Essential Nutrition Law Blog : Northwest Nutraceutical Lawyers & Attorneys : Stoel Rives Law Firm : Dietary Supplements, FDA Regulation

With 2011 nearly upon us, we have taken a look back at the news from 2010 and the posts from the inaugural year of the Essential Nutrition Law Blog and have created a list of what we feel were the top five news stories affecting the nutrition industry in 2010. Below are our choices, in no particular order. Feel free to weigh in in the comments.

1. Senator McCain’s “Dietary Supplement Safety Act”. We began the year with the threat of more stringent regulations for dietary supplement manufacturers under a bill backed by Senator McCain. The Senator backed away from the bill in March, much to the delight of Senator Orrin Hatch. This was, of course, great news for the industry.

2. Litigation for False Claims and Deceptive Advertising.  We saw a number of high-profile cases in 2010 where companies were sued for false claims or deceptive advertising in connection with dietary supplements and functional foods. For example, Dannon will pay 66 million to settle a class action suit and an action brought by the attorneys general of 35 states, the FTC put an end to some claims regarding acai berries, consumers sued Coca-Cola for claims made related to Vitamin Water, and a U.S. Attorney in Wisconsin brought suit against Beehive Botanicals, resulting in federal officials seizing a number of products from the company.

3. The FDA begins enforcing GMP’s.  In May, the FDA sent out its first warning letter related to a GMP inspection, indicating that the FDA is finally enforcing the GMP regulations first announced in 2007. For tips on preparing for a GMP inspection, read Jonathan Stagg's post here. 

4. The November Elections. The November elections shook things up in Washington, especially in the House of Representatives, where we saw the largest shift in party control in over six decades. There has been much speculation over how this will affect legislation for the remainder of President Obama’s first term in office. In addition, most analysts predict that the results of the 2010 Census will  likely favor Republicans. This change could obviously alter how the nutrition industry is perceived by federal lawmakers, and could affect legislative efforts like the Dietary Supplement Safety Act.

5. Passage of the Food Safety Bill. The year ended with the Senate passing the Food Safety Modernization Act which updates the food regulations that have been around for over 70 years.  Assuming President Obama signs the Bill into law, it will bolster the FDA's ability to monitor food imports and will shift the regulatory focus to the prevention of contamination. The dietary supplement industry generally welcomes the update.  For more in-depth coverage of the Food Safety Bill, visit the Food Liability Law Blog. 

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Following several years of development, and much anticipation in recent months, the Federal Trade Commission has finally released “Proposed, Revised Green Guides.”  The new Green Guides will be open for public comment until December 10, 2010.  Thereafter, according to the agency’s press release, the FTC will determine if and how to issue the new Guides. 

The proposed, revised Green Guides are summarized here and published with substantial analysis and comment here; the FTC invites submissions of public comments here.

The current official Green Guides, last updated in 1998, provide non-binding “interpretations” of federal consumer protection laws, including Section 5 of the FTC Act (15 U.S.C. § 45), which is the law that empowers the agency to punish deceptive practices.  In general, the Guides establish that false or deceptive environmental marketing claims can be challenged under the FTC Act.  The Green Guides also provide instruction and interpretations of marketing buzz words that were popular in 1998, such as “biodegradable,” “compostable,” “recyclable,” “refillable,” and “ozone safe.”   

The proposed new Green Guides address the terms found in the 1998 edition, but also address several new issues that arise in present-day green marketing, including:

• environmental seals of approval,
• “free-of” and “non-toxic” claims,
• carbon offsets,
• claims concerning renewable energy, and 
• claims about renewable materials. 

The proposed Green Guides reinforce and restate the FTC’s reasonable policy position that environmental marketing claims should be supported by credible scientific evidence.  In addition, the proposed Guides expressly discourage sweeping unqualified claims.  For example, the Guides explain that an unqualified claim that a product is “eco-friendly” is inherently deceptive.  In contrast, a simple clarification – if it can be substantiated – may be acceptable.  The proposed Guides state that a claim such as “eco-friendly:  made with recycled materials” is not deceptive if the clarification is prominent, and can be proven.

