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In 2014, a judge sided with the Federal Trade Commission (FTC) in a clash with Hi-Tech Pharmaceuticals concerning the alleged use of unsubstantiated claims on supplement labels and marketing materials. The “misleading” assertions made by Hi-Tech? Describing some of its weight-loss products as “thermogenic” and a “metabolic aid.” The ruling left Hi-Tech, a Georgia-based supplements provider and manufacturer, on the hook for $40 million in sanctions.
Hi-Tech’s president and CEO, Jared Wheat, doesn’t believe the FTC cared to discover whether the products in question actually contained ingredients that would kick-start thermogenesis or boost metabolism. Instead, he says, it boiled down to Hi-Tech’s refusal to put the products through a $100 to $200 million double-blind placebo study.
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“I remember thinking, ‘If I can’t call something ‘fat burning’ or a ‘weight-loss aid’ without a double-blind placebo study, when we’ve been using ingredients that we know do those things, I need a new business,’ ” recalls Wheat. “In the past I’ve done doubleblind studies that cost $30,000 to $150,000, but you can’t patent most of the ingredients [in workout supplements]. So by the time you’re done with a two-year, $100 million study, the fad might be gone or the compound might not pay off.”
It wasn’t the first time Wheat battled the FTC. In 2004 he was smacked with a multimillion-dollar lawsuit and later jailed when he stood up to the FTC amid a product-recall demand. In 2014, history repeated itself. First came the fine—this one more than twice as much as the previous one—and then jail. (Wheat and another Hi-Tech executive were found in contempt of court, resulting in a 63-day lockup.)
With the $40 million judgment looming, Wheat had two choices: take the easier, cheaper route and settle the case or again do battle with the FTC. He chose the latter.
“Why pay lawyers three-fourths of the way through, if you’re going to blink at the end?” he asks. “Plus, I’m perfectly situated to fight the fight because I don’t have to go to a board of directors to get permission to stand my ground. To me, it goes back to the schoolyard bully— the guy might beat you up, but if you know you’re right and you hit him back, then he might not come at you again. In this case, if you know you’re right, and you believe you can win, then you can impact the whole industry.”
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Last May, the 11th Circuit of Appeals overturned the $40 million judgment, citing testimonies from experts that reinforced what Hi-Tech had said all along—that the claims on its labels and promotional materials were accurate and used in good faith. And just as Wheat predicted, the ripple effect from the victory would be industry-wide: A few months later, facing similar FTC allegations, Bayer Corp. was cleared of all wrongdoing.
“We’re still a young industry,” Wheat says, citing the Dietary Supplement Health and Education Act (DSHEA) of 1994 as the official start of government involvement in the dietary-supplement industry. “The law is still being interpreted on the books by the FTC or FDA [Food and Drug Administration], so [those agencies] might point you toward a case that was settled and tell you it’s law. But it’s not the law—they’re referring to a group of people who threw in the towel. That might be what they want the law to be, but that doesn’t make it so.”
For Wheat, the latest FTC episode serves as another chapter in a long history within the health and fitness industry. “Growing up…I sold products from Twin Labs, Weider, and the Costellos, even before Optimum was a household brand,” he says. “It goes back to when I was a kid lifting weights in the 1980s, selling products to get mine for free. Then after graduating from college in ’94, I made a business out of it. This is the only job I’ve had since.”
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The quick-paced, ever-changing nature of the game during the past two decades has forced Wheat and Hi-Tech to stay nimble and adapt to remain key players in the game. And even as he dealt with the FTC litigation, Wheat continued to elevate Hi-Tech’s standing and diversify its offerings. In 2015, his company acquired a handful of inventive brands, including iForce Nutrition, Nittany Pharmaceuticals, Advanced Pharmaceuticals and Nutritionals, FormuTech Nutrition, LG Sciences, and Innovative Laboratories.
“Our goal has been to find smaller, innovative brands that don’t have the money to get to that next level,” Wheat explains. “On top of that, the acquisitions have provided me with talented employees who have their finger on the pulse and can help build the business. Now I’m able to put the last 5% or 10% touch on there instead of feeling like I have to do all 100%.”