Nu Skin Enterprises

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Nu Skin Enterprises
Type Public
Traded as NYSENUS
Industry Personal care, nutraceuticals
Founded 1984 (1984)
Founders Blake Roney, Steve Lund, Sandie Tillotson, Nedra Roney
Headquarters Provo, Utah, United States
Area served Worldwide
Key people Steve Lund (Chairman)
M. Truman Hunt (President, CEO, and Director)
Ritch N. Wood (Vice President and CFO)[1]
Revenue Increase US$ 2.170 billion (2012)[2]
Operating income Increase US$ 340.844 million (2012)[2]
Net income Increase US$ 221.645 million (2012)[2]
Total assets Increase US$ 1.153 billion (2012)[2]
Total equity Increase US$ 590.612 million (2012)[2]
Employees 3,733 (Dec 2012)[2]
Website www.nuskin.com

Coordinates: 40°14′00″N 111°39′37″W / 40.233437°N 111.660171°W / 40.233437; -111.660171

Headquarters in Provo, Utah

Nu Skin Enterprises is an American direct selling and multilevel marketing company which develops and sells personal care products and dietary supplements (under the Pharmanex brand).[3] Nu Skin was founded in 1984 in Provo, Utah.[4] The company originated in the U.S. and began its first international operation in Canada in 1990. One year later, the company began operations in Asia with the opening of Hong Kong.[5] In 1996 the company listed on the New York Stock Exchange. The company markets its products in 53 international markets through a network of approximately 950,000 independent distributors.[2]

In the 1990s, the Federal Trade Commission (FTC) investigated Nu Skin over complaints of its multilevel marketing practices.[6] In 1992, Nu Skin reached settlements with 5 states which had accused the company of deceptive advertising and overstating the income earned by distributors.[7] In 1994, following an investigation by the Federal Trade Commission (FTC), the company paid $1 million and signed a consent decree prohibiting it from making deceptive or unsubstantiated claims about its products.[8] In 1997, the company paid an additional $1.5 million to the FTC to settle ongoing allegations of unsubstantiated promotional claims.[9] In 2014, the Chinese government announced that it was investigating Nu Skin for allegedly operating an illegal pyramid scheme.[10]

Brands and products[edit]

Under the Nu Skin and Pharmanex brands, the company develops and sells more than 200 personal care products marketed as helping people look and feel younger.[11] In the late 1990s, Nu Skin invested in Big Planet, a multi-level marketing company selling Internet services. The New York Times noted that Big Planet appeared to recruit people "even if they have little knowledge of the technology that they are supposed to be selling." A representative of the company stated: "I believe people who have never touched a computer before can become hugely wealthy in this business."[6]

In 1996, Nu Skin acquired Pharmanex, a dietary-supplement company.[12] A portion of proceeds from some product lines is donated internally to the Nu Skin Force for Good Foundation.[13] The company owns patent on a device developed by Pharmanex called a "BioPhotonic Scanner", which is designed to measure the carotenoid level in skin. According to Women's Health Letter, the device is a "scam" since it is designed merely to help sell more supplements: Nu Skin's 2002 annual report stated: "As customers track their skin carotenoid content, we believe they will be motivated to consistently consume LifePak for longer periods of time".[14]

In 2009, Nu Skin began working with LifeGen Technologies, a genomics company based in Madison, Wisconsin,[15] Nu Skin acquired LifeGen in December, 2011. LifeGen's genetic database aided in the development of Nu Skin's products, launching the ageLOC brand.[16]

Business model and sponsorships[edit]

Nu Skin Enterprises' business model combines direct selling with multi-level marketing. Each distributor markets products directly to potential customers, and can also recruit and train customers to become distributors. Distributors are paid from the retail markup on products they are able to sell personally, as well as a performance bonus based on the sales of distributors they have recruited.[17] Nu Skin states that it pays approximately 43 percent of its product revenue in sales compensation.[18]

Since the beginning of the 1992–93 professional basketball season, Nu Skin has sponsored the Utah Jazz Dancers.[19] Nu Skin also sponsors the Brigham Young University athletic program and the America's Freedom Festival at Provo, one of the nation's largest Independence Day celebrations.[20][21][22]

Scrutiny and reception[edit]

