The Business Ethics Blog

This is good news for consumers, but bad news for makers and sellers of herbal supplements. The New York State attorney general’s office accusing major retailers of selling. The office issued a series of cease and desist orders on Monday, targeting herbal supplements that, according to genetic tests, don’t contain what they claim to and often contained ingredients that don’t appear on the label. Walgreens, Walmart, and Target, along with supplement and vitamin retailer GNC, have been ordered to stop selling “adulterated and/or mislabeled” herbal dietary supplements, and given one week to produce a small mountain of information regarding the methods by which those products are manufactured and tested.

The AG’s investigation was apparently spurred by a 2013 article in the New York Times that cited a University of Guelph study that used genetic analysis to examine various commercial herbal remedies. That study found a striking disparity between what was on the label and what was actually in the bottle. (I wrote about the study here.)

As I wrote back in 2013, the findings of the Guelph study (and now the findings of the New York attorney general) suggest a quality control problem at best, and outright fraud at worst.

As it happens, I gave a presentation last week (with pharmacist and blogger Scott Gavura) on the ethics of marketing complementary and alternative medicines, including things like herbal supplements. You can see the webcast here. One of the key points we made involves the difference between marketing, say, a homeopathic ‘remedy’, which is utterly incapable of having any biological effect because it literally lacks any active ingredient, and marketing herbal products, a category of products which can in some cases be quite potent, but which can be highly variable in content, concentration, and labelling, not to mention the extent to which their effects and side effects have been verified. Marketing the former is unforgivable: you have to be either a huckster or willfully ignorant to market homeopathy as if it actually works. But the ethics of marketing herbal products is a trickier thing.

The heart of the ethical problem here is that herbal supplements are what economists call a “credence good” — that is, a good that most consumers aren’t qualified to evaluate. The only thing you can do, as a consumer who buys an herbal supplement, is rely upon the word of the manufacturer who claims that those pills really do contain ginkgo biloba or garlic or whatever. In other words, it requires trust.

And that trust could in principle be supported in two things, two forces that could make it more likely that those product labels would tell you the truth. The first is the ethics of the manufacturer. Most people are basically honest, so most-of-us-most-of-the-time trust the makers of the goods we consume, and that works out just fine. But as a backup, we have commercial law and various regulations to give makers and sellers of products good reason, from a self-interested point of view, to treat consumers well.

Alas, the herbal supplement industry has demonstrated that it cannot be trusted. So it’s a good thing that the NY state attorney general is stepping in to protect consumers.

Now if only Canadian regulatory and law enforcement agencies would follow suit.