Herbalife Ltd (NYSE:HLF) and Nu Skin Enterprises, Inc. (NYSE:NUS) both suffered when China announced it was launching an investigation into Nu Skin. Now Bloomberg is reporting that its sources claim the country’s regulators will be tightening restrictions on direct sales companies like Herbalife and Nu Skin.
China said to draft new rules for MLMs
According to the network’s sources, the State Administration for Industry & Commerce is in the process of writing new rules which would regulate training for sales teams for direct sales companies. The agency is also said to be writing rules to monitor these companies’ marketing meetings and also tighten their application procedures for when companies like Herbalife Ltd (NYSE:HLF) and Nu Skin Enterprises, Inc. (NYSE:NUS) want to enter new areas of the nation or offer new products.
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The State Council in China stated in a notice which is dated earlier this month and was published today that the country should “severely” crack down on companies which are operating as pyramid schemes and be stricter about regulating their sales. Last month, Nu Skin Enterprises, Inc. (NYSE:NUS) said it would launch a review into the practices of its employees and sales teams in China. The company’s CEO has also said that they are “absolutely not” a pyramid scheme.
Herbalife, Nu Skin face pyramid scheme allegations
Meanwhile the allegations that Herbalife Ltd (NYSE:HLF) and Nu Skin Enterprises, Inc. (NYSE:NUS) are pyramid schemes continue from a variety of places. Bill Ackman continues to turn up the pressure on Herbalife as he tries to recover the money he lost on his massive short of the company. He said recently that he has made progress toward reaching the breakeven point on his short, but he isn’t there yet. Several organizations have also been pushing for U.S. regulators to investigate Herbalife as a possible pyramid scheme. Unlike China, which has focused most of its attention on Nu Skin, U.S. lawmakers and organizations have been hyper-focused on Herbalife.
However, U.S. regulators have shown no interest in either Herbalife Ltd (NYSE:HLF) or Nu Skin Enterprises, Inc. (NYSE:NUS).