Nu Skin Enterprises - Scrutiny and Reception

Scrutiny and Reception

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. 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. 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. Nu Skin admitted to no wrongdoing or violation of law and paid Connecticut $85,000 for consumer-protection programs as part of a settlement.

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."

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.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. At the same time, Andrew Left's 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. The report sent the company's shares down nearly 10 percent." Nu Skin dismissed the claims calling its sales model in China kosher and had no plans to change its business model in China.