Utah supplement makers benefit from protections

Utah politicians love their state's vitamin-, mineral- and herbal-supplement industry. It's a global business that brings profits home.

A fifth of the entire U.S. production of dietary supplements occurs in Utah, with about 120 companies generating annual revenues of more than $4.5 billion, said Loren Israelsen, a regulatory consultant and director of the Utah Natural Products Alliance.

"It also provides a lot of jobs, and there's nothing illegal about that," said Sen. Orrin Hatch, R-Utah, a prime sponsor of a change in federal law that left supplements largely unregulated.

"Some people who think every aspect of our lives ought to be regulated raise complaints about it," he said.

The Dietary Supplement Health and Education Act of 1994 allowed vitamins, minerals, amino acids, herbs and botanical products to be sold without government approval. It's now a $22 billion U.S. industry.

The Silicon Valley of supplements is in Utah County, where the late Dr. John R. Christopher, a leading herbalist and author, opened the School of Natural Healing in 1953, giving inspiration the industry.

It's also an industry with a common business model that relies on unsalaried sales associates to recruit others in a chain of minimum order allotments, a practice critics contend is almost guaranteed to lose money for "downline" distributors.

Industry executives defend multilevel marketing as a legitimate business that can benefit anyone who makes an effort, regardless of their position in the distributor hierarchy.

"It doesn't just favor people at the top," said Bob Freeze, vice president of public relations for XanGo, a Utah bottler of mangosteen juice. "It favors anyone who wants to work this business."

A network marketing critic, Jon Taylor of Bountiful, says that more than 40 of the 120 Utah companies operate largely as multilevel marketers.

Taylor, a former distributor himself and a trial consultant for lawsuits against such companies, contends many are thinly veiled pyramid schemes for overpriced goods that couldn't sell any other way.

But the industry took care of that. In 2006, it got the Utah Legislature to change a law to say that if a company had any product to sell, it wasn't a pyramid scheme. A classic pyramid scheme involves no exchange of goods, according to the U.S. Securities and Exchange Commission Web site.

Attorney General Mark Shurtleff, the state's top lawman, urged legislators to make the change in Utah law.