Oriflame Cosmetics suspended from doing business in Iran

By Andrew McDougall

- Last updated on GMT

Related tags: Direct selling, Multi-level marketing

Oriflame Cosmetics suspended from doing business in Iran
Iranian authorities have today closed down Oriflame Cosmetics’ Tehran operations and detained three staff members and two sales consultants.

In Tehran, state radio has accused the Sweden-based company of violating tax regulations and claims the staff members were arrested over allegations of fraud, according to The Associated Press.

Allegations of illegal activity

Further claims allege Oriflame had collected $70m (€55m) through a multi level marketing scheme that is illegal in Iran.

However, Gabriel Bennet, CFO at Oriflame Cosmetics, claimed that Iranian authorities had detained staff members ‘without disclosed reasons’

“We believe, however, this has to do with our business model marketing cosmetics and giving some 40,000 women across Iran the opportunity to engage in a direct selling business,”​ Bennet told CosmeticsDesign.com USA.

Bennet explained there have been problems in the past regarding Oriflame’s business model, marketing cosmetics through direct sales, but denied accusations that its activities were illegal.

Last week, Oriflame had its local website blocked and was branded ‘illegal’ by Iran’s commerce and culture ministry.

Legal action taken

In an interview with CosmeticsDesign.com USA, Bennet explained that Oriflame has law expertise in Tehran and also authorities in Sweden attempting to resolve the case.

“At this stage our focus is to assist our co-workers and sales consultants”​ Bennet stressed.

Despite the furor, which Bennet has described as ‘an exceptionally dramatic development’, Oriflame will seek to continue operating in Iran should it be possible, indicating it is a market with great potential.

Potential in emrging markets

A permanent closure of the Tehran operation may lead to costs of $12.7m, as Iran represents 20 percent of sales in the Asia region.

Oriflame told CosmeticsDesign.com USA that emerging markets will remain a focus area for it as it is a key element of their business model.

Having seen sales boosted in developing markets in Asia and Latin America in Q2, shares in Oriflame fell by 4 percent in early Stockholm trading.

Related topics: All Asia-Pacific, Market Trends

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