In the early 1990s, Nu Skin was investigated by the states of Connecticut, Pennsylvania, Florida, Illinois, Ohio, and Michigan over allegations of misleading marketing practices.[7] Ultimately, in 1992 the company settled with 5 of these states, admitting no wrongdoing but agreeing to pay the states' investigative costs, refund disgruntled distributors, and revamp its promotional practices.[23][24][25][26] However, the Connecticut Attorney General did not agree to those terms and sued Nu Skin, charging the company with misleading its distributors and operating a pyramid scheme.[7][27][28] Nu Skin admitted to no wrongdoing or violation of law and paid Connecticut $85,000 for consumer-protection programs as part of a settlement.[29]

In 1997, the Attorney General of Pennsylvania sued Nu Skin, alleging that the company operated a pyramid scheme through a subsidiary, QIQ Connections. The Attorney General's office alleged that distributors paid for the right to market technology services which did not, in fact, exist. Nu Skin discontinued the QIQ subsidiary, allowing those who had paid QIQ to transition to Big Planet, another Nu Skin interest marketing Internet technology. The president of Big Planet described the pyramid-scheme allegations as a matter of "a few distributors who in their enthusiasm have been overzealous in some of their marketing activities."[6]

In 2010, Nu Skin was listed among Forbes "100 Most Trustworthy Companies".[30]

In 2012, Stanford University sent a cease and desist letter to halt the use of the name of one of its researchers in Nu Skin's advertising claims.[31] Stanford later released a statement regarding its long-standing, research-based relationship with Nu Skin explaining that the letter was sent to Nu Skin as a request by Stuart Kim, PhD, a professor at Stanford. Kim requested in the letter that his name be removed from Nu Skin's marketing materials as he is no longer involved with research funded by Nu Skin. However, the letter did not recognize the existing research relationship between Stanford and Nu Skin. Stanford apologized for any misunderstandings that may have resulted.[32]

Also in 2012, Citron Research issued a report "stating that Nu Skin's sales model on mainland China, the fastest growing market in direct-selling, amounted to an illegal multi-level marketing scheme."[31] Nu Skin dismissed the claims, calling its sales model in China kosher and stating that it had no plans to change its business model in China.[33] In January 2014, the Chinese government announced that it planned to investigate Nu Skin for allegedly operating an illegal pyramid scheme, causing the company's stock price to plunge. At least one analyst is optimistic about the outcome.[10] Following the investigation, it was announced in March 2014 that the Chinese government would fine Nu Skin for approximately $540,000 dollars due to illegal sales as well as making false product claims.[34]

In February 2014, a securities fraud class action lawsuit was filed in the United States District Court for the District of Utah against Nu Skin Enterprises, Inc. on behalf of investors who purchased or otherwise acquired the common stock of the Company during the period from July 10, 2013 through January 16, 2014.[35]

Evaluation of supplements[edit]

The Pharmanex LifePak Anti-Aging supplement was tested by ConsumerLab.com, and was reported as failing the overall review due to failing to clearly indicate its total Vitamin A content per FDA requirements.[36]

Political activities[edit]

In 2011, two Utah-incorporated business entities linked to top executives of Nu Skin each made a $1 million contribution to Restore Our Future, a "Super PAC" established by former aides to US presidential candidate to support his bid for the White House.[37][38]

References[edit]

