China's State Administration for Industry and Commerce directed local authorities to investigate Nu Skin's operations following a Xinhua News report published January 15th. The directive targets allegations of false information distribution and illegal business practices by the direct selling company within China.
Criticism of Nu Skin's business in China has surfaced before. Now, government officials show increased scrutiny. The Xinhua investigation started with a reader's letter to the editor. The reader expressed concern after a family member reportedly sold their house to begin a career with Nu Skin.
The report also detailed several marketing issues. Nu Skin affiliates allegedly claimed potential recruits could "earn one million in six months." They also made false assertions about a 2007 "Government Work Report" that supposedly cited direct marketing as the "best career opportunity" for Chinese citizens.
Affiliates used claims from the "China Direct Selling Association." This organization operates out of Hong Kong and is not registered as a social organization with the Chinese government. Potential recruits were told they "need to purchase" a specific number of Nu Skin products to join. Nu Skin affiliates marketed 104 types of products, though the Ministry of Commerce approved the company for only about 20.
A Nu Skin brochure claimed the company had a Scientific Advisory Group. It cited names of "Chinese professors" who had not been associated with the company for years; at least one is now retired. False marketing claims mentioned "Science Magazine" studies from 1999 and 2009 that purportedly referenced "gene reset" technology. The company also falsely claimed advertising on "twenty-six Chinese television stations." Nu Skin used an article in the People's Daily newspaper, clearly marked "paid advertisement," as supposed government endorsement of its business model.
On January 14th, the Xinhua reporter attended a Nu Skin event on the outskirts of Beijing. Nearly 2 million people gathered from Taiyuan, Shijiazhuang, Tianjin, and other cities. Lights flashed as a thunderous sound filled the venue. The conference included recognition of elite Nu Skin affiliates, on-site interviews, and other activities. These elites took the podium, leading the audience in loud roars and chants of Nu Skin slogans. The crowd of almost 2 million people chanted to a drum beat in a fanatic atmosphere.