The author also singles out Utah as a major factor in the industry's strength, call

ing Utah the "Silicon Valley" of the industry and citing Utah-based companies as the source of a fifth of all dietary supplement production in the U.S. Mr. Krusch identifies the state's friendly direct sales laws and support from Sen. Orrin Hatch as factors contributing to Utah's position in the industry.  The Nutrition Law Blog authors, being based in Salt Lake City, can attest to the strength of the industry and the favorable business conditions in Utah. 

This is, of course, great news for the industry, especially for the Utah companies. 

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. 

The multinational food company Dannon agreed to a 45 million dollar class action settlement earlier this year based on consumer complaints about advertising claims regarding the health benefits of its probiotic line of dairy products. Now the company has entered into a $21 million dollar settlement with the attorneys general from 39 states. The L.A. Times reports that this is the largest-ever multistate attorney general consumer protection settlement with a food producer. The attorneys general alleged that Dannon made deceptive and unlawful claims in advertising which were not substantiated by competent and reliable scientific evidence at the time the claims were made. According to the allegations, the majority of scientific studies showed improvement in intestinal transit time when an individual consumed three servings of the probiotic products per day for two weeks, and did not support Dannon's advertised claims that one serving per day for two weeks improved digestive health. In addition, the attorneys general alleged that Dannon could not substantiate claims regarding improved immunity against the flu and common cold.

Dannon also agreed with the FTC to drop claims that the probiotic foods help prevent irregularity and offer protection against the flu and common cold. The FTC found no substantiation of these claims. This isn’t the first time Dannon has had to alter its advertising; the March settlement required Dannon to remove specific language about the health benefits of the products from labels and advertising.

Between this and the March settlement, Dannon has now agreed to pay $66 million as restitution for the misleading health claims, which comes out to about 1.3% of Dannon reported $5 billion in worldwide net sales of the probiotic line in 2009. This latest settlement should remind companies to keep state governments on the list of watchful eyes monitoring health claims related to food and supplement products.

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.

This suit is another warning to the supplement industry that the FTC, along with the FDA and consumers, are paying special attention to the claims and practices of dietary supplement companies.

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.

For more information, contact Melanie Williamson, Stoel Rives Business Development Coordinator, at (801) 715-6662 or mwwilliamson@stoel.com.  

This post also appears on The Food Liability Law Blog

In a May 25, 2010, Federal Register Notice, the Federal Trade Commission (the “FTC”) announced its intention to issue compulsory process orders to 48 food and beverage manufacturers, distributors, marketers, and quick service restaurant companies. The proposed orders seek information concerning the companies’ marketing expenditures targeted toward children and adolescents, and nutritional information about the companies’ food and beverage products marketed to children and adolescents.

The proposed orders, issued under Section 6(b) of the Federal Trade Commission Act, 15 U.S.C. § 46(b), will seek information in six categories, including:

• The categories of foods marketed to children (ages 2-11 years) and adolescents (ages 12-17 years);

• The types of measured and unmeasured media techniques used to market food products
to children and adolescents;

• The amount spent to communicate marketing messages about food products to children and adolescents;

• The nature of the marketing activities used to market food products to children and adolescents;

• Marketing to children and adolescents of a specific gender, race, ethnicity, or income level; and

• Marketing policies, initiatives, or research in effect or undertaken relating to the marketing of food and beverage products to children and adolescents.

By procuring this information, the FTC will be able to evaluate the impact of self-regulatory efforts on the nutritional profiles of foods marketed to children and adolescents. In addition, the FTC seeks to determine and analyze how companies allocate their promotional activities and expenditures among various media and for different food products. Interested parties may submit comments on or before June 24, 2010.

This FTC action is a follow-up to its July 2008 report entitled, Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation. That report represented the findings of a 2006 FTC study of promotional activities related to food and food products targeted toward children and adolescents. It found that, while room for improvement existed, the food and beverage industries had made significant progress on this front since the FTC and the Department of Health and Human Services co-sponsored a Workshop on Marketing, Self-Regulation & Childhood Obesity in 2005. As everyone from the First Lady to the World Health Organization is focused on the impact of marketing on childhood obesity, the results of this FTC action will bear monitoring.

The Act would allocate more funds to the FDA and would create additional requirements for the FDA and for dietary supplement companies. If this bill were the become law, the FDA would be required to:

• provide an estimate to Congress of the cost over the next five years of fully implementing the DSHEA
• conduct inspections of all facilities in which a dietary supplement is manufactured
• implement the recommendations from the January 2009 report from the Government Accountability Office
• notify the DEA if the FDA determines that t anew supplement contains an anabolic steroid

The act requires Dietary supplement manufactures, distributors, and retailers to:

• comply fully with the DSHEA and the Dietary Supplement and Non-prescription Drug Consumer Protection Act
• cooperate fully with the FDA in implementing all relevant federal laws and regulations
• blow the whistle on suspected violations of federal laws and regulations

The act would also allocate additional funds through 2014 to the FDA for enforcement of dietary supplement safety.

