I Fought the Law and the Law Sucks…

In 2008 the Federal Trade Commission came after me, my wife, and our herb company, so we sued them back. I will be writing a whole chapter on this but in the meantime these news articles give a good idea of the story:

Here is an article from Mises.org that was written in July 2008 by S.M. Oliva:

“Consumer Protection or Legal Extortion?”

On April Fool’s Day of this year, New Mexico resident Mark Hershiser received a letter from Erika Wodinsky, a San Francisco attorney, demanding Hershiser turn over all revenue from Native Essence Herb Company, a small business co-owned by Hershiser and his wife Marianne. The letter was not a joke or a mistake. It was a premeditated act of extortion by Ms. Wodinsky. She had never met or spoken with Hershiser; her staff discovered Native Essence through its modest website.

Internet scams and predators are commonplace. What distinguishes Erika Wodinsky from a Nigerian banker or a pedophile is that she’s the assistant director of the Federal Trade Commission’s San Francisco office. Her staff spends their days trolling the Internet for small business owners, like the Hershisers, who sell herbs and herbal remedies to willing customers. The FTC routinely targets such businesses as part of its “consumer protection” mission — which in practice has nothing to do with actual consumers.

Ms. Wodinsky’s demand letter said that her office had conducted a “non-public investigation” of Native Essence and determined that the company’s website contained “false and/or unsubstantiated claims” that “induced” customers to buy certain herbal products. This itself was a false statement. Ms. Wodinsky and her staff never interviewed any of Native Essence’s customers. Indeed, many of the website statements deemed illegal by Ms. Wodinsky offered firsthand customer testimony praising Native Essence’s products and customer service.

But in “consumer protection” cases, the FTC does not have to allege or prove any actual consumer injury. Instead, midlevel bureaucrats like Ms. Wodinsky merely substitute their own judgment for that of a business’s customers. Since she wouldn’t buy Native Essence’s products based on the company’s website, neither should anyone else. Anytime an FTC official disagrees with the content of a commercial website, it logically follows that the website operator is making “false and/or unsubstantiated claims” in violation of the Federal Trade Commission Act of 1917.

Having made a unilateral determination that the Native Essence website should be censored, Ms. Wodinsky offered the Hershisers a simple choice: sign an enclosed “negotiated settlement,” where she had already decided the terms, or face an FTC-controlled administrative litigation process. Of course, if they opted for litigation, Ms. Wodinsky would ask a federal judge to place Native Essence under a government receiver and freeze all of the couple’s personal assets to ensure they couldn’t afford to defend themselves.

The “negotiated settlement” was hardly a better option, however. Under its terms, Native Essence and the Hershisers individually would be under FTC control for the next ten years. This would mean, among other things, that all of the couple’s business records — for any business they own now or in the future — would be subject to FTC search and seizure without a court order: accounting records, personnel records, customer files (including names, addresses, dollar amounts paid, and products purchased), advertisements, and promotional materials would all be under the FTC’s control.

The “settlement” would also require the Hershisers and Native Essence to turn over all money earned through the sale of their products to the US Treasury. In theory, the FTC would administer refunds to “injured” customers, but since there are no injured customers, the money will simply remain in the Treasury “as disgorgement.” And since the FTC didn’t know how much money the Hershisers earned, detailed financial disclosure forms accompanied the proposed “settlement” for Native Essence and the Hershisers individually.

Most recipients of extortion letters from Ms. Wodinsky and other FTC regional bureaucrats simply sign the “settlement agreement” and pray for mercy. The Hershisers took the opposite approach — they filed a preemptive lawsuit against the FTC in US District Court in Albuquerque. They have asked the court to enjoin the FTC from proceeding against them, primarily on the grounds that the First Amendment protects their website from government censorship.

Ultimately, Hershiser v. FTC is about the free-speech rights of businesses and their customers. The FTC is actively preventing individuals from seeking information about products that they might find useful. If you read the feedback on one of the Hershisers’ websites — posted after news of Ms. Wodinsky’s extortion letter became public — you’ll find dozens of satisfied customers who don’t want or need the FTC’s interference.

Here’s a particularly eloquent explanation of what the Hershisers really do, from a customer identified as “V.M.”:

I have been buying herbal products from Native Essence Herb Co. for nearly 14 years. I have engaged in extensive conversations with Native Essence Herb Co. owner, Mark Hershiser, and I have read the data on his website.

Mark has never prescribed any of his products for us. The choice is completely mine based on traditional knowledge and contemporary research which I get through, among others, Dr. Andrew Weil, head of the Program of Integrated Medicine at the University of Arizona.

The FTC’s ideological position is that any information about herbs and herbal remedies must be censored through the federal government — preferably the FTC. In other words, the government alone will decide what information consumers are allowed to consider. Any information published without state permission is inherently “deceptive” and illegal.

