Nutritional supplements companies that have been accused of selling tainted products and providing misleading information are facing the wrath of the justice department and the market. The federal Justice Department has filed cases against 117 companies and individuals. With some of the companies facing criminal and civil cases, the big retailers in the dietary supplement market saw their shares have dip initially before the full details were released to the public.
USPlabs Faces Charges on Multiple Supplements Brands
One of the notable companies indicted in the suit is USPlabs, the Dallas-based company which sold Jack3d and OxyElite pro, two of the best-selling workout supplements containing an amphetamine stimulant. Six executives from the enterprise face prosecutions for selling the products that the justice department claims to be illegal and dangerous. The two largest retailers of USPlabs supplements, GNC Holdings and Vitamin Shoppe have suffered; the crackdown has led to both of their stock prices dipping. GNC Holdings shares went down by a whopping 27 % while Vitamin Shoppe lost nearly 10% before the market realized that the retailers were not named in the suit by the justice department.
USPlabs is being accused by the FDA of passing misleading information to the retailers and wholesalers; the company claims that its products are made from natural plant extracts whereas investigations revealed that they have been using a synthetic stimulant that is made in a Chinese chemical factory. According to the proceedings brought against the company, one of the products sold by USPlabs has led to liver injuries and one death. According to the marketers, the products enhance performance through increasing endurance, speed and strength.
Another product that is sold by USPlabs, Jack3d was banned in December 2011 by the department of deference when two of the soldiers died after consumption. Some shops operated by GNC Holdings were also affected when the DOD banned the product on military bases and surrounding areas.
Increased Regulation Causes Anxiety in the Market
The news that the Justice Department was making an announcement on the charges caused panic in the stock market, the investors were anxious, when the decision was made, companies that were not mentioned in the list got a reprieve. GNC Holdings and Vitamin Shoppe were not mentioned in the cases that were brought by the federal prosecutors leading to a slight recovery in share prices. The crackdown is a positive move to ensure that the consumers are well protected from harmful products; the investors can also learn from the incidence, use of ingredients that harm the consumers will not only lead to numerous criminal and civil cases but will also adversely affect their businesses.
Inspired by well.blogs.nytimes.com
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