Skincare products maker Nu Skin settles class action suit

(Reuters) - Nu Skin Enterprises Inc will pay $47 million to settle a lawsuit that alleged the skincare products maker operated a pyramid scheme in China and made false and misleading statements about its operations in the country.

The logo of Nu Skin is seen at its "experience centre", where customers can sample and purchase the company's products, in Beijing January 21, 2014. REUTERS/Kim Kyung-Hoon

Nu Skin’s shares rose as much as 4 percent to $31.35 in early trading on Friday.

The settlement, which will be paid by Nu Skin's insurers, is not expected to result in a net charge to the company's income statement, Nu Skin said in a filing. (

The company said the deal is subject to court approval and a final approval is expected in mid-2016.

Nu Skin and other direct-selling companies such as Herbalife Inc have come under increased scrutiny after short sellers and other critics have accused them of running illegal pyramid-type schemes.

Under such schemes, distributors often make more money by recruiting agents than from actual product sales.

Short seller Andrew Left’s Citron Research said in 2012 Nu Skin’s direct-selling business in China was actually “pyramid-selling”, which is illegal under Chinese law.

Nu Skin has denied the allegations.

The company also said on Friday a Japanese court had upheld a previous decision regarding customs assessments related to the import of several of the company’s products.

Under the customs dispute, Japan’s government had required Nu Skin to pay more than $30 million in duties.

“The company is disappointed with the court’s decision and will consider appealing,” Nu Skin said in the filing.

As a result of the decision, Nu Skin said it expects to record a non-cash charge of about $32 million, or about 36 cents per share, in the first quarter of 2016.

Reporting by Siddharth Cavale and Subrat Patnaik in Bengaluru; Editing by Saumyadeb Chakrabarty