Industries: State of Reliefs

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Sure. But promising a nice paint job isn't the same as claiming to cure cancer. In 1997, Utah-based Nu Skin paid $1.5 million to the Federal Trade Commission, which monitors advertising claims, for five products it said could reduce fat and build muscle. Before that, the company was accused of making unsubstantiated claims about a baldness treatment and a wrinkle lotion. Packaging for many Nu Skin products (and those from sister company Pharmanex) now carries an array of disclaimer asterisks.

Any major regulatory oversight would be a new hurdle for the supplement business, thanks to some old friends in Washington. Senator Hatch co-sponsored the Dietary Supplement Health and Education Act of 1994, which released manufacturers from demonstrating that products were safe before being sold. Hatch has invested in a Utah company called Pharmics, and other supplement companies contribute regularly to his campaigns. XanGo recently became Hatch's top contributor, with executives donating $46,200.

Not even Hatch could halt the industry's dose of bad press, though, over ephedra. The FDA received more than 800 reports of adverse effects from the Chinese weight-loss herb before it proposed limiting doses in 1997. A subsequent study tied 155 deaths to various ephedra products, but uncontrolled sales weren't banned until 2004. Utah company Neutraceutical Corp. is still arguing that lower doses are safe, but in August the firm was overruled by an appeals court.

Another concern: supplement companies may soon have to rethink their MLM models in order to go global. In July, Nu Skin received word that China's Ministry of Commerce has approved the company's proposal to begin direct sales in that country early next year. (So far, Avon is the only other such U.S. company allowed there.) Nu Skin has poured $100 million into manufacturing plants and opened 150 retail shops in China. But it won't be business as usual. Under the license, Chinese distributors earn commissions on products sold outside stores but won't be paid to recruit other sellers. "The government was not inclined to allow multilevel or tiered compensation," says CEO Truman Hunt.

With much of Asia already supplement crazy, U.S. companies believe that China is a natural market for their goods, many of which are derived, after all, from Asian herbs and plants. Consider the buzz in holistic-healing circles around Himalayan goji berries, used in Tibet for nearly 2,000 years to treat kidney problems, allergies, diabetes and tuberculosis. At least that's according to the marketing materials of Timpanogos Nursery, a farm growing goji berries--in Utah. The mangosteen may have met its match.