A US$540,000 fine for illegal direct selling and unsubstantiated product claims for Nu Skin Enterprises came as a relief, since the company could have faced a higher penalty. But it serves as a warning for all direct selling in China, says market analyst Ben Cavender to Bloomberg.
The penalty is a signal to all direct-selling companies operating in China that they need to ensure their staff are well trained and checks are in place to prevent unlawful behavior, said Cavender at China Market Research Group.
“Direct selling is one of those segments that has always been under a watchful eye by the government,” said Shanghai-based Cavender. “They don’t want these companies abusing their position in the market.”…
Nu Skin shares were indicated higher in German trading amid relief that the company wasn’t fined more or banned from selling in China. The stock plunged 38 percent in January after the Chinese government announced the investigation.
“They’ve been waiting for several months to figure out what the government was going to do and during that time it really affected their stock price because people were worried that the fines would be huge or they would be stopped from selling in China,” said Ben Cavender, an analyst with China Market Research Group. “But I think given the company’s financials, this is not a lot of money.”
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