For the most part, the proposed Green Guides do not represent a radical shift from the 1998 version of the Guides.  And on a careful reading of the revised Guides and the preceding 186 pages of analysis and comment provided by the FTC, it’s clear that the fundamental issue is deception.  It’s deceptive to say your product has 50% more recycled contents than it used to, when your product only increases recycled content from 2 to 3 percent.  It’s deceptive to mark your product with your own green “seal of approval” and not disclose that you made up the seal yourself.  It’s deceptive to claim that you’ll plant trees to offset carbon emissions from your products, when it will take 10 years for the trees to get big enough to actually offset those emissions.

Ultimately, it does not appear that the FTC is proposing a major shift in regulations.  The key question for any environmental marketing claim remains:  is the claim “deceptive” under Section 5 of the FTC Act?  The bigger question is, how will enforcement change?  Last February, The New York Times reported that the FTC has filed seven complaints concerning environmental marketing claims since President Obama took office (compared to zero during the prior administration).  If enforcement remains at that level, there cannot be substantial application of the new Green Guides.  Then again, given the rapid growth of environmental marketing claims in recent years, the FTC’s renewed interest in this subject, and the threat of state consumer fraud actions, it would be imprudent to disregard the new Guides. 
 

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 By Guest Blogger Joseph Eckhardt

In an unfair competition suit under 15 U.S.C. § 1125, the king of the two-ounce energy shot, 5-Hour Energy, is suing the makers of 8-Hour Energy in the Eastern District of Michigan, claiming that 8-Hour Energy falsely associates itself with 5-Hour Energy.  8-Hour Energy has tried to strike back with a monopolization claim, arguing that 5-Hour Energy has engaged in a number of anticompetitive tactics to drive away competitors like 8-Hour Energy, and 6-Hour Energy, which 5-Hour Energy sued in 2008. 

 Anyone who has recently set foot in a convenience store or watched late night cable television knows how valuable the energy drink business has become. To get an idea of how this market has grown, take a look at the wall of energy drinks displayed at thescreamingenergy.com product review web site.  Perhaps the most valuable spot in that market is in the two-ounce “energy shot” space, on the counter next to the cash register, where customers are willing to pay $3.50 for two ounces of an elixir that will “help you feel sharp and alert.”  (By comparison, a consumer will seldom pay more than 99 cents for a 12 ounce can of caffeinated cola.)   And the consensus is that 5-Hour Energydominates this category. 

The 8-Hour Energy defense team may have a good argument that 5-Hour Energy is the king of the convenience store counter, but the Eastern District of Michigan issued an Order last week slapping down 8-Hour Energy’s monopolization claim. 8-Hour Energy argued that 5-Hour Energy engages in anticompetitive tactics to control the market, but failed to convince the court that those tactics actually harm 8-Hour Energy.  For example, the court noted that anything 5-Hour Energy did to exclude 6-Hour Energy from the market couldn’t have harmed 8-Hour Energy.  Ultimately, 8-Hour Energy should be able to argue that any anticompetitive conduct is relevant to prove that 5-Hour Energy has harmed competition – this may be an issue that 8-Hour Energy can exploit on appeal. 

The court’s order provides a good example of the risks associated with raising antitrust counterclaims.  Here, the Eastern District of Michigan dismissed 8-Hour Energy’s monopolization counterclaim for failure to convincingly plead the claim.  If 8-Hour Energy somehow revives the claim, the next hurdle will be definition of the relevant market.  Is there an exclusive market of 2-ounce energy drinks?  If Red Bull, Coca Cola, or coffee are reasonable substitute “energy drinks,” 8-Hour Energy’s monopolization case doesn’t have a chance.

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By Guest Blogger Tyler Anderson

In an opinion issued on July 21, 2010, Judge John Gleason of the United States District Court for the Eastern District of New York largely denied the defendant’s motion for dismissal and held that 10 of the 13 claims in a class action suit brought against Coca-Cola for alleged unlawful health claims on its Vitaminwater drinks could proceed. The claims that still must be examined in court include allegations of misleading advertising, fraudulent business acts, and unfair methods of competition.

