Marketing dietary supplements is tough. While we at least have the latitude to make structure – function claims in the United States, and therefore have more options than most other countries, FDA laws prevent marketers from saying what they really want to say. Let’s face it, if a marketer’s advertising states “Brand X antioxidant is effective in the prevention and treatment of cancer” and follows it up with tear-jerking testimonials from a cancer survivors describing how brand X gave them a new lease on life, brand X is going to sell a lot more product than the competitor who simply states in plain vanilla fashion that their antioxidant supports proper immune system function. The downside of course is that claiming that brand X treats or prevents cancer renders it a new drug and exposes brand X to enforcement action by the FDA.
Given this conundrum, dietary supplement marketers are always looking for a new angle to promote their products – and of course constantly pushing the envelope. Not surprisingly, when one marketer finds success with a new marketing approach, others jump on the band wagon regardless of the apparent risk. The common justification: “Well, brand X has been doing it for years and they’ve gotten away with it, so it must be okay.” Soon brands Y and Z join the fray and from there it quickly snowballs.
A dangerous trend has taken root in the world of dietary supplement advertising, and it’s particularly prevalent in the Multilevel Marketing field. Like lemmings more and more are falling in line, believing that they’re on safe ground since others are doing it. The approach is rather simple: find third parties who are ostensibly unconnected with the company to author and publish brochures, booklets, or DVDs extolling the disease prevention or curative benefits of the generic ingredients in their products, and look the other way while the third party sells vast quantities of the promotional material to the company’s distributors. Once these materials are in the hands of its sales force, the MLM company does little to prevent their distributors from using it as sales and recruiting tools.
There is a legal basis from which the above described “third party” approach arose. Commonly referred to as the “Third Party Labeling Exemption” (“TPLE”), the law permits dietary supplement marketers to provide third party materials to consumers in connection with the sale of their dietary supplements, even if the third party material contains drug claims. So long as specific criteria are satisfied the third party material is exempt from the definition of “labeling.”
For those who want to legitimately use third party literature in connection with the sale of their supplements, the TPLE provides:
(1) is not false or misleading;
(2) does not promote a particular manufacturer or brand of a dietary supplement;
(3) is displayed or presented, or is displayed or presented with other such items on the same subject matter, so as to present a balanced view of the available scientific information on a dietary supplement;
(4) if displayed in an establishment, is physically separate from the dietary supplements; and
(5) does not have appended to it any information by sticker or any other method.
Debate will rage whether any given marketer’s material falls within the above specified criteria. In my experience the material often fails to meet the first of the numbered criteria as it is in some way false or misleading. Taking the obvious cases first, those claims that are patently false simply will not survive scrutiny. Similarly, the never-ending flow of testimonials that often appear in the third party material will not pass muster when judged against the FTC’s Guides Concerning Use of Endorsements and Testimonials in Advertising. The third party material I have seen also often fails to satisfy the third listed criteria as it does not present a balanced view on the subject. In fact, it is unusual to see anything other than the positive side of the research associated with any supplement in third party material presented by marketers.
Whether or not a piece of literature meets the listed criteria is just one part of the analysis. The often overlooked issue is identifying who is the author or driving force be-hind the third party material. Because the TPLE does not define who can be an author of third party material we have seen publications written by supplement marketers (often through ghost authors) or by others with a material connection to the marketer. While this may arguably comply with the TPLE and exempt the material from the definition of “labeling” (the FDA will take the position that only material from independent third par-ties is sufficient), the Federal Trade Commission will approach the use of third party material from a different perspective.
While the FTC will pay deference to bona-fide third party material used in connection with the sale of supplements, the Commission will take the further step of deter-mining whether the third party material is simply a backdoor advertising effort rather than legitimate scientific material intended to educate consumers. The Commission will be particularly interested in connections that can be made between the author of the third party material and the Multilevel Marketing company selling the supplements. If a material connection exists the FTC will use it as evidence that the third party material is actually part of a broad advertising scheme by the MLM, and the company will be responsible for substantiating the claims in the third party material. On this point, in Dietary Supplements: An Advertising Guide for Industry, the Commission states:
So how do we avoid the FTC problem? It’s actually fairly simple, although the answer may take the wind out of the sails of some. The solution is to use legitimate third party material from reputable sources and comply with the listed TPLE criteria. If for example a favorable study was reported in The Lancet or The New England Journal of Medicine on the beneficial effects of a supplement, it would be appropriate for use by a supplement marketer as third party material (you must still comply with copyright laws, so a republication fee will undoubtedly be involved) so long as the other TPLE criteria are also met. Such material is clearly independent material that has no connection to a marketer and is published for educational purposes. Under these circumstances it will not be viewed as part of an advertising scheme.
The use of questionable third party material has started to snowball. So far neither the FDA nor the FTC has brought a major action against a direct seller that has relied on the TPLE. However, the future is predictable. The FTC will eventually bring a case against a marketer that is using aggressive material authored by someone with a material connection to the company. The agency will paint the picture of the purported third party material as being part of the company’s advertising effort, and will show that the material is deceptive and misleading. This will be followed by MLMs scurrying to distance them selves from the material their distributors have been using with their tacit, if not express, consent. For some it will be too late. Those who are a bit wiser will act now, moving away from questionable third party material and replacing it with bona fide third party material from reputable sources.
Spencer Reese is a graduate of the Washington University School of Law. He is former in-house counsel to the direct selling company Melaleuca, Inc., and is currently a partner in the firm Reese, Poyfair, Richards PLLC where his practice is limited to providing legal services to direct selling companies and the dietary supplement and cosmetics industry. Spencer is a member of the Utah, Idaho, Colorado and Missouri bars, and is an active member of the Direct Selling Association’s Lawyer’s Council and the Government Relations Committee. He is also a frequent speaker at numerous industry functions and is a contributing author to numerous industry publications. Spencer can be contacted at email@example.com or at (208) 522-2600.