(Brevard, NC) – Gaia Herbs Inc. has successfully defended a federal antitrust lawsuit filed by Vitacost.com, an Internet distributor of dietary supplements, affirming Gaia’s position not to sell their premium quality herbal supplements to dedicated e-commerce retailers who sell them at deep discounts online. This serves to ensure traditional “brick-and-mortar” natural products stores that competition from online mass market discounters will not factor into the sales potential of Gaia Herbs’ extensive line of more than 300 products.
Starting in 2006, Vitacost.com intended to force Gaia to sell its herbal products to them. They maintained that Gaia’s business practice of mandating a minimum re-sale price for its products, a practice known as Resale Price Maintenance (RPM), violated Florida state antitrust laws. Vitacost’s principals refused to agree to Gaia’s RPM policies that were a condition of sale to Vitacost, and which Gaia unilaterally enforced to all customers operating Internet resale businesses.
Gaia Herbs spent almost two years and over a hundred thousand dollars defending their position, with representation from a leading anti-trust law firm, Greenberg Traurig, LLP. In the final ruling, Judge Donald M. Middlebrooks of the United States District Court for the Southern District of Florida declared that “a product manufacturer may unilaterally announce its resale prices without committing an antitrust violation. Independent action is not proscribed. A manufacturer of course generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently.” Furthermore, the Court referred to the U.S. Supreme Court decision of U.S. vs. Colgate & Co. and stated that “the manufacturer can announce its resale prices in advance and refuse to deal with those who fail to comply.”
Ric Scalzo, Gaia Herbs’ President and CEO, stated upon this case’s dismissal, “This is the right outcome for retailers and consumers of herbal medicines. Gaia Herbs delivers products of unsurpassed certified organic quality. We should not be forced into a mass market pricing model. This decision is a win for any manufacturers and retailers who are choosing sustainable business models based on premium quality and customer service.”
In January 2007, before the lawsuit had been resolved, Gaia Herbs instituted a policy to discontinue sales of its products to dedicated online retailers who have no “brick and mortar” stores. Gaia willingly suspended hundreds of thousands of dollars of online sales with this policy in order to support the fair pricing offered in the traditional retail channel. Gaia’s management team determined that sales to mass market customers at steep discounts via the e-commerce channel was inconsistent with their long term business strategy and customer service goals, which emphasize a premium product branding position promoted by extensive in-store marketing and individual customer service. Gaia’s retail customers who use an e-commerce tool in addition to their brick and mortar store may still sell the company’s products online as long as they uphold Gaia’s RPM policies.
About Gaia Herbs
Gaia Herbs is a certified organic grower and nationally-branded manufacturer of liquid herbal extracts based in Western North Carolina near Asheville. The company cultivates 250 acres of medicinal herbs which, along with all operations at their 36,000 sq. ft. manufacturing facility, are organically certified each year by Oregon Tilth under USDA’s National Organic Program.
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For more information contact:
Ann Griffen Buchman
National Marketing Director