THE WHAT? Estée Lauder has agreed to pay US$210 million to settle a shareholder lawsuit accusing the beauty giant of misleading investors about its reliance on grey-market sales practices in China.
THE DETAILS The proposed all-cash settlement was filed in Manhattan federal court and relates to allegations that Estée Lauder concealed its dependence on “daigou” sales in China’s Hainan province during and after the Covid-19 pandemic. Daigou refers to a grey-market system in which resellers purchase luxury products duty-free and resell them at discounted prices to mainland consumers. Shareholders claimed the company failed to disclose the financial impact of a January 2022 Chinese crackdown on the practice until November 2023, when Estée Lauder’s shares fell 19%, wiping around US$8.7 billion from its market value. The company denied wrongdoing as part of the agreement and said insurance would cover part of the settlement costs.
THE WHY? The settlement highlights ongoing scrutiny around transparency in China-related sales channels and the risks global beauty companies face from reliance on grey-market distribution practices.
Source: Reuters
