[00:00:07] Chris: Hey everybody. Welcome back to Seller Performance Solutions with Leah McHugh, and a client of ours, Keith Gregory of Hyland Labs. How you doing?

Good. And I'm glad you came up with this idea and approached us to talk about what we're talking about today. Compliance craziness. Amazon did a big sweep asking for certificates of analysis and compliance documentation . Was it two years ago when they initially initiated that?

[00:00:38] Keith: They started talking about it about two years ago and rolled it out around January, February 2021.

[00:00:44] Chris: 2021. So maybe 18 months ago. And we just want to catch up on this topic because we know that certain brands, especially lesser known sort of Phantom brands have been proven to be, or shown to be misrepresenting the potencies of their dietary supplements, that's one issue we're going to talk about today. And the other is just Amazon's lack of follow-up in terms of auditing, they might request a COA on your way in, right? But never check back in or pull random samples of products in FBA to check their potencies later on down the line, unless there's a buyer complaint, right? Maybe we'll just start with that. Do you think it's even just by a buyer complaining, Hey, this product, wasn't what it was cracked up to be. What, what it was supposed to be as shown on the label is that where this all starts?

[00:01:30] Keith: I don't think most consumers in this space would necessarily even know of a product met label claim or not. And I think that's the real danger here, is with vitamins and supplements. A lot of the times you're, you're taking them from a active stance, so it's not, Hey, I'm sick and I'm taking something to cure or prevent because we're selling supplements. You can't do that. We're doing things to better your life from a proactive standpoint. So a lot of times people wouldn't know if the product wasn't what it claimed to be and unless there's somebody out there, you know, policing that, checking that and making sure, you know, the products are selling are actually compliant. There's nobody safeguarding the consumer here.

Right.

That's the real danger, I think.

[00:02:13] Leah: Yeah. And it's interesting because I think that a lot of the new compliance checks that we were seeing were being pushed by greater scrutiny by the FDA. I've certainly seen in my work a lot more FDA warning letters, specifically mentioning products that were sold on Amazon or what verbiage they were using on their Amazon page. I guess my question to you as somebody in the industry is what would be the next step? Is it the FDA that needs to push for greater scrutiny? Is it Amazon? Is it both?

[00:02:46] Keith: I think there's a burden on everybody, right? Certainly Amazon as the host of this marketplace share some responsibility in this. Right?

And I feel like they've kind of done the bare minimum as far as saying, okay, we're going to require a C of A for a new product before we allow it to list. Right? Which is and they did step up that requirement. Cause it used to be, you could list anything on Amazon and the dietary supplement category, and then there was no requirements, right?

So at least they're requiring a third-party CFA now to say, okay, this product does indeed have what it says it is. And then even further, like in some categories, male enhancement categories, those kinds of things. They're requiring further testing to show that there aren't adults rated materials in some of those products, but where they're falling down is, you know, as soon as a product has submitted at CFA, further lots that are being submitted further, you know, shipments into Amazon and those marketplaces, they're not testing again.

There's no random sampling across the marketplace and so It creates a conundrum , as when you're in the industry and you see products selling on Amazon at below market price, of some of raw materials that are in there. Right? So those of us that are in the industry, we start to question, okay, well, what's the integrity of that product?

We don't know this brand. You don't see this brand on a store shelf anywhere. I can't go down to the local Kroger and buy this. So who's policing that? And the way we started this conversation was Now Foods came out with this big study where they went and they randomly bought 24 different products and the person in space on Amazon, and they sent them off to a third party lab, ISO lab to test them.

And what you find out is there's only three out of those 24 products that actually met or exceeded label. Some of them, it was non-detectable..

[00:04:37] Chris: And we've heard this a lot in the supplement space, a lot of sellers who are new sellers jumped into it because Amazon wasn't mandating compliance documentation. Right? It's not the same thing as in selling in a retail store where the process was different. Amazon seemingly was playing catch up or building this from the ground up. And there was a history of misrepresented product for years in the supplement space, right? I mean, the supplements became known for that kind of behavior.

[00:05:06] Leah: We would also be appalled to know how many people contacted us, who were already selling supplements who did not know what a CFA is or how to get one, or had ever had one made for their supplement problem.

[00:05:18] Chris: And so why should it be your burden, Keith, as an established player in this category, in this business to do all the buying and testing it yourself? Why wouldn't Amazon assumed some of that burden? Why is it up to a supplement seller to conduct all this due diligence, right?

