Justice Department Charges Dietary Supplements Maker

November 17, 2015, 10:45 PM UTC
Various pills lying on a white surface
Photograph by David Malan — Getty Images

The U.S. Department of Justice revealed the results of a sweeping investigation into the dietary supplements industry, resulting in criminal indictments of Texas manufacturer USPlabs and four of its executives.

The DOJ is partnering with multiple other agencies, including the Federal Trade Commission and the U.S. Food and Drug Agency, in an ongoing review of dietary supplements to rat out the items—and the manufacturers—using unlawful and fraudulent ingredients.

The DOJ continually issues civil and criminal indictments against supplement makers, and this latest group of indictments targets a group of products made by USPlabs and SK Laboratories. The two manufacturers are accused of doctoring packaging and other paperwork to defraud others about what the product contained. Both claimed that their products, such as OxyElite Pro and Jack3d, were made from natural plant extracts even though they were wholly synthetic.

“They made misrepresentations to convince well-known retailers, who had concerns about untested synthetic materials, to sell their products,” said Benjamin Mizer, head of the Justice Department’s Civil Division. “They falsified labeling and marketing materials to convince consumers who prized natural ingredients to buy their products.”

The department announced via Twitter at around 1 p.m. ET that it would make announcements related to dietary supplements case at 3:30 p.m. ET. The news sent the stocks of supplement sellers, including GNC and Vitamin Shoppe, plummeting in anticipation. Shares of GNC (GNC) sank as much as 25.7% before rebounding and closing down 6.4%. Vitamin Shoppe’s (VSI) stock experience similar shocks, but to a lesser degree. Neither company was named in the DOJ’s announcement.

GNC, the largest retailer for herbal supplements in the U.S., was targeted earlier this year by New York Attorney General Eric Schneiderman, who alleged that GNC sold items that were fraudulent or contained unlisted ingredients that could harm consumers. In response, GNC opted to implement even stronger quality control measures than required by federal law to ensure its products are safe and properly labeled.

The vitamin and supplement industry brings in sales of nearly $18 billion a year and is expected to grow 6% per year over the next decade, according to IBIS World. This market is one of the most challenging areas that the FDA regulates, according to Howard Sklamberg, the FDA’s Deputy Commissioner for Global Regulatory Operations and Policy.

The Department of Defense even considers dangerous supplements a threat to the readiness of the U.S. military given how far reaching items like protein powders and weight-loss supplements have become. As such, the FDA, DOD, DOJ, and other government entities will continue to closely monitor the supplement industry and issue both civil and criminal charges for violations.

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