Similar to a gazelle roaming the African plains, a dietary supplement company must be aware of various threats that lurk in the distance. To succeed in this highly competitive industry, dietary supplement companies often seek the newest ingredients and innovative delivery methods. They also rely on advertising the benefits of their products to gain new customers and a greater share of the market. Most companies understand they must comply with federal regulations (FDA and FTC) and individual state laws, but often they forget about private actions.
It’s common to associate enforcement against a dietary supplement company from a private attorney with personal injury lawsuits brought when a consumer sustains injury from using a product. While this is certainly something to be aware of, this type of risk can often be mitigated by having adequate liability insurance and using ingredients that have a long history of safety data to support them. However, over the years there has been a rise of another type of claim in the industry, one that is often more damaging and expensive than a personal injury claim—the class action lawsuit based on a false advertising or a misbranding theory.
The term “class action” refers to a type of lawsuit, brought in either state or federal court, on behalf of a group of individuals who have suffered similar harm or losses. Class action lawsuits usually seek monetary damages on behalf of the group of plaintiffs, referred to as the “class.” Rather than naming each individual plaintiff, a class action lawsuit will typically name one individual, the “lead” or “named” plaintiff, to represent the entire group.
Typically, a private plaintiff attorney will pursue cases involving injuries based on a contingent fee. This means the attorney will recover a percentage of the award only if the lawsuit is successful. As a result, in a case involving an injury to a consumer in which the monetary value of the injury is small, a private plaintiff attorney does not have the incentive to invest the time and resources necessary to pursue the case. However, in a class action lawsuit, multiple “small” injuries are grouped together and can add up to be a significant amount of money. This, in turn, offers a monetary incentive for a private attorney to pursue the case on behalf of the larger class.
Two popular types of class action lawsuits brought against dietary supplement companies are those based on false advertising or misbranding. These types of class action lawsuits are based not on the theory that the product is dangerous or has physically hurt someone, but rather, that consumers were defrauded into purchasing the product. The class action lawsuit based on false advertising alleges the claims made about the product at issue are not substantiated, and therefore, consumers purchased the product based on false and misleading advertising.
The standard for substantiation is “competent and reliable scientific evidence.” Per FTC, this means claims made about a dietary supplement must be based on “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.”
Class action attorneys commonly argue the studies used to support the claims are based on a larger dosage than those used in the product. For example, if the research states 5 g of creatine can increase strength, but the supplement contains 3 g of creatine, a claim that the product can increase strength would not be substantiated. As a result, to reduce the risk of this type of class action lawsuit, dietary supplement companies should ensure their formulations use equal, or greater, dosages as those used in the studies that support their claims.
The second type of class action lawsuit is based on misbranding. Under the Dietary Supplement Health and Education Act of 1994 (DSHEA), a “dietary supplement” is a product that contains one or more “dietary ingredients.” Dietary ingredients are defined as vitamins, minerals, herbs or other botanicals, amino acids, and dietary substances for use by man to supplement the diet by increasing the total dietary intake. Dietary ingredients also include extracts, metabolites or concentrates of the preceding substances.
Class action lawsuits based on misbranding allege one or more ingredients in the product do not meet the definition of “dietary ingredients,” and, as a result, labelling these products as “dietary supplements” causes the product to be misbranded under the law. The class action attorney will argue that consumers who purchased these products did so based on the false representation that the product was a dietary supplement. To reduce the risk of this type of class action lawsuit, it is vital dietary supplement companies ensure all the ingredients used in their products meet the DSHEA definition of “dietary ingredients.”
Class action lawsuits are difficult and expensive to defend. Settlement will involve a payment of money. It can occur at various stages, and it is prudent not to ignore a demand letter but to address it sooner rather than later. If it goes to the litigation stage, it is usually resolved with a payment to all members of the class in the form of a refund, a coupon for future purchases, or some other remuneration.
However, the defendant must also pay all the administrative fees, a cash payment to the lead plaintiff and the plaintiff’s attorney fees for bringing the action, which is usually the biggest expense. This is in addition to the defendant’s own attorney fees and costs.
Supplement companies thinking about formulating and advertising a new product should give thought not only to what a regulator may say, but whether the company has made itself an easy target for a class action lawsuit.
Jonathan Manfre, Esq. (Jay), is an associate attorney at Collins Gann McCloskey & Barry PLLC. For dietary supplement companies, Manfre regularly provides a legal review of the labels, websites, marketing and advertising to help ensure that companies are compliant with FDA and FTC regulations. He has been weight training for more than twelve years, has competed in two bodybuilding competitions, and has been a consumer of dietary supplements since the age of 18. He is extremely familiar with the dietary/sports nutrition industry and very knowledgeable when it comes to effects and function of these supplements.
Alan Feldstein, Esq., has over thirty years’ experience in the area of advertising and marketing law, with most of those years devoted specifically to the health and dietary supplements industry. In addition to serving as attorney to many of the top names in sports nutrition in his capacity as Of Counsel to Collins Gann McCloskey & Barry PLLC, Alan has served as a professor of law on the Adjunct Faculty staff at Southwestern University School of Law teaching advertising and marketing law.
Editor’s note: Looking for insights on social media marketing regulations, effective messaging or audience engagement? Join us for the Marketing Effectively & Legally via Social Media workshop on Thursday, Nov. 8, at SupplySide West 2018.