July 24, 2014

States Go After 5-Hour Energy for Deceptive Advertising

By Gordon Schnell

In the ever-expanding market for high-octane energy drinks, 5-Hour Energy has been the standout success story.  These two-ounce power surges are purchased 9,000,000 times a week for a total takeaway of more than $1 billion a year for the crafty vendors of this wonder blend, Living Essentials and Innovation Ventures.  And it took them only ten years to get there.  Sitting proudly and seductively at virtually every checkout counter in the country these days, 5-Hour Energy has been unstoppable in its consumer appeal and revenue return.  Until now, that is.

According to three states — Oregon, Washington and Vermont — 5-Hour Energy’s undeniable success has a lot more to do with its fraud on the public than its magical “blend” of vitamins and nutrients.  In a jointly orchestrated attack, each of these states late last week filed lawsuits against the makers of the brawny brew for deceptive advertising.  More states are expected to follow.  The gist of their claims is that 5-Hour Energy is a very different beverage than what its highly caffeinated enthusiasts believe it to be, and that its promoters have spent half a billion dollars to keep it that way.

According to the Vermont complaint, which closely follows the complaints that Oregon and Washington filed, there are four principal frauds surrounding the 5-Hour Energy marketing and promotional juggernaut.  First, the product claims a mighty mix of B-vitamins, enzymes, amino acids and other ingredients that separate and apart from its caffeine infusion — about five sodas worth — leads to higher energy, alertness and focus.  Vermont and its sister states reject any such nourishing component to the energy drink.  They say, it is all about the caffeine and “nothing else.” Second, the product claims hours of increased energy and zest but without the inevitable “crash” associated with other caffeine-based products like coffee.

The problem is that the company’s own research apparently fails to back up this “no-crash” claim.  And when the National Advertising Division of the Council of Better Business Bureaus advised the company to discontinue what it viewed as this unsubstantiated hype, the company refused to comply (though it last year backpedaled a bit by “downgrading” the rhetoric to “no sugar crash,” whatever that means). Third, through its “Ask Your Doctor” campaign, the product claims the backing of trusted medical experts who have supposedly attested to the cocktail’s safety and health benefits.

The suing states, however, challenge the underlying basis of the company’s claim to this medical industry support.  They argue 5-Hour Energy has not come clean on the number of doctors it actually surveyed, how they actually responded, and what they actually found.  The states also argue the underlying survey on which the ad campaign is based is scientifically unsound and misleading. Finally, the product — despite its high caffeine concentration — strongly suggests it is appropriate for adolescents.  This comes from the product label and promotional material (which only cautions children under 12 not to take the product) and the high-intensity TV advertising directed at programming with high teen appeal.

To make its point, Oregon highlighted a study by the Yale Rudd Center for Food Policy & Obesity which found 5-Hour Energy as the beverage teenagers saw most advertised on TV — three times more than any other drink, including Coke and Pepsi. It is this final point that may be what is behind the crusade by Oregon and other states to force 5-Energy to clean up its act as there has been a very forceful drive to keep these kinds of highly caffeinated drinks away from children.  As Oregon highlights in its complaint, the American Medical Association last year called for a ban on marketing these drinks to those under 18 until we learn more about the potential health risks.

The American Academy of Pediatrics has also cautioned about the potential health concerns of which we remain unaware.  Oregon seems particularly perturbed that 5-Hour Energy is so actively going after this constituency “despite the fact that they lack competent and reliable scientific evidence that their products are appropriate” for this age group.

So where 5-Hour Energy has thrived in the marketplace, running rings around its competitors, it finally may have met its match in the regulatory arena.  The States are not only seeking to enjoin what it sees as this litany of deceptive marketing and promotional activity.  They also are aiming to get a total refund for their residents for the drinks they purchased or significant penalties for each deceptive act in which they say the company has engaged.

While a total refund is a tall ask and one unlikely to be granted by any court, the threat of a significant damages award against the company remains real.  As for those who are regular users of this or other high-energy dietary supplements, stay tuned.  No doubt, changes are on the horizon regardless of how these lawsuits ultimately play out.

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