10/2/2006

FDA Hits XanGo
Virtually All Third-Party Materials Must Go


The Food & Drug Administration has issued a Warning Letter to XanGo in which they state they have "serious concerns" about the way they are promoting their Mangosteen juice product. The relatively lengthy five page Warning Letter identifies several different brochures used to market the XanGo product and includes a list of specific disease treatment claims allegedly attributed to Mangosteen juice and specifically the XanGo juice product. Claims cited by the FDA include those professing XanGo and/or its primary ingredient to have anti-Parkinson and anti-Alzheimer benefits, as well as having anti-tumor and anti-cancer properties. "Lowers blood pressure" and "anti-viral" are other proposed benefits, along with the product's ability to keep consumers free of "dysentery, infections, inflammation, diabetes and pain."

The FDA claims they obtained XanGo materials by attending a XanGo presentation where XanGo co-founder Joe Morton and his brother David, a neurobiologist and popular XanGo spokesman, "made presentations designed to recruit distributors into XanGo." The FDA then called a phone number provided at the event and ordered the "Mangosteen Brochure Combo Pack."

According to The Salt Lake Tribune, XanGo's response to this FDA action is that the materials they collected are not actually from them, but from Sound Concepts, a producer of video, audio and printed promotional materials serving the MLM industry. Although XanGo's regulatory attorney claims the two companies do have a "symbiotic relationship" they are independent from each other. The news report goes on to allege that XanGo has conceded that the materials in question are problematic and possibly illegal. Sound Concepts has responded with the obvious question, if XanGo felt this way about their materials why didn't they give them the "boot"? Sound Concepts has been the primary provider of Mangosteen/XanGo marketing materials for several years.

The FDA has given XanGo 15 days to address their concerns.

To view the actual Warning Letter go to: http://www.fda.gov/foi/warning_letters/g6024d.htm

To view a recent news report go to: http://www.sltrib.com/business/ci_4421792

Commentary:

XanGo's claim that they were somehow either ignorant to the illegal claims being made about their product (until now), or they had no control over what Sound Concepts produces, seems to me to be somewhat disingenuous. I feel this way because I know for a fact that XanGo corporate, and specifically their legal department, was made well aware of the actionable claims being made in all of this material many months ago. Because I told them. Three times. In detail.

The first occasion was in August of 2004 when a XanGo distributor asked me what my concerns were about XanGo, and I told him (as I will always do when asked). He then, as is expected, contacted XanGo's legal compliance department to have them address these same concerns (all dealing with the manner in which XanGo is being marketed -- other than their disease treatment claims and their misguided attempt to patent mixing the rind of the Mangosteen with any other juice, I have said little else negative towards XanGo). After receiving a cordial phone call from XanGo attorney Steve Bean I outlined all of my concerns and cited several specific, verifiable examples. He claimed, as their patent attorney (rather than compliance attorney) that he was not aware of these claims and asked that I outline them in writing and forward them to him for further research, which I promptly did. I then received an email from XanGo compliance manager Mike Mansfield, who inquired as to my motives for providing the evidence I had sent (Mr. Mansfield asked if, perhaps, I was seeking employment with XanGo). I responded by describing my previous conversation with Mr. Bean and then proceeded to relate additional concerns, with source data, to Mr. Mansfield, including my specific and primary concern over the content of the Sound Concepts produced materials. Mr. Mansfield responded, "As you are probably aware, XanGo has no control over the publication of materials by the publication company that you mentioned." I responded back with the following:

"But you do have control over your distributor's use of this material. And much of this material was produced by XanGo reps. Sound Concepts was simply hired to produce them. Surely your policies forbid the creation of such material without prior corporate approval. Shouldn't these distributors be suspended? Shouldn't corporate be publicly forbidding the use of this material? I'm certain if you were to announce that the use of (this material) would result in termination this would cause Sound Concepts to stop producing them."

In fact, I strongly suspect that a simple request to Sound Concepts to cease production of, or revise, these brochures would have probably been very effective. I've met the management of Sound Concepts and they seem like pretty reasonable folks. Mr. Mansfield's final response was simply, "We will do all that we can to enforce the Policies and Procedures."

XanGo corporate once again was provided an in-depth litany of disease treatment claims being attributed to XanGo, along with sources and including a detailed list of specific claims and their exact time (to the second) that they are presented in audio format (Disclosure: This was as part of a report I was hired to create on behalf of New Vision in their defense of XanGo's patent infringement litigation. This report is now public record and can be viewed at http://www.USPTO.gov using application #95/000,157). This was presented to XanGo six months ago.

One of the tests I asked XanGo to perform was to do a Google search of the terms "XanGo" and "Cancer" or other disease names. Of the tens-of-thousands of web pages this will find, surely many will not be making a disease treatment claim, but it makes it real easy to find those who are. It was rare that I had to search past the first two pages of hits to find someone specifically attributing the consumption of XanGo to the treatment of the disease in the search field. Did my efforts do any good? Well, back in March there were 246,000 web pages containing both XanGo and Cancer. Today there are only 199,000. XanGo and Diabetes used to pull up 213,000 web pages, and now it only finds 151,000. Arthritis and XanGo used to generate 159,000 hits. Today, 115,000.

