Inc said it would suspend promotional
meetings in China where it recruits new distributors, days after
Chinese regulators launched investigations into its business
An internal investigation found that some distributors had
failed to adequately follow and enforce the company's policies
and regulations, Nu Skin said in a letter to its customers on
"We sincerely apologize for these unfortunate and
The company also said it would take corrective actions,
including further training of its employees in China.
Chinese regulators started investigations into Nu Skin last
week after local media accused it the company of exaggerating
its influence and creditworthiness in brochures and organizing
Nu Skin's shares lost a third of their value on Thursday,
after news of the investigation broke. Shares of Herbalife Ltd
, which has a business model similar to Nu Skin, fell 10
percent the same day.
Short sellers and critics have accused companies such as Nu
Skin and Herbalife of running illegal pyramid-type schemes,
questioning their distribution model where distributors make
money not only from their own sales, but also from those they
recruit to become distributors themselves.
Activist investor Bill Ackman accused Herbalife of running a
pyramid scheme in 2012 and took a $1 billion short position in
the company. Herbalife has vehemently denied Ackman's claim that
it's operating a pyramid scheme.
Nu Skin said on Tuesday it would continue to sell products
through its existing distributors in China. It would also extend
its product refund policy to them.
The company allows distributors to return products within 12
months of purchase for a refund after deducting 10 percent of
the cost as restocking fee, according to a regulatory filing.
Nu Skin also said its training will now aim at stopping
sales executives from inaccurately attributing endorsements to
public figures or media reports, exaggerating product claims and
improperly describing Nu Skin's business model in China.
Provo, Utah-based Nu Skin's Shares were up 1 percent at
$80.37 on the New York Stock Exchange on Tuesday.
Herbalife shares were up 2 percent at $71.63.