On Wednesday  the Senate Special Committee on Aging held a hearing regarding dietary supplements. The hearing was mostly devoted to concerns about maintaining and ensuring the safety of dietary supplements sold in the United States. Senator Herb Cole (D-WI), the chairman of the committee opened the hearing, with testimony from Greg Kutz of the Government Accountability Office, Tod Cooperman from ConsumerLab.com, Charles Bell from Consumers Union, Steve Mister from CRN, and Joshua Sharfstein from the FDA. Senator Hatch made a formal statement regarding the Dietary Supplement Full Implementation and Enforcement Act. You can watch the recorded version of the hearing and read the statements from each witness here.

1. Substantiate your claims.

The claim must be based on competent and reliable evidence and the basis must exist at the time the claim is made. Objective scientific research (test, studies, etc.) by qualified experts using generally accepted procedures to produce reliable results is normally sufficient to satisfy the "competent and reliable" requirement. Because the evidence must exist when you make your claim, you cannot rely on research conducted after you make the claim as proper substantiation. Companies making green claims should keep documentation and other records showing proper substantiation.

2. Be specific.

Does the claim apply to your manufacturing process, your packaging, your product, of some combination of the three? For example, if you use the word "recyclable" without any qualifications, that claim is misleading unless every component of the product and packaging is recyclable (excluding minor incidental components like the plastic lid on a soda pop bottle). You also need to be clear about how you define your advertising terms. What do you mean by "Eco Friendly" or "Ozone Safe"? Courts and the FTC tend to give very literal interpretations that include every ambiguity to such claims and therefore, clarity on the part of the advertiser is  essential. 

3. Qualify your claims.

If Tip #2 requires you to be more specific with your claim, you must qualify that claim with clear, prominent, and understandable language. The larger the font and the closer the statement appears to the green claim, the less likely you are to have a problem. Avoid fine print and legalese as much as possible.

4. Accurately present your claims

Comparative advertisements need to be accurate. If you advertise the product as having "50% more recycled content", it is not clear what you are comparing; it could be another version of your product or a competitor's product. A claim may be literally true but misleading: "50% More Recycled Content!" when the recycled content went from 2% to 3%. Consumers and the FTC are probably looking for something a little more substantial than 2% to 3% when products make such claims.

5. Be truthful

Finally, and perhaps most obviously, make sure your claims are true. Avoid making claims that are half-truths or otherwise leave out crucial facts. For example, fruit labeled as "organic" that uses three times as much water in the growing process. Also, toting a product as "All-Natural" in an attempt to set the product apart from competing products can be misleading because various harmful "all-natural"  ingredients like arsenic, lead, or mercury are not likely to come to mind when a consumer sees the ad. Using marks or symbols that give the impression of third-party approval or certification is also misleading and has led to problems for a number of companies.

These tips are based on the FTC's Guides for the Use of Environmental Marketing Claims, or "Green Guides". 

Additional resources:

Last November, Stoel Rives hosted the webinar series, "Bringing Environmentally Sustainable Food Products to Market", presented by Ken Odza and Ann Glazer of Stoel Rives and the Food Liability Law Blog, Steve Marinkovich from Propel Insurance,  and Peter Truitt, CEO of Truitt Bros. Inc. all of whom offered excellent advice to companies marketing environmentally friendly food products. The third session of the webinar included a discussion of the FTC Green Guides, the pitfalls of greenwashing, and other advice similar to that given at the Salt Lake City seminar. An on-demand version of the webinar is available here, with the slides in pdf format available here.

For an interesting study on false or misleading green claims, check out TerraChoice's "Greenwashing Report".

It is hard to deny that Americans are putting on the pounds and that the problem is often starting with poor nutrition during childhood. The problem has not gone unnoticed and a number of organizations, including the federal government, are trying to trim down the epidemic.

Authors Ellen-Marie Whelan , Lesley Russell, and Sonia Sekhar of the  Center for American Progress recently published the report, "Confronting America's Childhood Obesity Epidemic: How the Health Care Reform Law Will Help Prevent and Reduce Obesity" (link to website introducing the report, with links to the full version and executive summary). As is clear from the title, the report analyzes the potential effect of the new health care reform laws on children's nutrition. Specifically, the authors discuss the Patient Protection and Affordable Care Act and highlight the following provisions as those with the most effective measures for combating childhood obesity:

• Improved nutrition labeling in fast food restaurants, which will list calories and provide information on other nutrients (For more information on this specific provision, take a look at Richard Goldfarb's excellent post with his thoughts on the new labeling requirement).

• The Childhood Obesity Demonstration Project, which gives grants to community-based obesity intervention programs

• Community Transformation Grants, which gives grants to community-based efforts to prevent chronic diseases

The report also analyzes a number of other aspects of the law that, while not targeted specifically at combating obesity, the authors believe will have some positive effect on the problem.

“I often hear people say that they will just focus on the business side of things and not worry with the politics, but the question is: can you really afford to do business without politics.” - Daniel Fabricant, PhD of the Natural Products Association. This is an interesting question presented in today's article on Nutra Ingredients-USA.com regarding lobbying for the nutrition industry, and what some insiders identify as excessive freeloading by U.S. nutrition companies.

