People's Daily accuses Nu Skin of being pyramid scheme cult

China Times, Taiwan/January 17, 2014

By Dai Rei-fen

Direct selling company Nu Skin Enterprises is under fire in China, which contributed a whopping US$1 billion to its sales last year, following a People's Daily report which alleges that the company's local operations constitute a pyramid scheme which violates local laws.

The Communist Party mouthpiece published reports on both Jan. 15 and 16, claiming that the company adopts a multilevel market scheme — currently banned in China — and holds "brainwashing" sessions.

The term has been used in the past to describe the religious group Falun Gong, which has been banned in China since 1999.

The attacks came after Nu Skin claimed the People's Daily took four pages to write about the company, but according to the newspaper, the so-called coverage was only an advertisement.

People's Daily also noted that Nu Skin "photo-shopped" and rearranged the so-called coverage in its brochure and that the company twisted the wording used in government documents on direct selling.

In addition, the paper said the 500 yuan (US$85) that Nu Skin charges people who join the ranks of its marketers and the portion of sales it pays them with sales made by their recruits both constitute pyramid schemes banned under Chinese law.

The newspaper also cited readers who said that their family and friends have been lured by Nu Skin members' wealth and were willing to sell their homes just to join the company.

Following the reports, Ministry of Commerce spokesman Shen Danyang said that the government has noticed "American direct-selling giant Nu Skin's possible involvement in multilevel selling in China" and has launched an investigation.

In addition, the newspaper revealed that Nu Skin had been fined 4.42 million yuan (US$730,000) by local authorities in Harbin for multilevel marketing in 2007.

China's State Administration of Industry and Commerce also said it has ordered an investigation into the reported violations.

In a statement issued by Nu Skin, the company said that the People's Daily exaggerated the facts and gave an incorrect description of its operations in China, and that it was contacted by the newspaper's reporters to verify the allegations before the stories were published.

The US-based company stressed that its Chinese operations have been operating in line with local laws and regulations over the past 11 years, and has been under the government's supervision.

Nu Skin reported stellar performance in the sector in 2013, with its annual global sales estimated at US$3 billion. The company has seen sales in China grow sevenfold over a period of four years and doubled in 2013.

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