Mannatech Inc., a multilevel/network marketer of dietary supplements, has agreed to pay $4 million in restitution to Texas customers in a settlement with the Texas Attorney General. The company and its former CEO Samuel L. Caster were accused of unlawfully marketing products from 2002 to 2006 by exaggerating their health benefits. In addition to the $4 million, the company will pay $2 million to cover fees and expenses of Texas regulators, and Caster will pay a $1 million civil penalty and is prevented from serving as an employee of Mannatech for the next five years.

Mannatech’s marketing materials falsely claimed that its supplements could cure and treat down syndrome, cystic fibrosis, cancer and other serious illnesses. Under state and federal law, drug manufacturers cannot claim their products cure, treat, mitigate or prevent illness unless the product has been approved by the U.S. Food and Drug Administration as a drug. The state also cited Mannatech for encouraging product testimonials that exaggerated the products’ healing effects. The company reportedly used misleading “before and after” photos that deceived consumers.

The Texas Attorney General commented on the civil action in a press release. “Texans will not tolerate illegal marketing schemes that prey upon the sick and unsuspecting. These deceptive practices posed a health risk to seriously ill consumers who may forgo traditional medical attention because of the company’s false claims. Today’s agreements put an end to Mannatech’s deceptive marketing practices in Texas.”

Mannatech detailed “significant changes” to its operating practices in a press release. Those changes include the expansion of its compliance department, banning the use of disease claims and implementing a six-month money back guarantee on all of its products.

Clearly, the government—be it federal or state—is increasingly cracking down on blatantly false supplement marketing claims. The claims only serve to tarnish the image of the all supplement companies and add to the misperception that this is a rogue, unregulated industry. News like this Mannatech story will always be bad for the industry, but it could be particularly harmful during tough economic times when consumers are being more careful than ever with their healthcare spending.

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