I'll bet these counts really go down now.

XanGo's argument that someone else created all these egregious brochures won't, in my opinion, hold water. Or even really concentrated Mangosteen juice. As MLM Watchdog Rod Cook has exclaimed on his web site in the past, "FDA DOES NOT ALLOW DISTRIBUTORS TO DIRECTLY USE 3RD PARTY INFO -- No matter who they are from!" (Emphasis original). I completely agree with him. The challenge is that when you use "third party" materials to market your product, the information on those materials essentially becomes an extension of your product's labeling! I contacted the FDA directly and was informed that under the FD&C Act (section 201[m]) "Labeling" is defined as "all labels and other written, printed or graphic matter upon any article... or accompanying such article" (in this case the "article" is the XanGo product itself). "No physical attachment of one to the other is necessary. It is the textual relationship that is significant." They went on to say that the intended use of a product as a drug, rather than a dietary supplement, can be "established through product labels and labeling, catalogs, brochures, audio and videotapes, Internet sites, or other circumstances surrounding the distribution of the product (including oral representations, testimonials, and other promotional activities)." Emphases within all FDA quotes are mine (email me if you want a copy of the FDA's entire response to this issue). In other words, it makes no difference who actually produced the marketing material you are using; if you use it to sell your product the claims made on that material are then attributable to your product -- and you are responsible for them. Specifically, all the brochures the FDA received, or more specifically the claims made in those brochures, were clearly being used to promote the XanGo opportunity and sell the XanGo product. The FDA isn't stupid, and I'm surprised, based on XanGo's reported response, at how much they appear to disagree with me.

The FDA does offer a set of criteria in which third party material may be used in conjunction with the selling of a specific health product. They say an exemption from labeling requirements apply to "scientific journal articles, books and other publications used in the sale of dietary supplements, provided these materials are reprinted in their entirety, are not false or misleading, do not promote a specific brand or manufacturer, are presented with other materials to create a balanced view of the scientific information, and are physically separate from the supplements being sold." So if you're going to use third party scientific data to promote a XanGo product, you must: 1) provide the entire study or research document; 2) be able to provide scientific evidence your disease claim is not false or misleading; 3) never mention or reference the XanGo brand in any way; 4) offer opposing scientific studies or opinions, if they exist, and; 5) don't display the materials anywhere close to the XanGo product (which kind of duplicates #3).

Here's the bottom line: Virtually all of these brochures, CDs, and quasi-newspapers were being used exclusively and specifically to market the XanGo brand product. Several of these items mention XanGo by name. The marketing tool that appears to have gotten by far the greatest distribution is the "Magic Wand" CD which not only includes blatant medical claims specific to XanGo in the form of testimonials (and an income projection with the FTC has already declared "fraudulent"; FTC vs. Nu Skin, 1992, ¶28), the speaker -- a high level XanGo distributor -- specifically instructs the listener that it is legal (our "first amendment right") to make such claims if they are personal testimonials or presented as third party scientific data -- in direct contradiction to easily accessible FTC and FDA statements to the contrary (maybe we should have the freedom of speech to make these claims, but before you flame me please remember, I'm just the messenger -- I'm just describing the law, I don't make it). It's very hard to believe, at least for me, that XanGo was unaware of these statements in this single CD alone, let alone this rather large library of brochures and CDs available to all XanGo distributors.

Unlike some companies, like SeaSilver, I believe XanGo will heed this warning and reign in all of this material and make dramatic revisions to the manner in which XanGo is marketed in the field. However, I strongly believe that these claims are the primary way in which XanGo is being sold, and to remove any reference to the prevention, treatment or cure of any and all diseases will significantly impact sales. It's going to be extremely difficult to tell tens-of-thousands of distributors that they have to stop promoting the product in the very effective way they have been promoting it (which their field leadership has been telling them for years is perfectly okay to do). When sales, thus commission checks, begin to drop watch for these claims to continue, but be driven underground. And watch for the FTC to break out the shovels (they come in after FDA Warning letters are not heeded). It will take a harsh, fully enforced, zero-tolerance policy to put a halt to this promotional juggernaut.

Can XanGo survive this? Certainly. There's too much pro-Mangosteen propaganda already out there, and you can't unring the bell. But unless they bite the bullet and really enforce such a zero-tolerance policy against any disease treatment claims, even in the form of third party brochures or personal testimonials, one of the strongest, most successful MLM companies in history is going to get wrecked. I think the FDA has got their attention (they seem to pull more weight than I do), and now, finally, they will do the right thing.

By the way, on a side note: Any of you remember the comment I made in my "Coming Network Marketing Boom" presentation where I describe the pattern of how the largest, most "high profile" MLM companies always seem to get hit right before a national election?

Interesting phenomenon, isn't it?

Len Clements
MarketWave, Inc.


 

  Since 1989, Len Clements has concentrated his full-time efforts on researching and analyzing all aspects of Network Marketing. He is a professional speaker and trainer, and currently conducts "Inside Network Marketing" seminars throughout the world. Len is the author of the controversial book "Inside Network Marketing" (Random House) and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." He is a court recognized expert in the field of network marketing.

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