Designs for Health (DFH), a practitioner channel dietary supplement company, announced a recent legal victory in its ongoing fight against unauthorized resellers of its products. The company says fraud by unauthorized resellers not only hurts its business, but poses a public health threat, as the perpetrators often remove barcodes and expiration dates in an effort to avoid detection. DFH filed a lawsuit in October 2017 against one such company, Fruitful Longevity Inc., which does business under the name “Health Powerhouse.” According to the lawsuit, Fruitful Longevity removed barcodes and expiration dates from DFH products and sold them on its Amazon.com storefront.
On June 8, 2018, the United States District Court for the Southern District of Florida entered a consent judgment permanently enjoining Fruitful Longevity and several other defendants from dealing in DFH products (Civil Action No. 17-23898). It was uncovered during litigation that there was a nationwide ring of perpetrators opening accounts for DFH products and supplying them to Fruitful Longevity. Defendants also agreed to pay DFH $220,000 in damages.
This is not the only victory for DFH in its effort to combat unauthorized resellers. In December 2017, DFH won a $27 million default judgement in Connecticut (Hartford) Superior Court against Steven Lucchesi (CV176080533S) who impersonated John Pinto, a pulmonologist in Las Vegas, to open a wholesale account with DFH and then sell its products on VitaDocs.com. After determining that the true Dr. Pinto had no knowledge of the fraud, both DFH and Pinto filed complaints with the Las Vegas Police Department.
According to Neal Mercado, vice president of marketing and innovation for DFH, practitioner brands are vulnerable to unauthorized resellers because consumers want to circumvent appropriate channels in an effort to buy a premium product for less money. “As a result, it is desirous of some entrepreneurial individuals to attempt to move high volumes of premium practitioner products at significantly discounted rates,” he told Nutritional Outlook.
That is not to say that all online sale of practitioner brands like DFH are unauthorized. “We enable qualified healthcare practitioners the ability to offer our products on their site as long as they have control over who is purchasing these products to ensure that there is a consultation or appropriate recommendation involved,” explains Mercado. “Legitimate online practitioner websites can be very effective at helping individuals lead better lives through nutritional supplementation when this model is done correctly.”
Other brands have not been keen on pursuing the matter of unauthorized resellers so publicly, but Mercado says DFH felt this was a slippery slope that would erode brand value and trust. “Our approach, while bold and to some extent controversial, has pretty well shut down all unauthorized reseller activity,” says Mercado. “Early on, we decided to be proactive and take control of our brand with Amazon and this has therefore protected our ability to ensure anyone who purchases and takes a DFH product is incentivized to obtain a practitioner consultation and individual DFH product recommendation to get the best results.”
Opening its own Amazon storefront has been one way in which DFH has been able to better control how its products get into the hands of consumers, but the company says it still wants its products to be purchased from healthcare practitioners primarily. For this reason, the company has started a program called DFH Rewards. “[This is] a free program for our practitioner customers that provides additional support, tools, and incentives to ensure they remain the preferred channel of recommendation and purchase for anyone looking to take a DFH supplement,” explains Mercado. “We feel this program provides the best value for the consumer as it ensures they receive an appropriate consultation, and we are planning to expand this program in the coming months with further levels of support and incentives.”
DFH still has two open legal cases which it hopes to finalize in the coming months. Additionally, the firm says it recently identified two other unauthorized resellers against which lawsuits are being prepared.