Quick Facts
- Estée Lauder agreed to pay $210 million to settle claims it misled investors about dependence on Chinese gray market sales
- Company allegedly concealed reliance on ‘daigou’ resellers until November 2023, causing shares to plunge 19% and wiping out $8.7 billion in market value
- Settlement covers shareholders from February 2022 to October 2023 and requires federal court approval
Estée Lauder reached a $210 million settlement Thursday to resolve a shareholder lawsuit accusing the cosmetics company of concealing its overdependence on gray market sales in China.
The proposed class action settlement was filed in Manhattan federal court and requires approval from U.S. District Judge Arun Subramanian. The company denied wrongdoing in agreeing to settle.
Shareholders alleged Estée Lauder was heavily dependent on a practice called ‘daigou’ after the COVID pandemic began. Daigou involves resellers buying luxury goods at low duty-free prices and reselling them below market rates to Chinese consumers.
The lawsuit claimed the company waited too long to disclose how a January 2022 Chinese government crackdown on daigou was hurting sales. Estée Lauder allegedly concealed this information until November 1, 2023.
When the company finally revealed the impact, shares plunged 19% and wiped out about $8.7 billion in market value. The stock has lost nearly half its value since then.
Judge Subramanian rejected Estée Lauder’s bid to dismiss the case in March 2025. He faulted the company for touting reasons for its success “while leaving out the parts of the truth it found inconvenient.”
“The telling of half-truths — that’s what the securities laws don’t tolerate,” Subramanian wrote.
China represents about one-fifth of Estée Lauder’s sales. The company’s Asia Pacific business has declined for three consecutive years, with fiscal 2024 sales of $4.89 billion falling 16% below their 2021 peak.
Overall revenue dropped to $15.6 billion in fiscal 2024, down 12% from its 2022 peak. The settlement covers shareholders who owned stock between February 3, 2022, and October 31, 2023.
Three Michigan public pension funds led the shareholder lawsuit. The plaintiffs’ lawyers plan to seek up to 32% of the settlement fund, or $67.2 million, in fees.
Estée Lauder said insurance would cover some settlement costs. The defendants also include former CEO Fabrizio Freda and former CFO Tracey Travis.
The company has publicly disavowed reliance on daigou practices since 2019, when then-CEO Freda emphasized policies limiting per-customer purchases in travel retail locations.
Read more: Estée Lauder Companies Reaches $210 Million Settlement Over China Sales Practices
