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TheStreet Open House

Amid Vietnam Gloom, US Company Promises Riches

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 US 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 is it 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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