Estee Lauder faces US legal challenge over China sales practices

Jonathan Stempel - Reuters - 01/04
Estee Lauder must face a lawsuit accusing the cosmetic giant of defrauding shareholders by concealing its overdependence on improper gray-market sales in China, a federal judge in Manhattan ruled on Monday.
  • Judge finds omissions, half-truths in Estee disclosures
  • Estee said to conceal impact of gray market crackdown
  • Estee not immediately available for comment
NEW YORK, March 31 (Reuters) - Estee Lauder (EL.N), opens new tab must face a lawsuit accusing the cosmetic giant of defrauding shareholders by concealing its overdependence on improper gray-market sales in China, a federal judge in Manhattan ruled on Monday.
U.S. District Judge Arun Subramanian said shareholders identified "several misleading omissions" and "half-truths" in Estee disclosures, related to the negative sales impact from a January 2022 government crackdown on the "daigou" gray market.

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Shareholders in the proposed class action said Estee became dependent in China on "daigou," or duty-free purchases by resellers, after the COVID-19 pandemic began, especially in the Hainan province.
They said the New York-based company concealed the truth about how the crackdown was hurting sales until November 1, 2023, causing its shares to plunge 19% and wiping out about $8.7 billion of market va...
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