  1. ^ "Nu Skin Executives". Hoover's. Retrieved December 26, 2008. 
  2. ^ a b c d e f g "Nu Skin Enterprises / United States Securities and Exchange Commission Form 10-K". February 26, 2013. Retrieved April 26, 2013. 
  3. ^ "Nu Skin Enterprises Company Description". BusinessWeek. Retrieved February 21, 2012. 
  4. ^ "2011 UV50 TOP 10 Revenue Companies". Utah Valley BusinessQ. March 10, 2011. 
  5. ^ http://www.referenceforbusiness.com/history2/21/Nu-Skin-Enterprises-Inc.html
  6. ^ a b c Davis, Ruth (May 28, 1998). "Selling Sites Like Soapflakes". The New York Times. Retrieved February 21, 2012. 
  7. ^ a b c Romboy, Dennis (January 3, 1992). "Nu Skin still has wrinkles to iron out in Connecticut". Deseret News. Retrieved February 21, 2012. 
  8. ^ "Consent Order C-3489". Federal Trade Commission. 1994-04-01. Retrieved 2010-12-25. 
  9. ^ "Nu Skin to Pay $1.5 Million Penalty to Resolve FTC Charges Over Fat-Loss Claims for Supplements". Federal Trade Commission. August 6, 1997. Retrieved December 26, 2008. 
  10. ^ a b Coleman-Lochner, Lauren; Rachel Butt (January 16, 2014). "China to Probe Nu Skin’s Operation After People’s Daily Report". Bloomberg News. 
  11. ^ "Company History" (Press release). Nu Skin Enterprises. 
  12. ^ http://sis.windhover.com/buy/abstract.php?id=199810153
  13. ^ Pugmire, Genelle (June 5–6, 1996). "Nu Skin introduces ethnobotanical products". Deseret News. 
  14. ^ "Don't fall for this scam". Women's health letter 14 (11): 5. 2008. 
  15. ^ "LifeGEN Technologies". 
  16. ^ "Nu Skin Enterprises Acquires LifeGen Technologies". PR Newswire date = December 14, 2011 (Press release). 
  17. ^ Xardel, Dominique (1993). The Direct Selling Revolution. Understanding the Growth of the Amway Corporation. Blackwell Publishing. pp. 1–4. ISBN 978-0-631-19229-9. 
  18. ^ "How do participants in the sales network earn money with Nu Skin?". Nu Skin Enterprises. May 6, 2013. Retrieved May 22, 2013. 
  19. ^ "Utah Jazz Cheerleaders". best-basketball-tips.com. 
  20. ^ Walch, Tad (August 29, 2008). "New scoreboard means no more stiff necks at BYU". Deseret News. Retrieved February 21, 2012. 
  21. ^ http://www.freedomfestival.org/get-involved/sponsors
  22. ^ America's Freedom Festival At Provo. David A. McDougal Publishing. 1989. p. 16. 
  23. ^ "Nu Skin settles complaints with 5 states". Pittsburgh Press (Associated Press). January 3, 1992. Retrieved February 21, 2012. 
  24. ^ Yeomans, Adam (January 3, 1992). "Nu Skin settles suit with state". Ocala Star-Banner. Retrieved February 21, 2012. 
  25. ^ Elmore, Charles (January 3, 1992). "Coming clean: State drops pyramid probe as Nu Skin agrees to refunds". Palm Beach Post. 
  26. ^ "Nu Skin will pay 5 states in pyramid-scheme case". Philadelphia Inquirer. January 4, 1992. 
  27. ^ "Connecticut sues Nu Skin". Boston Globe. January 3, 1992. Retrieved February 21, 2012. 
  28. ^ Waggoner, John (January 3, 1992). "Nu Skin signs up for a makeover". USA Today. Retrieved February 21, 2012. 
  29. ^ Romboy, Dennis (June 3, 1992). "Connecticut and Nu Skin Sign Pact Limiting Company's Sales Practices". Deseret News. Retrieved May 2, 2012. 
  30. ^ Coster, Helen (April 5, 2010). "The 100 Most Trustworthy Companies". Forbes. Archived from the original on July 31, 2012. Retrieved May 2, 2012. 
  31. ^ a b "Exclusive: Nu Skin told not to use researcher's name". Reuters. August 16, 2012. 
  32. ^ "School of Medicine statement regarding its relationship with Nu Skin Enterprises". Aug 17, 2012. Retrieved Oct 30, 2012. 
  33. ^ Wahba, Phil; Bases, Daniel (August 16, 2012). "Nu Skin CFO calls China model 'kosher', plans no changes". Reuters. Retrieved October 30, 2012. 
  34. ^ China Fines Nu Skin $540,000 for Illegal Sales and Claims, Business Week, March 24, 2014
  35. ^ "Saxena White P.A. Files Securities Fraud Class Action Against Nu Skin Enterprises, Inc.". Wall Street Journal. February 5, 2014. Retrieved February 5, 2014. 
  36. ^ "ConsumerLab Multivitamin and Multimineral Supplements Review - Main Review". June 15, 2011. Retrieved August 18, 2011. (subscription required)[dead link]
  37. ^ Martin, Jonathan; Kenneth Vogel (July 31, 2011). "PAC brings in $12.2 million for Mitt". Politico. Retrieved August 4, 2011. 
  38. ^ Farnam, T.W. (September 12, 2011). "Donation helps Romney get some skin in the presidential game". New York Times. Retrieved December 17, 2011. 

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