Thursday, February 5, 2015

The $6 Billion Market For Snakeoil

Hucksters used to travel from town to town selling remedies for common ailments.  Snakeoil was one of their favorite natural remedies.  Of course, snakeoil was not present in any of the products, and it would not have helped consumers if it were present.  The FDA was created to regulate the market for medicines.  Congress decided to limit the authority of the FDA to prescription medicine.  That set the stage for the $6 billion unregulated food supplement business which provides snakeoil for many common ailments.  The NY State Attorney General's office tested many of these products and found that most of them did not contain the magic natural ingredient that was promoted on the product labels.  Gullible consumers have been being bilked for $6 billion per year by an industry that sells "snakeoil" but does not put any of it their products.

Many of our "reputable" chains like Walmart, CVS, Walgreens, Target and GNC have been selling private labeled products at retail.  They are also being sold online by criminal enterprises that offer them at a reverse discount.  That is, they are sold online for a much higher price than they are sold at retail.  For example, Somnapure, (marketed by sells a supplement online that is supposed to help individuals with sleeping problems.  They sell a months supply of the supplement for $30; it can be purchased at Walmart for $11.88.  They get the higher price online by deceptive marketing.  They offer a "free sample" to hook the customer into trying the product.  The consumer uses a credit card to pay for shipping and handling.  Somnapure will bill the credit card for $30 unless the consumer calls the company to cancel a "contract" that is buried in the terms and conditions of the "free sample".  The contract enables Somnapure to charge $30 for the free sample unless the consumer calls the company to cancel the contract within a short time period.  The contract also commits the consumer to a monthly purchase of the product forever unless the consumer calls to cancel the order.  This is a perfectly acceptable transaction that is honored by Visa and Master Card if the consumer disputes the charges without canceling the "contract"within the trial period.

This $6 billion criminal industry has many supporters in Congress who consider themselves to be "libertarians".  They have resisted efforts to regulate this market and the deceptive practices that are commonly used to sell the products online.  The don't believe that government should interfere with transactions between snakeoil merchants and consumers.  They use the same argument to prevent the EPA from regulating the energy market.

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