[00:05:36] Keith: And the reality is, is the FDA would say it is the brand's responsibility to have. So if you look at 21 CFR, part one 11, which regulates dietary supplements and vitamins in the United States, it very clearly it says, if you're going to sell a brand, regardless of the marketplace, You need to have third-party certification on what's in that product, you have to have a CFA for every lot of product you sell to say, okay, this is what my product is. It lays out pretty clearly what you have to test in that product. So if I'm the FDA, I'm going to put the burden on the brand. Which is probably why Amazon has said it's not necessarily our job to police this, but at the same time, the FDA does not have the resources to go out and police all of the different brands that are on Amazon and Amazon doesn't make it easy to know who those brands are. Right? Like you can go and find out somebody might be selling that product, but it may not be easy to contact them or ultimately figure out who they are either. So regardless of the regulatory piece, it's hard to sometimes track down who these people are and who's selling on that platform.

[00:06:43] Leah: Well, and unlike in a traditional retail relationship, there isn't a whole lot of due diligence done before the products are listed. I mean, products that are being sold in the store, somebody knows who is selling those products and somebody knows where to find that person, if something goes wrong, Amazon not necessarily.

[00:07:02] Keith: Very true again. You see that across all categories on Amazon, but certainly in this space there's a lot of opportunity in the supplement space. I went through and pulled the numbers for maybe 12 of the products that were in this test a nd you're talking about $2 million a month and some potent products, you know, so twenty-five million dollars a year. People are spending on products that aren't what they claim to be. It seems like a pretty big deal and that's just one small sub-sect of products on Amazon. it's not one of the biggest categories. It's not vitamin C you probably see the same thing pervasive in a larger category.

[00:07:38] Chris: We've worked with vitamin C sellers, supplement sellers who had to report products where the labels didn't match the contents of the product at all. And had to report that to Amazon, which leads to my next question, because I was thinking of the vitamin C examples, and we've worked with people in that area, that category, Amazon has kind of had to be pushed to take action on those sellers.

Amazon wasn't necessarily pulling the products, testing them, sampling them themselves until they were really pushed hard. So do you think that's what it takes at least in this day and age? Do you think Amazon has to be almost arm-twisted, or coerced into testing this stuff in order to take more of an interest in the bad buyer experience created by sub-potency products?

[00:08:25] Keith: I think they certainly have a responsibility to either provide more transparency around products or require a greater burden on people selling on the platform. Right. And I say that as a seller, not really loving the current burden that we have to go through sometimes, but in order to ultimately protect the consumer, either Amazon has to randomly sample products, right? And you can argue about whether that's truly their responsibility or not, or you've gotta create a bigger burden where every time a seller sends in a new lot of product, they've got to provide a CFA, which I don't think that would be unheard of. Right. I as a brand owner already have a responsibility to make sure I have a CFA for every lot of product that I have. Why not just require me to send it in? You might have a harder time if somebody wants to sell FBM. But you know, that's a different ball game.

[00:09:18] Chris: Well, the alternative is Amazon just waits until they get a letter from the FDA mandating certain actions, right? Which is how it currently appears to be. So they could either just stand pat and keep waiting for letters from the FDA. The difference here is that Amazon's always professing that the number one goal is the best buyer experience and online commerce it's online, shopping possible. So if you're sitting around waiting for letters from the FDA, telling you to take down all these listings and pull all these items out of FBA, then you're not providing the best buyer experience by definition, right?

[00:09:54] Keith: No. And I don't know how you can possibly sit there as Amazon and say you're providing the best buyer experience when the number one selling product in this category where that was tested they sell over $500,000 a month in product that's less than 60% potent so, okay, how, how is that providing a good consumer experience? The people are basically buying junk, right?

[00:10:17] Leah: I don't even think they would need to create new SOPs. They own Whole Foods. Whole foods has pretty much been known since the beginning as being one of the highest burden of proof in terms of getting your products listed in there. So they probably already have the SOP is with Whole Foods. They're just not using that on the marketplace.

[00:10:35] Chris: Yeah, it's not scalable. It's not adjustable enough and convenient enough for their needs.

[00:10:42] Keith: So the supplement space has some of the highest PPC costs of any space on Amazon, right?

So you start cracking down on some of these sellers and all of a sudden you're cutting into your revenue big time.

[00:10:52] Chris: Right. Though the financial disincentives we don't even have to go into because we already know that they're there, but what kind of traction do you get when you refer any of this or report, any of this to Amazon compliance?

