China's Nu Skin probe drags down Herbalife, USANA too
Published on Jan 17, 2014 4:57 AM
BEIJING (REUTERS) - China's regulators launched probes into skincare products maker Nu Skin Enterprises Inc after local media questioned the US company's business practices, dragging down shares of several retailers that use similar distribution models.
Nu Skin shares shed a third of their market value by Thursday afternoon. Shares of nutritional supplements maker Herbalife Ltd fell 10 per cent, while those of USANA Health Sciences were down 12 per cent.
Earlier Thursday, the Xinhua news agency said the State Administration for Industry and Commerce (SAIC) ordered local authorities to investigate a report in Communist Party mouthpiece, the People's Daily, alleging Nu Skin had been exaggerating its influence and creditworthiness in brochures and organizing "brainwashing" gatherings.
Short sellers and other critics have accused companies such as Herbalife, USANA and Nu Skin of running illegal pyramid-type schemes, questioning their distribution model where distributors make money not only from their own sales, but also from those by people they recruit to become distributors themselves.
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