The Federal Trade Commission confirmed Monday that it has reached a $1.2 million settlement with Nu Skin International.
The FTC charged that the multilevel marketing firm and three of its leading distributors misrepresented potential earnings and made unsubstantiated claims about three products.Nu Skin announced last Friday it had reached an agreement with the FTC. The federal agency investigated the company for the past three years. Nu Skin admits no wrongdoing as part of the settlement.
"We are very pleased although not surprised that the business practices of Nu Skin held up under great scrutiny," said Michael D. Smith, the company's general counsel.
In addition to naming Nu Skin, the federal complaint singles out Clara McDermott, Craig Tillotson and Craig Bryson, three of firm's highest-earning distributors. The company markets personal-, hair- and skin-care products through a worldwide independent sales force.
The FTC alleged that distributors made deceptive earnings claims to prospective sales people through ads and promotional material. The literature, for example, state that distributors "will earn in excess of $60,00 to $80,000 their first year without jeopardizing their present income" and that "a lot of other people are earning $14,000 a month . . . $168,000 a year," according to the complaint.
The complaint also said it was deceptive for distributors to fail to disclose that only a very small percentage of Nu Skin distributors have earned more than a small monthly income - a material factor in consumers' decision to join the sales network.
The FTC said that distributors falsely promoted three products:
- Nutriol as a product that can prevent, cure or reduce hair loss and is as effective as the prescription drug Minoxidil.
- Face Lift as a nonsurgical face lift that will remove facial wrinkles and is as effective as Retin-A.
- Celltrex as a product that will promote the healing for third-degree burns, which otherwise would require skin grafting.
The agreement requires Nu Skin to have evidence to back up claims about performance, benefits, efficacy or safety of its products.
Nu Skin now reviews and pre-approves all distributor-produced promotional material and sales aids.
Copies of the FTC complaint and proposed agreement are available for 60 days for public comment at the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Ave., N.W., Washington DC 20580. The FTC telephone number is 202-326-2502.