Pharmavite sues Clean Label Project over running alleged protection racket

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The lawsuit was filed on Sept. 1 in the California Central District Federal Court. The lawsuit was filed under  RICO (Racketeer Influenced and Corrupt Organizations Act), Lanham Act and California’s Unfair Competition law.  Named as defendants are the Clean Label Project (CLP), Pure Market LLC and Ellipse Analytics LLC, two allegedly allied businesses, all of which are based in Colorado and for the purposes of the lawsuit have been construed as a single entity.

Clean Label Project (CLP) has claimed to be acting in favor of label transparency in an effort to expose products that had troublesome amounts of heavy metals, pesticides or other contaminants and also to highlight products that don’t meet label claim. The organization selects categories of products, tests them, and then based on the results issues grades, all allegedly to help consumers find the best products to buy.

Criticisms of organization’s business model

From the outset stakeholders in the dietary supplement industry had been uncomfortable with the organization’s business model.  CLP had been criticized for being intransparent on the testing methodologies it used as well as being coy about how the organization was funded. In addition, critics have said the organization’s grading system was subjective and the criteria used to assign certain grades was not made clear.

The organization has also drawn fire for raising the alarm about trace amounts of metals and other substances in various categories of products that the manufacturers maintain are well within federal guidelines and within the stricter standards laid out by California’s Prop 65 as well.  For example, when CLP raised the alarm about contaminated baby products in 2017 it subsequently revealed to fact checking website Snopes that the median concentrations of arsenic was 5.5 ppb, well below the Environmental Protection Agency’s level for drinking water and the US Food and Drug Administration’s limits set for baby cereal.  Similarly, the median concentration of cadmium was 2.74 ppb, well below EPA’s limit.

To date the organization has tested and graded protein powders, edible oils, baby foods, pet products, hemp products, sunscreens and prenatal vitamins.  It publishes lists of the ‘best’ products, those which have gone through what CLP says is a certification process.  CLP issues what it calls its Clean Label Project Purity Award and its Transparency Award.  It also lists the ‘worst’ products, a list which includes some big industry names such as Vega and Dymatize.

Questions about funding

As far as funding is concerned, Jacklyn Bowen, CLP executive director, told NutraIngredients-USA​ last month that while the organization does receive some funding by sales of products on Amazon, the majority of its income comes from donations from consumers.​  Bowen claimed that the average donation from consumers through the first half of 2020 was $25.

Pharmavite’s lawsuit alleges that the organization is funded differently.  According to the lawsuit, CLP uses the cover of its nonprofit status to pressure companies into paying sizable fees to acquire the organization’s certifications.  If companies refuse, the lawsuit alleges they are subject to threats of lawsuits that will claim the products are ‘adulterated’ or ‘impure.’

Pharmavite: CLP profits from payments on demand letters

“To date, the lead named defendant has filed no fewer than 15 such lawsuits, and has threatened numerous others, including threatening to sue Plaintiff Pharmavite, unless Pharmavite pays millions of dollars for the lead named Defendant​ [CLP] to stand down,” ​the lawsuit stated.

The lawsuit says that two Pharmavite Nature Made Prenatal Multi multivitamin products received rankings of C+ and D+ from the organization, even though the products are identical save for the pill count (one sku contains 90 tablets, the other 250).  The products were listed as “fair” or “below average” for heavy metals without explaining what those rankings mean.  

Pharmavite claims in the lawsuit that the levels of lead and cadmium in its prenatal vitamins that were cited by CLP as problematical are lower than Prop 65’s safe harbor limits and thus are lower than CLP’s own purported standards.  The lawsuit raises similar concerns about pesticides.

The lawsuit also alleged that the product labeled as ‘best’ in the category has lead and cadmium levels that are equal to or higher than the levels purportedly found in Pharmavite’s products.

Pharmavite alleged it has received two demand letters from CLP issued by a Michigan law firm.  The lawsuit alleged the letters demand Pharmavite pay “millions of dollars” ​to obtain a CLP certification and avoid a lawsuit.  In a press statement that accompanied the filing of the RICO suit Pharmavite said the amount was $1.9 million.

Pharmavite: Attempts to engage CLP on test results were fruitless

“Quality is the cornerstone of every product we make at Pharmavite. This complaint, asserting claims under RICO and California’s Unfair Practices Act, is Pharmavite’s first step in stopping Defendants’ wrongful conduct,” ​ said Pharmavite vice president and general counsel Christine Burdick-Bell.

Tobe Cohen, Pharmavite’s chief growth officer who has jurisdiction over the company’s quality group, said Pharmavite had attempted to discuss the testing results with CLP but was rebuffed.

“When we were first contacted by CLP our initial goal was to reach out to them and Ellipse Analytics for a professional and frank discussion on testing results and methodologies. Those efforts were met with a refusal to share relevant details. If CLP was truly interested in protecting consumers, I would expect it to be eager to be transparent with its testing methodology and other details,”​  he said.

Attorney:  RICO strategy of interest for wider industry

Attorney Ivan Wasserman of the firm Amin Talati Wasserman said the filing is part of an ongoing trend within the legal profession to widen the scope of what the RICO statute can address.

“This is definitely the new ‘case to watch’ in the supplement industry.  No matter how this case turns out,  it is very interesting to see how RICO actions, that are generally thought of as ways to take down the mafia, are not just being used by the government against bootleggers and gambling syndicates.   Anyone that has been the victim of an organized attempt to harm them that includes illegal activity (e.g., fraud) may be able to use a civil RICO action to fight back,”​ Wasserman said.

Clean Label Project was contacted for comment on the lawsuit but did not respond in time for the publication of this report.

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