[00:11:06] Keith: So, when you look at NOW Foods who started this kind of self policing program in 2017, every time they go through one of these categories and create these reports, they send it to Amazon, they send it to the FTC and there's been very little action of any kind that you can tell from it.

I think Amazon gives it a little bit of lip service, but they're not taking action in the category. They're not doing anything to make it a better experience for buyers. It's just making it I think harder for reputable brands that are trying to do the right thing to be competitive in this space and actually get their products in front of consumers.

[00:11:42] Chris: And Leah can tell you, we've taken on client cases where people have hired us just to escalate this type of abuse, because they've already reported it in maybe 92% of the cases that the people who come to us have already tried reporting it through established Seller Central regular channels. Most of them got absolutely nothing back that indicated that it had been reviewed or that any action was taken. Obviously they can tell if the listing is still up, that no action was taken, but they don't know why. No one explains that. And we have to use the escalation process just to increase the odds that it's reviewed. Right?

[00:12:19] Leah: Yeah. Or more public forums to try to sway consumer decisions in terms of Amazon decisions.

[00:12:28] Chris: Which in itself means if you have to escalate it, I mean, a lot of sellers and brands don't even know how to escalate a complaint or an abuse report like this. Most sellers, I would argue, don't know how to do that.

[00:12:38] Leah: Well, and this is something that a consumer wouldn't necessarily realize, a consumer isn't going to take their supplements to a lab to make sure that it's as potent as it's supposed to be. So it's not a consumer facing issue, which usually means that it gets ignored until pushed by a regulatory body or the media.

[00:12:58] Keith: If you look at it from Amazon's perspective, if somebody is doing 22,000 units sales a month and they get one or two complaints on that, Amazon looks at that as a great seller.

[00:13:10] Chris: A victory.

[00:13:12] Keith: They're not seeing the fact that, oh, that product is complete garbage, and they're basically just people that are throwing their money away on it. But that's the reality, you know, you take some of these products that whether it's completely just mislabeling or just outright fraud. I mean, I don't know how you take, you know, some of these products that were in this test that had non-detectable levels of the active ingredient, or less than 50% of the active ingredient and say it's anything other than fraud and that's what you're seeing pervasive on the site. And it shouldn't be the responsibility of other brands to point this out to Amazon. I think that's kind of the point, right? Amazon should be doing something to protect the consumer in this regard. But you're not going to end up, you're not going to end up with a class action lawsuit regarding supplements against Amazon.

If it was a toy, that some of the people's children were buying and we were having a problem with it, Amazon would be treating this very different.

If the category manager, undoubtedly is aware of this. If the people who are responsible for managing this category, don't have the bandwidth, they don't have the authority, or don't have the support of their superiors to implement new SOP and new solutions for this. We can all agree that it probably won't happen. So what other suggestions, what are other ideas are there that we could suggest to Amazon knowing that we can't just lay this at the feet of the category manager? Is it really just people writing letters to Andy Jassy? What other concepts do you think haven't been touched yet that could be brought into this?

The reality is the solutions are there and they're already part of the regulatory framework of our industry. It's getting Amazon to kind of enforce some of those compliance issues and all they have to do is require that CFA for every lot of products that send in and then actually have somebody trained on the other side that can review it. So I think sometimes there's a challenge there too, where we send it, and it's very detailed, analytical paperwork and whoever's reviewing that doesn't quite understand it. It's not always the same format. There's hundreds of different labs out there with different formats.

So you do have to have somebody competent that can actually review that stuff on the other side. Otherwise it's just paperwork for the sake of paperwork, which I know Amazon doesn't love. But There's things in place already. They just need to be enforced in this space, and from a consumer perspective, know who you're buying your product from.

I think if you're somebody that's taking supplements and you're buying them on Amazon, do a little research, do these people sell anywhere else other than on Amazon?

[00:15:41] Chris: We're always preaching everyone on this podcast. Don't believe everything you see, hear or read. So that goes for consumers and sellers. Of course, too. All right, Keith, thank you so much. This is really interesting and really important. Thanks for speaking with us today about this. Is there anywhere you want anyone to reach you directly, if they have examples like this that you want to show to Amazon, or would you prefer that they reach out to us with that information?

[00:16:09] Keith: They can reach out to you guys and you can share with me, that would be perfectly fine. If somebody wants to reach out to me directly, they can reach me at keith@highland-labs.com and they can probably find me on LinkedIn too if they try real hard.

[00:16:23] Chris: Alright. Well, they know where to find me and Leah. So thanks again for joining us for Seller Performance Solutions. We will speak with you next time.

[00:16:31] Keith: Thank you.