Retailers—It’s ‘Seller Beware’!

One of the great myths of American society is the notion of Caveat emptor—”Let the buyer beware.” In other words, the buyer alone is responsible, prior to purchasing, for assessing the quality of goods or services offered for sale, and has no recourse against the seller if things are not exactly as they appeared to be at the time of purchase. While that may have been true at some point, in today’s consumer-driven economy, the reality is almost precisely the opposite; it is the seller’s responsibility to understand the nature of the goods or services being sold, and to ensure the quality thereof.

Laws designed to protect consumers’ rights exist on federal, state and even local levels. Agencies such as the Federal Trade Commission (FTC), state Attorneys General (often selecting cases through the appropriately named NAG—National Association of Attorneys General) and even local district attorneys in some states all frequently engage in enforcement activities designed to vindicate consumers’ rights. Most cases brought by these agencies involve large companies (i.e., Metabolife), large frauds (credit card number or identity theft) or threats to public health (bogus cancer or Attention Deficit Disorder cures).

In addition to these public agencies, consumer rights are regularly “vindicated” through private litigation. Such cases are most often brought by private attorneys specializing in representing individuals who have been injured, either physically or financially, as a result of a purchase of consumer goods. These cases, known as “personal injury litigation,” often result in significant amounts of money being paid to the injured consumer. This can involve everybody in the chain of sale, from the manufacturer all the way down to the retailer.

In order to fully appreciate their exposure to potential liability for causing personal injury, retail purveyors of dietary supplements must keep in mind they are selling ingestible substances, and the potential consequences if something goes wrong are much more serious than if the goods in question were pencil erasers.

At common law (the basic law applied by U.S. civil courts) anyone who enters into a transaction with a merchant (i.e., a retailer) for the purchase of an item, in this case a dietary supplement, is entitled to rely upon any express warranties that are made by the merchant on behalf of the product. These can include representations made on the product label, in advertising, or even orally at the point of purchase. Examples of express warrantees include everything from, “Lose weight while you sleep,” to “Guaranteed safe and effective,” to “Contains only 100 pure...”. If any express warrantee is made in association with the sale of a supplement and it turns out not to be accurate, a breach of warrantee will occur and the seller can be sued by any person who has suffered injury as a result. This is true even if the seller was not negligent and reasonably believed the claims made on behalf of the product were true.

In addition, sellers are also responsible for a variety of implied warranties, the most important of which is the “implied warrantee of merchantability.” This is the implied representation made by the seller in any consumer transaction that the item sold is “fit for the ordinary purposes” for which such items are sold. Thus, any supplement retailer sells products with the implied representation that the supplements he is selling are suitable for ingestion—that they will not cause any adverse effect to the person using the supplement. Implied warrantees apply only to merchants ordinarily dealing in the type of product purchased by the consumer. In other words, a supplement retailer will not be held responsible for any implied warrantees relating to the sale of an automobile based upon a sign hanging in their store window.

While retailer liability is often something that is more hypothetical than real, a recent jury verdict in Southern California provides evidence that supplement retailers who ignore the notions of express and/or implied warrantees do so at grave risk to their financial well-being.

On Aug. 25, a Los Angeles jury awarded a former Culver City police officer who suffered a stroke after taking an ephedra dietary supplement a judgment of $4.1 million against Fox Nutrition, the retail store that sold him the product. (It is worth noting the manufacturer of the product in question, AST Sports Science, had filed for bankruptcy.) This decision, which appears to be the first of its kind against a retailer, may establish a precedent that should send a warning to all supplement retailers. In reaching this verdict, the jury relied on evidence that the owners of the retail store were aware of the controversy surrounding ephedra, and had read medical journal articles linking ephedra to consumer deaths and serious injuries. The store owners, however, did not discuss any of this information with potential customers. According to a published interview with the jury foreman, the basic message of the verdict was that store owners who take the position “We don’t give advice; don’t ask us questions,” put themselves at risk if they sell potentially dangerous products and do not expressly warn their consumers or remove the product from their stores.

In other words, if you do not know and understand the nature of what you are selling in your stores, and/or are unwilling to discuss with the consumer any potential adverse effects of any supplement you carry—seller beware!