March 25, 2014
Nu Skin Reports Fines to Follow China Review
Photo above: Nu Skin’s symbol displayed outside its new global headquarters in Provo, Utah.
Shares in Nu Skin surged 18 percent on Monday following the company’s update on regulatory reviews of its China business. Following two months of uncertainty, Nu Skin’s stock price jumped in response to the relatively light action taken by China’s State Administration of Industry and Commerce (SAIC).
The SAIC fined Nu Skin China $524,000 for distributing products not registered for direct sale under the country’s tight regulations. Nu Skin was fined an additional $16,000 for product claims that authorities deemed unsubstantiated.
The company also reported that six of its salespeople were fined a total of $241,000 for alleged unauthorized promotional activities. The investigation followed criticisms of the company’s sales and marketing tactics published in a January article by the Communist Party’s People’s Daily newspaper.
At the onset of the administration’s probe, Nu Skin voluntarily suspended distributor recruitment in China and reinforced training in proper business practices. Chinese regulators have now asked that Nu Skin enhance the education and supervision of its salespeople.
China’s SAIC also announced plans to increase the level of regulation and crack down on illegal behavior in its wider direct sales market.
“The company is already taking steps to correct the issues raised in the AIC reviews, and is not aware of any other material enforcement investigations currently pending in China,” Nu Skin said in a statement. In 2013, Greater China accounted for 43 percent of Nu Skin’s total revenue.
“We continue to believe in the potential of China’s large and growing market,” said Dan Chard, President of Global Sales and Operations. “We remain committed to working cooperatively with the Chinese government to ensure the healthy, long-term growth of our business.”