By Jonathan Stempel
NEW YORK, May 7 (Reuters) – Estee Lauder has reached a $210 million settlement of a lawsuit accusing the cosmetic giant of defrauding shareholders by concealing its overdependence on improper gray-market sales in China.
A preliminary all-cash settlement of the proposed class action was filed on Thursday in Manhattan federal court, and requires approval by U.S. District Judge Arun Subramanian.
The case concerned a practice known as “daigou,” in which resellers buy luxury goods at low duty-free prices and resell the goods at below-market prices to consumers.
Shareholders said the company was heavily dependent on daigou, especially in the Hainan province, after the COVID pandemic began, and waited too long to reveal how a January 2022 Chinese government crackdown on the practice was hurting sales.
They said the New York-based company concealed the truth until November 1, 2023, causing its shares to plunge 19% and wiping out about $8.7 billion of market value.
Estee generates about one-fifth of its sales in mainland China.
The company denied wrongdoing in agreeing to settle, and said insurance would cover some of the settlement costs.
Estee did not immediately respond to requests for comment.
Subramanian had rejected Estee’s bid to dismiss the lawsuit in March 2025, faulting the company for touting reasons for its success “while leaving out the parts of the truth it found inconvenient.”
The shareholders are led by three Michigan public pension funds. Their lawyers plan to seek up to 32% of the settlement fund, or $67.2 million, in fees, court papers show.
(eporting by Jonathan Stempel in New York; Editing by Chris Reese and Will Dunham)
Comments