The article presents the view that companies are not doing enough to let the industry's voice be heard in Washington, quoting one source saying that many display "all the characteristics of a parasite". To show the benefit of organized political efforts by nutrition-related companies, Suzanne Shelton gives the  example of Senator McCain's withdrawal of support from S.3002  but warns that the industry needs to step up to avoid losing advocates like Senator Orrin Hatch and Congressman Frank Palone Jr.

So industry insiders, is lobbying a necessary component of growth and stability for the nutrition industry?

Thanks to Tyler Anderson of the Food Liability Law Blog for forwarding the article.

Post by Tyler Anderson, co-author of the Food Liability Law Blog.

In an April 28 release, the Food and Drug Administration (the “FDA”) asked for comments and information from the public and other interested parties about front-of-pack (“FOP”) nutrition labeling and shelf tags in retail stores. The FOP is the part of the package label that is most likely to be examined under customary conditions of display for retail sale. 

According to the FDA release, the FOP nutrition labeling effort aims to “maximize the number of consumers who readily notice, understand, and use point-of-purchase information to make nutritious choices for themselves and their families.” Specifically, the agency is seeking to learn more about:

• the extent to which consumers notice, use, and understand nutrition symbols on FOP labeling of food packages or on shelf tags in retail stores
• research that assesses and compares the effectiveness of particular approaches to FOP labeling
• graphic design, marketing, and advertising data and information that can help develop better point-of-purchase nutrition information
• how point-of-purchase information may affect decisions by food manufacturers to reformulate products

These recent developments did not appear out of thin air. As noted by our colleagues at the FDA Law Blog, in a March 3 letter to industry, the FDA said it is working to devise a front-of-pack labeling system that consumers can understand and use. In the meantime, the FDA announced plans to issue new draft guidance relating to front-of-pack calorie and nutrient labeling. The agency is also planning to issue draft guidance that would recommend nutritional criteria for foods that make “dietary guidance” statements (such as “Eat 2 cups of fruit a day for good health”) in their labeling. Dating back even further, in an October 2009 letter to the industry, the FDA said it was working on developing a regulation that would define the nutritional criteria that would have to be met by manufacturers making broad FOP or shelf label claims concerning the nutritional quality of a food.

Dr. Hamburg also noted that the FDA is in the process of notifying numerous manufacturers that their current labels are in violation of the law and subject to proceedings that will remove their misbranded products from the marketplace. Thus it appears the FDA is willing to back up this position with action. Given the increasing number of headlines such as this one regarding the ability of the armed forces to find able-bodied servicemen and women, the issue of how manufacturers communicate to consumers with respect to nutritional content is likely to be a subject of FDA scrutiny for the foreseeable future.

It looks like Vermonters likely won't be paying any extra for their vitamins and dietary supplements. As we previously posted, the Vermont House of Representatives passed a bill last month that, among many other things, would impose a 6% sales tax on all dietary supplements sold in the state. On April 23, the Vermont Senate amended the bill to remove the tax. Other sources report that the Senate panel recognized that a tax on supplements would penalize Vermonters who wish to improve their health. The bill must now go back to the House for reconciliation with the Senate's version.

Interestingly, Vermont has been in the forefront of the “junk food tax” issue, with at least two bills introduced in the House that would tax soft drink sales. A dietary supplement tax would likely undermine the state’s position of promoting its citizens’ health and nutrition, and perhaps instead portray Vermont as a state simply looking for more tax revenue.

Nutrition companies should take the FDA’s warnings seriously; a facilities raid by the U.S. Marshals is obviously harmful to a business’s bottom line, not to mention its reputation. As Mike pointed out in a previous post, reviewing FDA warning letters sent to other companies is a good method for verifying compliance with labeling requirements and, in light of this news, avoiding federal court complaints and visits from your local U.S. Marshals.

If you haven’t seen Jamie Lee Curtis in the commercials, you have seen the products in the yogurt section at the grocery store. “It Works Or Your Money Back!” is the guarantee that Dannon makes regarding the ability of Activia, its probiotic line of dairy products, to boost digestive system health and immunity. Now an Ohio judge has signed a settlement agreement (pdf) in which the company agreed to pay up to $45 million as part of a class action settlement.

Consumers sued Dannon alleging that the health claims regarding the yogurt were false and mislead the public into paying a premium for the yogurt. Dannon disagrees with the allegations in the suit, and maintains that it did nothing wrong. However, as if often the case in litigation, the company decided to avoid the cost of a trial by settling with the other side.

Among other things, the settlement agreement requires the company to remove the phrases “clinically proven” and “scientifically proven” from labels and advertisements for Activia and other related products, and replace those phrases with something like “clinical studies show”. Dannon must also place qualifying statements on the products’ labels and company’s website that explain that the yogurt and other products are not intended to treat medical conditions, and that consumers eating the products will not see an immediate improvement to digestive health.

This should be a warning to all functional food companies; make sure you think VERY carefully about how you present the benefits of your products and assume that your customers will sue you if the product does not work exactly as described on your labels or advertisements.