In the past few months, this blog has explored ways in which class action lawsuits and FDA regulation affect the lives of everyday Americans. Today we will discuss the corporation Herbalife–which sells “nutrition, weight-management, energy and fitness, and personal care products”–in a story that combines both of these topics, adding to the mix an active investigation by the U.S. Federal Trade Commission.
According to its own web site, Herbalife had net sales of $4.8 billion in 2013, but critics have also accused the company of operating as a pyramid scheme. According to a recent article in Slate, the company recently agreed to pay $15 million in a class action suit that asserted it was operating in violation of California legislation called the Endless Chain Scheme Law. The case was brought by former Herbalife distributor Dana Bostick, who claims that he was unable to sell his products due to discounts given to those above him on the Herbalife distribution chain. In other words, only individuals who have been working for the company the longest are allowed to sell the products at lower prices, making it very difficult for others to compete.
An attorney representing Herbalife denied that the organization is a pyramid scheme, writing to Bloomberg, “We are very confident that we would have prevailed [at trial]. Settling this matter, however, is in the company’s best interest as it allows us to put it behind us and focus on the future growth of the company.”
While it is reassuring to learn that those harmed by Herbalife were able to earn financial compensation in a class action suit, it may be slightly more disconcerting to take a step back and look at the way the company functions as a whole. For example, due to the fact that the company’s products are considered “dietary supplements” rather than drugs or food products, they “are not required to undergo Food and Drug Administration-regulated clinical trials, and are sold with the warning that they are not intended to ‘treat, prevent, or cure disease.’” (You may remember a similar strategy being used by Monster Energy and other energy drink manufacturers in order not to disclose specifics about quantities of ingredients, including caffeine.)
So while employees who have been treated unfairly by the corporation may band together in a class action suit in order to be made whole, the same may not be true of individuals physically harmed by taking the supplements Herbalife sells. Since there are so few regulatory rules guiding the safety and manufacture of products like these, judges often consider such cases to be without merit.
Within the last few months, however, the FDA has announced that it may make slight adjustments to its “Red Book,” officially titled Toxicological Principles for the Safety Assessment of Food Ingredients, which is meant to serve as “a how-to guide for companies to show their food products and additives are safe (i.e. non-toxic) for human consumption.” Regulators working for the agency have expressed a desire to expand the Red Book’s scope from solely food items to include “dietary supplement ingredients [and] food contaminants.” In fact, the FDA has invited the public to discuss the matter, which you may do at its web site