Amid Vietnam gloom, Nu Skin promises riches

By CHRIS BRUMMITT

Associated Press

Published: Sunday, Nov. 25 2012 10:40 p.m. MST

"Almost everyone is being sold to a ticket on a flight that has already left," said Jon Taylor, a former distributor and well-known critic of Nu Skin and other MLM companies. "It is only an opportunity for the first ones in and the ones at the top of the pyramid. If you come in late, there is no chance to get anywhere."

Around 100 students crammed into Tran's sales pitch in a room at the company's headquarters in Ho Chi Minh City. The economics students, from a prestigious university in the city, had been invited by their teacher who was friends with a relative of Tran.

Comparing Nu Skin's success to that of Facebook and the iPhone, his pace never dropped in the one- hour presentation. "Who wants to be financially free, "he asked. "I'm going to share with you something that will change your life."

After the meeting ended around 10 students approached one of his assistants for more information. Others were more skeptical. "He transmitted his enthusiasm to me," said Tran Ngoc Kim Hoang. "Do I believe him? It's 50-50."

His presentation to the students focused mostly on the financial rewards they could achieve with Nu Skin and the brilliance of the product, but he said earlier in an interview that "I tell people the whole story, which is that it's not going to be easy."

Tran, who was coy about his age but appeared to be in his late 20s or early 30s, was perhaps surprisingly honest about the bad reputation the MLM has in some quarters: "Everywhere in the world, it has a negative stigma." Asked why, he said because "so many who participate fail."

In the 1990s, Nu Skin reached settlements with five states in the United States that had accused it of deceptive marketing and overstating the income earned by distributors. In 1994, the Federal Trade Commission investigated some of the claims it was making for the efficacy of a hair loss prevention potion, an anti-wrinkle cream and a product for treating minor burns. The company paid $1 million. In 1997, the FTC fined it $1. 5 million for making unsubstantiated claims about fat-loss products.

Those decisions hit the company's reputation and its bottom line, and it began aggressively exploring markets abroad. Along with other firms like Amway and Avon, they found success in Asia where strong family, work, religious and community ties mean that network marketing was a natural fit.

Multilevel marketing businesses have a strained history in China and Vietnam, whose Communist rulers have been wary of pyramid-based sales schemes that have been characterized by some as preying on the dreams of poor citizens. They also fear that unrest as a result of associated scams from the schemes could challenge their legitimacy.

After heavy lobbying from the companies, China opened its doors to U.S. direct-sales companies in 2006. Now, China accounts for much of Nu Skin's growth, but the company has had to modify its business practices to skirt laws there that still prohibit multi-level marketing.

The company's once soaring share price has come under pressure this year after reports by short selling stock analysts suggesting its business could be at risk in China because it is carrying out multi-level marketing there in secret. It has also faced fresh scrutiny over the pseudo-scientific claims underpinning its latest products. In a disclosure to the New York Stock Exchange this year, it revealed that it was also facing increased complaints and scrutiny in Japan over its marketing practices but gave no more details.

The company said the claims it makes for its products comply with applicable laws and that it is abiding with regulations in China.

Nu Skin's Vietnam marketing manager Henry Nguyen said the company was committed to ensuring its distributors aren't making false claims about potential earnings and that it had a comprehensive training program in place.

"Before a lot of people lost money and the social order was very messy," as result of bad MLM companies, "he said. "We are educating our people."

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