Some libertarians use the phrase “Nanny State” to describe this sort of government intervention. But “nanny” implies an overprotective caretaker who nonetheless has the child’s best interests at heart. People like Erika Wodinsky are more akin to abusive, alcoholic parents who beat their spouses and children to enforce strict obedience. Indeed, Ms. Wodinsky’s rage seems more directed at Native Essence’s customers — how dare they discuss and purchase herbal remedies without my permission — than at the Hershisers themselves.

Hopefully, Mark and Marianne Hershiser’s stand against the FTC’s abuse will encourage other victims to stand up and be heard. The public rarely hears about the FTC’s extortion until after the “settlements” have been signed and approved by FTC leadership. It’s too early to know if the Hershisers’ First Amendment lawsuit will succeed, but one thing is almost guaranteed: the FTC will fight this case tooth and nail; after all, the power of people like Erika Wodinsky to violate the privacy, property, and due-process rights of all Americans could hang in the balance.

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Here is an article published in The Taos News on July 8th 2008 and written by Chandra Johnson:

Taos herbalist Mark Hershiser is about to give the federal government a history lesson.

As a merchant of herbal and natural remedies in Taos for almost two decades, Hershiser was surprised when the Federal Trade Commission threatened him with a lawsuit for providing his customers with historical context for some of the herbs on his site.

So on Wednesday (June 25), Hershiser filed what could be an unprecedented suit against the FTC in Santa Fe for infringement of Hershiser’s First Amendment rights. It is an issue his lawyer, Richard A. Jaffe of Houston said has never before been litigated with the FTC.

“I honestly thought I was doing the right thing by telling people what my products had been used for historically,” Hershiser said Wednesday (June 25). “At least that way you could take that and make your own decision.”

Specifically, the FTC was concerned about information Hershiser posted on his Web site for astralagus root, a plant that was used in traditional Chinese medicine to treat diseases like hepatitis and cancer. While the FTC would not admit to Hershiser that his information was wrong, Jaffe says they instead resorted to dictating what information Hershiser could give his clients.

“Just the idea that the FTC can tell me, a person with a condition, that I can’t have access to that information from a site that sells these products is ridiculous,” Jaffe, a nationally known health care attorney, said in a phone interview. “What it comes down to is the FTC is afraid that people might take that herb rather than chemotherapy.”

And although Hershiser pulled the information from his Web site in an attempt to comply with the FTC, the commission then informed Hershiser that a settlement would entail him theoretically paying back every customer he had sold the herbs in question to since his business — Native Essence Herb Company — opened its doors 15 years ago.

To Hershiser, that would have been almost $1 million he would have had to pay back to customers who had used the herbs and never complained.

“As far as we know, none of his customers have ever complained,” Jaffe said.

“I’m not going to pay for injuries to customers when there are none,” Hershiser said. “I told my lawyer, I just can’t do it. I just question that terribly.”

On top of that, Jaffe says the government is being hypocritical, especially since the historical information Hershiser put on his Web site came directly from government Web sites like the Office of Dietary Supplements, National Library of Medicine and the National Institutes of Health.

“The FTC wouldn’t bind itself to allow him to use information that was coming from the government,” Jaffe said. “How can one branch of the government say something and then have another branch of the government say it’s not true?”
Disclosures and disclaimers

While the FTC would not put in writing for Jaffe and Hershiser that the information on the Web site was false, Jaffe said the issue is the information’s context. In order for Hershiser to use the information for his herbs, he would need to be personally responsible to substantiate the information.

“The Food and Drug Administration says that the information can be used, but if it was used for a serious illness like cancer, even if anthropologists know as a fact that certain herbs were used to treat certain illnesses, it can be construed to be a claim that the herb can cure the disease,” Jaffe said. “They’re saying that you can’t say it unless there’s been a clinical trial.”

In other words, Hershiser would have to do the FDA’s job and test his herbs in double-blind clinical trials to ensure that the so-called claims were true. Because herbal medicine is not tested by the FDA, they say Hershiser has no right to post the information, because someone with the intention of using the herbs might take historical context as fact that the herb would cure a certain ailment, which the FTC says is false advertisement.

But Hershiser and Jaffe say that claim is a bit of a stretch, especially considering that Hershiser long ago had an attorney write a disclaimer on his Web site stating that the information was “for educational purposes only” and that the herbs were “not intended as a diagnosis, treatment, or cure for any disease or condition,” and that none of the herbs had undergone clinical trials.

And that’s an issue the U.S. Supreme Court has ruled on before. In the 2002 case Thompson v. Western State Medical Center, the court ruled that “Even if the government did argue that it had an interest in preventing misleading advertisements, this interest could be satisfied by the far less restrictive alternative of requiring a warning that the drug had not undergone FDA testing.”
The future of historical use

The issue of the FTC censoring information like historical use is not new. Last year, Rep. Ron Paul sponsored a bill that would have put a greater burden of proof on the FTC in false advertising cases.

