5/30/2007

Wall Street Journal Hits Mannatech

The May 11th edition of The Wall Street Journal included a seemingly innocuous, if not positive column, at least based on the title, about supplement marketer Mannatech Inc.. The article is titled "Health Claims by Sales Force Boost Supplement Firm". The subtitle is "Mannatech's Products Attract the Gravely Ill; Disclaimers on Labels".

The article (which is copyrighted and only available by subscription, so can not be linked to in it's entirety here) begins with the story of a Mannatech rep who, in the spring of last year, sold $1,200 worth of Mannatech's products to his niece who had cancer. He later returned the money when her nausea made the capsules too difficult to swallow. She died last April.

The article quotes Mannatech Chairman and CEO Sam Caster as saying "Nobody is claiming these products by themselves are providing a treatment for disease." But the column's author, Suzanne Sataline, seems to paint a very different portrait of Mannatech's sales tactics, saying "Some (Mannatech associates) make sweeping claims about the power of Mannatech products to provide relief from serious disease."

The author reports that during one company sponsored event at least 35 Mannatech distributors and/or customers give personal testimonials, which included relief or recovery from paralysis, tumors, lesions, leukemia, arthritis, cystic fibrosis, Down syndrome and, of course, cancer. At least ten of these testimonials were from the stage. Later in the article several other individual cases are described where subjects with serious, life threatening diseases were all persuaded to take Mannatech products. One cancer victim was even convinced, for a time, to forgo chemotherapy in lieu of Mannatech's glyconutrients.

According to the WSJ article, scrutiny of Mannatech has been increasing. The FTC has received at least 30 complaints (albeit over the past 9 years) all claiming deceptive marketing practices and false health claims. So far the FTC has taken no formal action, but the Texas attorney general's office indicated last October that an investigation of "health-law violations" has been ongoing since 2005 and they did "anticipate filing suit" against Mannatech. So far no action has been taken. However, there is a federal class-action law suit by shareholders underway, which alleges that not only did Mannatech's senior management know about the disease treatment claims, but Sam Caster overruled attempts to reign in top leaders who were making such claims.

According to Caster, Mannatech has issues large fines (up to $25,000) to distributors and even terminated others for making medicinal claims about their products.

Commentary:

Normally I would expect Mannatech to receive a warning letter from the FDA first and then, like XanGo a few months ago, really start cracking the whip and getting this stuff cleaned up. Except that Mannatech is careful not to make disease claims in their brochures and on their labels, which is where the FDA tends to focus. Virtually all such claims are verbal.

What does concern me is the quote in the WSJ article from Sam Caster where he allegedly said that consumer testimonials are perfectly legal because none use the word "cure", "treat" or "mitigate" in referring to diseases. If he really believes that's all their distributors have to do to make their testimonials legal, Mannatech is in big trouble. Personally, I find it hard to believe he was quoted correctly. Surely he does know that the FTC and FDA both go by the "net impression" of the statement, or what is "implied" by the presentation. For example, claims like "germ killing properties" or the testimonial "My blood sugar went from 230 to 117 in just 21 days", or just the words "Hot Flashes" on a list next to a product all don't contain any of those words, yet the FDA still sent a warning letter to each company making these claims. Even less direct statements like "Thumb your nose at the flu" or "cardiologists recommend our product" (implying the product prevents influenza or heart disease) garnered FDA warning letters. In fact, I saw a warning letter once for a before and after photo (woman with a walker, then dancing)!

I also did a Google search for Mannatech and Cancer together. Although not very scientific, when the company uses a unique name not normally found in nature (XanGo, Zenza, Xler8, etc.) this kind of test at least gives a general picture of how many web sites are mentioning cancer within the context of that company. Certainly many, if not most, will not be saying "Mannatech products cure cancer" or words to that effect, but if there are more than a few thousand hits then there are likely a few hundred that are. And over 51,000 web pages contain both of these words (24,000 with arthritis and 19,600 with "heart disease"). On the first screen of hits I found three that were, in fact, specifically touting a Mannatech product for the prevention or treatment of cancer. It's hard to believe that no one at Mannatech can perform this same exercise.

There is a link to a "Medical Claims" conference call at the bottom of the Research Links page on my web site. I have recently updated it so it now streams (no download necessary) and cleaned it up a lot (I edited out almost 4 full minutes of babies crying, dogs barking, beeps and coughs, and my own "ums", "uhs" and "you knows").

Here is the direct link: http://www.marketwaveinc.com/audio/medclaims.mp3

Please listen to it. The more that do, the less the FDA and FTC will have to do.

Let's all make the rest of 2007 a very lazy, boring year for them.


Len Clements
MarketWave, Inc.


 

  Since 1989, Leonard 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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