Niches on the Internet


Credentials, Biography & Articles


The Clinton White House, in its last year in office, released ten million dollars to federal consumer agencies to "police" the Internet. This has resulted in a substantial increase in enforcement actions, especially against nutrient (and alternate energy device) purveyors. At the same time, the grace period for filing "Structure and Function" claims notices with the FDA expired in early 2001. The nutrient marketplace became "self-policing" just as the authorities were enabled to test the limits of the new electronic markets. And testing they are!

All goods and services in the marketplace are subject to various government regulations. In market oriented societies it is understood that the less regulation the better, but, certain goods and services are still regulated "for the public good."

The FDA states on its web site,

"FDA regulates dietary supplements under a different set of regulations than those covering "conventional" foods and drug products (prescription and Over-the-Counter). Under the Dietary Supplement Health and Education Act of 1994 (DSHEA), the dietary supplement manufacturer is responsible for ensuring that a dietary supplement is safe before it is marketed. FDA is responsible for taking action against any unsafe dietary supplement product after it reaches the market. Generally, manufacturers do not need to register with FDA nor get FDA approval before producing or selling dietary supplements. Manufacturers must make sure that product label information is truthful and not misleading."

Thus, the main point to note is that we are in a "self-regulating" business where we are responsible for "ensuring" safety and making sure that all claims are "truthful and not misleading."

Or, as a Federal Trade Commissioner, said in 1995,

"As many of you know, the FTC is charged with protecting consumers from unfair or deceptive acts or practices. In advertising and marketing, the law requires that objective claims be truthful and substantiated. The FTC does not pursue subjective claims or puffery -- claims like "this is the best hairspray in the world." But if there is an objective component to the claim -- such as "more consumers prefer our hairspray to any other" or "our hairspray lasts longer than the most popular brands" -- then you need to be sure that the claim is not deceptive and that you have adequate substantiation before you make the claim. These requirements apply both to explicit or express claims and to implied claims. Also, a statement that is literally true can have a deceptive implication when considered in the context of the whole advertisement, even if that implication is not the only possible interpretation.

"The substantiation requirement exists because every time an advertiser makes an objective claim, the advertiser also implies that there is a reasonable basis for the claim. This reasonable basis is substantiation. What constitutes a reasonable basis for a particular claim can vary, depending upon the nature of the claim, the product, the consequences of a false claim, the benefits of a truthful claim, the cost of developing substantiation for the claim, and the amount of substantiation that experts in the field believe is reasonable. Health and safety claims generally require competent and reliable scientific evidence. And if a marketer makes a representation that a claim has a particular level of support -- for example, "clinical studies prove . . ." -- the law requires at least that level of substantiation."

Specifically about nutrients, the FTC also stated: "supplement marketers are cautioned that the FTC will require both strong scientific support and careful presentation for... claims. *** Supplement marketers should ensure that anyone involved in promoting products is familiar with basic FTC advertising principles. The FTC has taken action not just against supplement manufacturers, but also, in appropriate circumstances, against ad agencies, distributors, retailers, catalog companies, infomercial producers and others involved in deceptive promotions. Therefore, all parties who participate directly or indirectly in the marketing of dietary supplements have an obligation to make sure that claims are presented truthfully and to check the adequacy of the support behind those claims."

I talk to many nutrient vendors who are just beginning to learn about the new marketing situation the hard way -- by having to respond to formal inquires from the federal agencies. Like many marketers, they keep on trying to "make claims" and, of course, agency lawyers are often smart enough to see through each effort. Some thought that using "testimonials" would allow claims, but, testimonials can only support claims that are lawful to make in the first place. So, for example, you cannot make a health claim (which characterizes the relationship between a nutrient and a disease) without prior agency approval, even if you have many testimonials as to the use. The agency will require "competent and reliable scientific evidence" before approving the claim.

My advice to all "on the edge" alternative marketers is to delete all health claims, testimonials etc. What needs to be accepted is this: THE GREATEST POWER OF THE INTERNET IS WORD OF MOUTH. So instead of spending all your time "fighting the feds," you can present a bare web site and spend marketing time encouraging word of mouth. Alternative marketers will not likely ever have an "Amazon" mass market. Nor does the recent fate of the .com companies suggest that such a marketing strategy really works on the Internet. The Internet will turn out to be the true home of the savvy niche marketer!

What you do have is a market of educated consumers who already know what they want. You just have to let these individuals know what you've got. Not what it is claimed to do.

"Private site. You must join our private association before you can buy. This site makes no claims as to the use of these items. Not intended to be used on or in the human body. Not intended to diagnose, treat, prevent, mitigate or cure any human disease or condition. Experimental. Use at your own risk. The contents of this site are not advertised to the public. If you like this site, you can let your friends know about it. That is the only way to find out about this site."

The main things you would have to be careful about in this type of marketing are:

(1) The meta tags you use. One could argue that tags for search engine use may not be 'advertising' as the public is not intended to see those words. However, the agency may very well consider such meta tags as claims, subject to the usual prior substantiation and "truthful and not misleading" standards. Putting your competitor's trademark in your meta tag could very well be an illegal unfair trade practice, as some cases have held, but mentioning a competitor can also be "fair use" of another's trademark. If you are selling cola and put "coke" as a meta tag you may be violating the cola company's registered trademark. If you put in "not coke" you may be making fair use of the word.

(2) How to gently encourage word of mouth without "spamming" or abusing chat rooms and billboards (you can't post in your company's name, but satisfied customers can certainly post and let others know about you), and

(3) How to have a private, not public (and therefore arguably not within agency jurisdiction) relationship with your buyers. How do you join the association of buyers? By reading the Association Statement and leaving your email address. Have a "public" first page (for search engines and links) that requires the viewer to make a conscious choice to enter the private section after being required to leave their e-mail address.

You need a strong Privacy/Private Association Statement/Disclaimer web page and careful attention to all the words used on the site -- "no claims" -- explain what the product is, not what it is claimed to do. You have to learn to trust your customers to find you in the new electronic marketplace.

One edge marketer who moved to this position during an agency investigation reports that there were about two dozen sites selling competing nutrient products. The agency entered into standard Stipulations of Settlement with a dozen of them, letting them stay open if they strip out their claims, offer all their old customers another chance to get refunds, pay hefty "civil penalties" and submit to close oversight. Another nearly dozen are being prosecuted and will be closed down. And his site -- he implemented the strategy before getting to the settlement stage and was just told that he would receive a letter telling him that since his site now complies with the "truthful and not misleading" requirement, there would be no need for further action, no "settlement" and no probation!

Let's call this "new" marketing strategy "mum marketing" --
you know, "mum's the word... of mouth."

Ralph Fucetola, JD

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