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Case Study 1: Energy Supplements
Natural Balance, Inc. plans to introduce its new energy supplement drink called the Force Fit in six weeks. The company suggests a retail price of $2.50 for a 5-ounce bottle; however, the retail buyers must agree not to sell the drink for less than $2. Natural Balance plans to offer the product for sale to retailers at the same price; however, large discount chains, such as BigCo, and fitness chains will be offered free cases of the product if they purchase a certain amount of Force Fit.
Natural Balance plans to sell Force Fit and other supplements in Mexico, but the company is not sure if the product will require any special licensing or government approvals. Your neighbor says that he knows someone in the Mexican government that could help you bypass any regulations for a small fee.
Rachel works full time as a purchasing clerk, taking classes online to finish her degree in business administration and taking care of her elderly mother. Late one night while watching television, Rachel hears about a new energy supplement that promises higher energy levels. The commercial promotes the supplement as containing natural ingredients, which include vitamin B6, vitamin B12, and a proprietary blend of ingredients, including caffeine; however, the amount is not specified. The advertisement claims Force Fit is safe and consuming the product would not result in any negative side effects. Rachel is excited about the prospect of having more energy so she will be able to accomplish all of her responsibilities.
Rachel purchases 14 bottles of Force Fit and consumed a bottle every day around 3 p.m. for a whole week and felt the rush of energy. She was able to stay up late and did not need as much sleep. After several weeks, Rachel found that she needed to drink two bottles a day to maintain the same energy levels. Rachel started to suffer from severe headaches and leg cramps. Rachel begins to wonder if the drink is safe and firmly believes the advertising was misleading. She considers filing a lawsuit but remembers something from her business law class about two government agencies that might be able to help her and prevent others from being tricked into buying this dangerous product.
Using the South University Online Library or the Internet, research and read about the lawsuits filed against energy drink manufacturing companies or other deceptive advertising lawsuits such as weight loss supplements.
Based on your research, understanding, and the scenario, answer the following questions:
What violations has Natural Balance, Inc. committed in its dealings with the retailers?
Is Natural Balance’s current plan to distribute products in Mexico legal and ethical? Why or why not?
Which two government agencies might be able to assist Rachel? How would they be able to help Rachel?
How would an administrative agency handle Rachel’s complaint? What would be the possible challenges by Natural Balance and the possible outcome?
In one paragraph, summarize the case you found related to energy drinks or deceptive advertising of other products.
Assessing Natural Balance Violations Sample Answer
Assessing Natural Balance Violation’s
Natural Balance violates the laws of supply and demand by establishing a fixed price for its product in the market. Such tactics are considered unethical since they increase the revenue collected by the firm on the sale of the commodity and discourage competition. Whenever a company sets up its price, it influences the supply of the product all through the year (Federal Trade Commission, 2016). Furthermore, a consistent price implies the company does not follow the laws of demand and supply exposing the consumer to a constant high rate for purchase of the product. When Natural Balance forged an alliance with its retailers, the undertaking was wrong since it led to the establishment of a cartel that would uphold the commodity’s price throughout different market segments, regulating the ability of all individuals to access it.
Natural Balance’s plan to expand its operation in Mexico is not ethical since it plans on commencing the operation through illegal means. The company asserts that due to Mexico’s unstable state it should take the opportunity and move into the region without appropriate validation. This implies that Natural Balance will sell its products and not compensate the government its dues (Tax) due to lack of appropriate filling documents. Moreover, the company can abuse its entry into the region and provide substandard products since it is illegally operating in the region, hence not liable for lawsuits when compared to the legally registered companies. Mexico is a sovereign state governed by its regulations and policies, an aspect that implies that before any firm sets up operations in the region, it should be willing to comply with the territories regulations.
Consumer Product Safety Commission (CPSC), and Food and Drug Administration (FDA) are two important consumer agencies in America that can assist Rachel, who is a victim of false advertising. Rachel is a woman who is suffering from various health complications as a result of unethical advertising. Although most of the energy drink firms are excluded the freedom to reveal various components on their products such as caffeine, Rachel’s lawsuit should target misleading advertisements conducted by Natural Balance (Carlan and Nored, 2011). It is paramount that the consumer agencies understand that Rachel was a victim of deception, hoaxed to purchase the product based on its vitamin content but at the end suffered side effects associated with extended consumption of the product.
The administrative agency would file a lawsuit, where it will accuse Natural Balance of falsified advertising and demand for compensation to Rachel based on the unforeseen health implications that the buyer is vulnerable to. Rachel purchased the product with an intention of obtaining energy to work effectively in her environment. The drink although at inception promised results; Rachel later experienced the side effects of the drink after continuous consumption. Based on this aspect, Rachel should advise her agency representatives to file a lawsuit where detailing how she was compelled by the firm’s advert to purchase the product based on the companies withdrawal of information, that its products contained numerous unforeseen side effects (Carlan and Nored, 2011).
A common case of falsified advertising involved Red Bull energy drink, a firm that was accused of its misleading advert that its drink gave you ‘wings to fly’ and ‘vitalizes one’s body and mind.’ Both of these catchy phrases implied that the product enhanced the consumer’s mental and psychological output. It was charged for lack of concrete research to support its falsified claims and finally had to part with over 13 million in settlements to reconcile the aggrieved consumers (O’Reilly, 2014).
Assessing Natural Balance Violations References
Adams, R. J. (2011). A Brief Review and Assessment of the Leegin Decision: Who Wins and
Who Loses When Manufacturers Are Free to Set Retail Prices? Business & Society Review, 116(2), 213-236. doi:10.1111/j.1467-8594.2011.00383.x. Retrieved from eds.a.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=14&sid=8278cdc8-90dd-450b-a5f9-52efd0d60637%40sessionmgr4005&hid=4110
Carlan, P., Lisa, S. & Nored, L. S. An Introduction to Criminal Law. Wall Street Burlington, MA:
Jones & Bartlett Publishers, 2011
Federal Trade Commission. (2016). The Antitrust Laws. Retrieved on April 15, 2016, from
https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws
O’Reilly, L. (2014). Red Bull Will Pay $10 To Customers Disappointed The Drink Didn’t
Actually, Give Them ‘Wings’. Retrieved from www.businessinsider.com/red-bull-settles-false-advertising-lawsuit-for-13-million-2014-10
