Estée Lauder Companies has agreed a US$210m settlement of a class action lawsuit related to claims around its sales practices in China.
A preliminary settlement was filed in the United States District Court for the Southern District of New York on 7 May, with no admission of liability or wrongdoing.
ELC said in its Q3 results published last week that it recorded an $84m loss contingency in the period, net of estimated insurance recoveries, after reaching an agreement in principle to settle the litigation.
A lawsuit filed in the US in 2023, and given the go ahead by a judge last year, claimed that the beauty giant defrauded shareholders by concealing its overdependence on grey market sales in the country.
The case concerns a crackdown by the Chinese government in 2022 on “daigou” – personal shoppers who buy luxury goods overseas and sell them for a profit in China.
Shareholders in the case claimed that ELC became dependent on daigou during the Covid-19 pandemic, in particular in the Hainan province.
They alleged that the owner of MAC Cosmetics and Jo Malone London concealed how this impacted sales until November 2023, causing shares in the company to plunge 19% and wiping $8.7bn from its market value.
ELC had sought a dismissal of the case, which named ELC’s former CEO Fabrizio Freda and former CFO Tracey Travis as defendants, saying there was no proof of fraudulent intent or legally actionable false statements that caused shareholder loss.
The settlement is subject to approval by a US judge.
ELC had no further comment beyond last week’s earnings disclosure.
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