Nu Skin: US firm gets $540,000 China fine

Sign outside Nu Skin office Reports in the local media had raised questions about the firm's practices in China

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US skincare and nutrition firm Nu Skin Enterprises has been fined $540,000 (£327,500) by Chinese regulators.

It has been accused of selling products illegally and making product claims that it could not verify.

The firm said that six of its employees in China were also fined $241,000 for "unauthorized promotional activities".

However, the fine was less than what many analysts had been expecting and the firm's shares rose nearly 20% in New York on Monday.

The firm said the fine over illegal product sales was levied due to "the sale of certain products by individual direct sellers that, while permitted for sale in Nu Skin China's retail stores, were not registered for the direct selling channel".

'Correct the issues'

Start Quote

We remain committed to working cooperatively with the Chinese government to ensure the healthy, long-term growth of our business”

End Quote Dan Chard Nu Skin Enterprises

The fines come after an investigation into the firm's practices in China.

The enquiry was triggered by a report in the state-run People's Daily newspaper which claimed that Nu Skin operated a "suspected illegal pyramid scheme" in the country and brainwashed staff.

Pyramid schemes refer to businesses that make money from recruiting new distributors rather than by sales to actual customers.

The firm has denied these allegations.

On Monday, the company issued a statement saying that it was "already taking steps to correct the issues" raised by China's State Administration for Industry and Commerce, the regulator that conducted the review.

It added that it was "not aware of any other material enforcement investigations currently pending in China".

"We continue to believe in the potential of China's large and growing market," said Dan Chard, president of global sales and operations at Nu Skin.

"We remain committed to working cooperatively with the Chinese government to ensure the healthy, long-term growth of our business."

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