Typically, the federal government has the burden of proof about false advertisements before censoring information, but according to congressional transcript, Paul said in a Congressional speech when introducing the bill last year that “the FTC has reversed the standard in the case of dietary supplements by requiring supplement manufacturers to satisfy an unobtainable standard of proof that their statement is true.”

As history waits to be written, all Hershiser and Jaffe can do is wait 30 days for the FTC to respond and see if the matter will go to trial.

“The FTC is throwing its weight around and everyone up to this point has been settling because it’s a 900-pound gorilla,” Jaffe said. “Not this time. Not him and not me.”

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Here is an article published in July 2008 on NaturopathyDigest.com:

Herbal Supplement Industry Fights Back

Company files suit against the FTC to protect right to share historical use claims with consumers.

By Editorial Staff

On June 25, 2008, an herb company filed suit against the Federal Trade Commission (FTC), claiming it has the right to inform customers about the historical use of herbs in treating disease.

Houston attorney Richard Jaffe, Esq., filed the suit on behalf of New Mexico-based Native Essence Herb Company and its owners, Mark and Marianne Hershiser.

“Herb sellers should be able to tell consumers that an herb has a long historical use to treat a disease,” said Jaffe, a health care litigator and the author of Galileo’s Lawyer, an inside look at the battles between government and complementary and alternative medicine. “The FTC’s prohibition of this kind of truthful information is unreasonable and unconstitutional.”

According to the suit, “The FTC’s dietary supplement advertising guidelines with respect to claims concerning the historical use of herbs violate the First Amendment” and “Plaintiffs can accurately and completely quote or provide a link to information contained on any informational federal government website concerning herbs or herbal remedies.” The suit also seeks “a preliminary and permanent injunction barring the FTC from enforcing its policies prohibiting truthful statements concerning the historical use of herbs against the Plaintiffs and all other persons or companies.”

In April, the FTC informed Native Essence that its Web site “contained false, leading or unsubstantiated claims,” including claims that Native Americans and other cultures have used some of the listed herbs for hundreds or thousands of years. The FTC, which had received no consumer complaints, threatened to file an injunction against the company, despite the Hershisers’ contention that much of the historical information posted on their site is taken from federal government Web sites. The commission also sent a stipulated consent agreement requesting all proceeds from the sale of specific herbs unless Native Essence could demonstrate it lacked adequate funds to do so.

The Hershisers removed the historical information from the company Web site, but then chose to file suit against the FTC rather than acquiesce to the commission’s demands. They hope the courts will decide herbal companies can provide consumers with information taken from government Web sites and other recognized legitimate sources.

“What (the Hershisers) did was put on their Web site information from studies done around the world,” said Jaffe. “[Mark Hershiser] doesn’t make this stuff up. A substantial portion of what he was posting is from federal government Web sites. But the argument is that if the government posts this information on a Web site it’s OK, but it’s not OK if you’re a company trying to sell herbs.”

“This is a precedent-setting case,” added Jaffe. “The issue has never been litigated; it not only affects the Hershisers, but all companies which sell herbal products.”

The FTC guideline, Dietary Supplements: An Advertising Guide for Industry, addresses historical claims in section II C (2), “Claims Based on Traditional Uses”:

In assessing claims based on traditional use, the FTC will look closely at consumer perceptions and specifically at whether consumers expect such claims to be backed by supporting scientific evidence. Advertising claims based solely on traditional use should be presented carefully to avoid the implication that the product has been scientifically evaluated for efficacy. The degree of qualification necessary to communicate the absence of scientific substantiation for a traditional use claim will depend in large part on consumer understanding of this category of products. As consumer awareness of and experience with “traditional use” supplements evolve, the extent and type of qualification necessary is also likely to change.

There are some situations, however, where traditional use evidence alone will be inadequate to substantiate a claim, even if that claim is carefully qualified to convey the limited nature of the support. In determining the level of substantiation necessary to substantiate a claim, the FTC assesses, among other things, the consequences of a false claim. Claims that, if unfounded, could present a substantial risk of injury to consumer health or safety will be held to a higher level of scientific proof. For that reason, an advertiser should not suggest, either directly or indirectly, that a supplement product will provide a disease benefit unless there is competent and reliable scientific evidence to substantiate that benefit. The FTC will closely scrutinize the scientific support for such claims, particularly where the claim could lead consumers to forego other treatments that have been validated by scientific evidence, or to self-medicate for potentially serious conditions without medical supervision.

According to Jaffe, no case law exists to support enforcement of the guideline. A complete copy of Dietary Supplements: An Advertising Guide for Industry is available online.

Resources

* Law Offices of Richard A. Jaffe, June 25, 2008.
* Native Essence Herb Company Sues FTC. Associated Press, June 28, 2008.