Nu Skin International distributors in Michigan will probably place more emphasis on product sales as a result of an investigation by that state's attorney general's office.
Representatives of the Provo-based manufacturer and distributor of personal-care products met with Michigan officials last week.The meeting was arranged after Michigan Attorney General Frank Kelley last month issued a notice of intent to file suit against the company, accusing it of operating a pyramid scheme. Kelley also accused Nu Skin of selling business opportunities in Michigan without being properly registered with the state.
At the meeting, Michigan officials requested Nu Skin draw up a proposal outlining possible changes it could make in its operation, said Chris DeWitt, spokesman for the Michigan attorney general's office. A follow-up meeting will occur in May.
"We need to stress retailing a little more," said Jason Chaffetz, a Nu Skin spokesman. He said literature the company puts out might have to be changed to reflect the new emphasis.
Nu Skin is described as a multilevel, or network, marketing company. It has thousands of independent dealers nationwide.
"There's no real emphasis on outside sales of the product," DeWitt said.
Michigan distributors are accused of pushing new dealers to buy $100 worth of products each month. This in turn allows them to sign up other distributors. Money is earned by getting a certain number of people to become dealers, rather than from product sales, according to a statement released by Kelley last month. Such practices are defined as a pyramid scheme in Michigan and violate state law, Kelley said.
The company has no minimum purchase requirement, Chaffetz said.
Chaffetz said Michigan distributors are selling products to earn money. "We know they are. It's a matter of showing the Michigan attorney general that," he said.
DeWitt said the initial meeting was an opportunity for both sides to express their viewpoints.
"We don't anticipate filing suit at this point," he said. "I don't want rule out the possibility of resolving the problems at this point."
Nu Skin doesn't consider the accusations a "hurdle we can't get over," Chaffetz said. He said the company anticipates the same thing happening in other states as Nu Skin grows.
DeWitt said several states, which he would not name, are currently scrutinizing Nu Skin. Chaffetz said Nu Skin has resolved in numerous states issues similar to those raised by Michigan officials.
"We haven't been in business seven years now by breaking all the rules," Chaffetz said.