A U.S. federal judge has ruled that Estée Lauder must face a shareholder lawsuit alleging the company misled investors by downplaying its reliance on China’s gray market, or “daigou,” and concealing the impact of Beijing’s crackdown on this resale channel. The court found that Estée Lauder’s financial communications contained misleading omissions and half-truths, especially regarding the regulatory shift in early 2022. Shareholders claim the company only disclosed the crackdown’s effects on November 1, 2023, triggering a 19% stock drop and a $8.7 billion market value loss. Former CEO Fabrizio Freda and CFO Tracey Travis are named in the case, which covers investors between February 2022 and October 2023. Estée Lauder’s stock has since lost nearly half its value.