The plaintiffs in the class action, which include the health advocacy group Center for Science in the Public Interest (“CSPI”) as co-counsel, contended that Vitaminwater’s labeling and marketing is misleading because it (1) communicates a number of purported health benefits (including healthy joints, optimal immune function, and reduced risk of chronic disease), drawing consumer attention away from the significant amount of sugar (33 grams per bottle) in the product; (2) portrays Vitaminwater as healthy when it is essentially a snack food that provides nutritional benefits because it has been specifically fortified to do so; and (3) suggests that Vitaminwater contains nothing but vitamins and water.

While the court concluded, citing applicable Food and Drug Administration (“FDA”) rules and commentary, that sugar was not a “disqualifying nutrient” under applicable FDA regulations, the plaintiffs’ latter two claims were found to accurately describe violations of FDA regulations, and accordingly may serve as a non-preempted basis of state law liability.

The FDA regulations restricting health claims or implied claims of healthiness related to foods that meet certain minimum nutrient levels, colloquially termed “the jelly bean rule,” were developed in an effort to prevent food producers from encouraging the consumption by consumers of junk food by fortifying the food in question with nutrients. The “jelly bean rule” is applicable only to (1) health claims, and (2) nutrient content claims that use the word “healthy” to suggest that a food may help consumers maintain healthy dietary practices because of its nutrient content. Finding that Vitaminwater’s labeling contains claims in each of these two categories, the court ruled the plaintiffs could proceed with this claim.

The plaintiffs alleged Vitaminwater’s labeling is misleading because it uses a product name that includes two of the product’s ingredients (vitamins and water), but fails to mention another notable ingredient (sugar). FDA regulations on this subject recognize that such product names have the potential to mislead consumers. Thus, the court held that the plaintiffs were allowed to pursue this claim. In the aftermath of this ruling, Coca-Cola released a statement expressing their confidence that the plaintiffs’ claims are without merit and will ultimately be rejected. Given that the implications this case could carry into the growing functional food and beverage segments of the market, we will continue to track it closely.

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The Canadian government recently proposed a temporary solution to allow continued sales of unlicensed Natural Health Products (NHPs). The proposed regulations, titled “Natural Health Products (Unprocessed Product License Applications) Regulations” (the “Proposed Regulations”) provide an exemption for some unlicensed NHPs that have pending applications for licensure. 

Under current Canadian regulations, NHPs must be licensed. There is currently a backlog of approximately 10,000 unlicensed NHPs on the market in Canada that have applications pending to receive regulatory approval. In January of this year, the National Association of Pharmacy Regulatory Authorities issued a statement urging pharmacies to halt sales of unlicensed NHPs because such products posed a risk to public safety. Some pharmacies adopted this position, cutting off market access for some manufacturers.

The Proposed Regulations would allow continued sales of unlicensed NHPs in some situations. To qualify, a manufacturer must have an application on file with Health Canada that has been pending for more than 180 days and the product must meet certain safety requirements. If implemented, the Minister of Health would notify an applicant that an exemption number has been assigned. Within thirty days of this notice, the applicant must consents to having its exemption information posted on the Health Canada website and must verify that the product meets certain safety and use criteria (for example that it is not intended for use by children or women who are pregnant or nursing and does not contain harmful or prohibited ingredients).

Once an applicant provides consent and verification, the NHP will be deemed to hold a license, allowing the product to be sold legally. Manufacturers will be required to display the exemption number (rather than an NHP number) on product labels. The Proposed Regulations give manufacturers 12 months or until the next label run to comply with the labeling requirements. Manufacturers must also comply with other safety requirements imposed by Canadian “Natural Health Products Regulations”, but will not share in all of the rights provided to licensees under such regulations. 

Note that deemed licenses provide only temporary relief. The Proposed Regulations will be in force for 30 months after becoming effective. Therefore, manufacturers will still need to complete the licensing process. For those whose Canadian applications are stuck in queue, however, the Proposed Regulations should provide some relief.

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