lawsuit

States Sue 5-Hour Energy Over Advertising: Lessons for Industry

<p>Recent legal action against 5-Hour Energy offers important lessons regarding the types of claims that can attract the interest of not only the states, but also the FTC and consumer class action attorneys.</p>

If you have ever been near a cash register, chances are you have seen that small, ubiquitous red bottle called “5-Hour Energy." You probably have even tried it; about 9 million bottles are sold every day. The company’s attorneys better have a lot of it on hand just to keep up with legal challenges—they have certainly been busy over the last several years, and the legal work shows no signs of crashing.

Under general advertising law principles, safety and efficacy claims for functional foods and dietary supplements cannot be false or misleading, and must be supported by adequate scientific substantiation. While most companies are aware of the regulation of their claims by the FDA and FTC, each state (and the District of Columbia), through its attorney general or department of consumer affairs, enforces unfair trade practice laws under its so-called “Little FTC Act." This enables an attorney general (AG) or other state official to investigate allegations of deceptive or unfair practices, initiate lawsuits or other state proceedings, and enter into settlements, consent decrees or assurances of voluntary compliance.

In 2012, 33 states began investigations into 5-Hour Energy’s marketing practices. It appears that the company generally cooperated with the investigations, including, according to the company’s statements to the press, providing more than 60,000 pages of documents spanning six years, and 1,900 pages in response to follow-up questions. However, there was one piece of information  the company refused to provide: the secret formula. According to the product label, it contains B vitamins and a proprietary “energy blend" of caffeine, taurine and other ingredients. Under FDA regulations, dietary supplement labels are not required to declare the amounts of each ingredient in a proprietary blend. Only the total amount of the blend (per serving) must be declared, and the individual ingredients in the blend are simply required to be identified in descending order of prevalence within the blend. This means 5-Hour Energy is labeled accordingly.  

According to press reports, the company refused to provide the state AGs with the amounts of each ingredient in the blend, arguing that it is trade secret, proprietary information, and that once released, there could be no guarantee that the information would not eventually fall into the hands of competitors.

After much legal wrangling, it appears that at least three states had enough. In July 2014, the AGs of Oregon, Washington and Vermont sued the companies behind 5-Hour Energy, alleging the advertising for the product violated their states’ consumer protection laws.

Without discussing the merits of the AGs’ charges, these lawsuits offer important lessons in the types of claims that can attract the interest of not only the states, but also FTC, the National Advertising Division (NAD) of the Council of Better Business Bureaus , and consumer class action attorneys.

The Effects of Ingredients Other Than Caffeine

The AGs allege that through various advertising claims, the company misled consumers to believe ingredients in the product other than caffeine, including the vitamins and amino acids, increase energy, alertness and focus (and because of those ingredients, the product is superior to coffee). The AGs argue there is no evidence that the other ingredients, in the amounts provided in the product, have those effects.

LESSON: Even if a company has adequate substantiation that a finished product has a claimed benefit, a claim that a particular ingredient in the product has a particular benefit and a claim about how a product works to achieve that benefit (mechanism of action), are separate claims that each require substantiation.

Safe for Adolescents

The AGs allege that because the label of the product warns: “Do not take if you are pregnant or nursing, or under 12 years of age," the company is deceptively implying that the product is safe for adolescents. The AGs maintain that there is not adequate evidence to support that claim, and they point to statements from the medical community that express concern about the use of energy drinks by children.

LESSON: Even statements that appear in a product’s directions or warnings can be considered to be claims requiring substantiation.

Doctor Survey Claims

In 2012, the company ran an advertising campaign titled “Ask Your Doctor," which puported to show the results of a survey of doctors. The AGs allege that the company misled consumers regarding the number of doctors in the survey and the results of the survey. They also allegethat the survey was not methodologically sound. In particular, the AGs allege that the campaign implied a certain number of doctors recommended 5-Hour Energy, when they actually recommended using a generic low-calorie energy supplement for patients who were already using a supplement.

LESSON: “Doctor recommended" and other survey-based claims are often the subject of enforcement actions, and marketers must not only be sure that the survey is methodologically sound, but also that they do not, expressly or by implication, misrepresent the results.

“No Crash" Claims

The AGs allege that the company has misleadingly claimed its product causes “no crash." That claim has been the subject of legal proceedings for years, including a 2007 review by the NAD, and the subject of consumer class actions. The AGs noted the NAD found that the claim was not substantiated and was, in fact, contradicted by the company’s own study. The product now states “no sugar crash."

LESSON: NAD proceedings must be taken very seriously, and a decision not to follow changes recommended by the NAD must be carefully considered.

According to Reuters, a representative for 5-Hour Energy called the Oregon case “civil intimidation" and said the company would fight to defend itself. So drink up, 5-Hour Energy attorneys. You’re going to need it.

For more information on the laws that regulate the supplement and functional foods market, visit INSIDER’s Regulatory Content Library.

Ivan Wasserman is a partner at the law firm of Manatt, Phelps & Phillips LLP in Washington, D.C., and is one of the nation’s premier attorneys focusing on the marketing of health and wellness products, including dietary supplements, foods, OTC drugs and cosmetics. 

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