Pfizer, Bayer, Amway and Herbalife pushing competitors out of the Russian dietary supplements market, violating US anti-corruption laws | Latest news The Moscow Post
01 October 2020

Pfizer, Bayer, Amway and Herbalife pushing competitors out of the Russian dietary supplements market, violating US anti-corruption laws

According to the American edition of NewYork Globe, "Pfizer, Bayer, Amway and Herbalife are pushing competitors out of the Russian dietary supplements market, violating the anti-corruption legislation of the United States".

The inflow of foreign direct investment to Russia in 2019 increased by 4.6% annually and amounted to 26.9 billion US dollars. This is the first significant increase in investment in Russia since 2016. However, many multinational corporations tend to conduct business in Russia "in the Russian way", that is, not disdaining dubious methods. For example, the Russian market of dietary supplements is a vivid example of how American companies conduct various kinds of illegal campaigns in Russia to displace their competitors.

The Union of Dietary supplements producers (SRO UDSP) is a self-regulating lobbying NPO established in the Altai territory in 2008. It includes Russian and international manufacturers of dietary supplements, such as Pfizer, Amway, Bayer, Herbalife, Evalar and others. The Union is controlled by Russian State Duma Deputy Alexander Prokopiev, the son of the owner of the Altai company Evalar. According to various sources, over the past 5 years, more than $6 million has been spent on bribing government officials to fight competitors of Pfizer, Herbalife, Bayer, Amway and Evalar in Russia.

The Director of SRO UDSP Alexander Zhestkov also has family connections in the authorities, namely, in the Prosecutor General's office of the Russian Federation, which directly contradicts the current instructions of the American anti-corruption legislation FCPA. Against the background of systematic pressure of the Prosecutor's office on competitors of SRO UDSP participants, all this forms a picture of a cartel agreement aimed at regulating the market in favor of the Union members. Alexander Zhestkov is also notorious in the community of Russian bloggers for his unethical statements on the topic of harrasment of women.

Here are the details of the SRO pressure on the dietary supplements market in Russia. In 2015, RIA Panda, Russia's largest dietary supplement company, came under a barrage of lawsuits initiated by this NPO. The organization had the largest market share among products for increasing potency, which displaced a number of popular analogues from Evalar and Pfizer. SRO UDSP initiated questionable research of RIA Panda products, which were repeatedly criticized in the media and by experts. The results of the study were sent to the Prosecutor's office and attached to the case, which later ended with the ban of the company's main products. This led to a sharp drop in the market share of RIA Panda in favor of Pfizer and Evalar products. RIA Panda was forced to leave the dietary supplements market.

It seems that nowadays history repeats itself, since the SRO UDSP is campaigning against iHerb with the direct participation of the State Duma of the Russian Federation and the Prosecutor's Office of the Russian Federation. The business model of the international online store iHerb is based on flexible pricing and direct deliveries. This has seriously concerned key manufacturers of dietary supplements in Russia, such as Herbalife, Amway, Bayer and Evalar. IHerb's application to join the SRO UDSP was rejected, and then the Union filed a number of lawsuits against iHerb. And now, the activities of this American company in Russia are almost paralyzed.

Here are some details of the proceedings. In 2018, the Director of the Union, Alexander Zhestkov, filed a complaint to the Prosecutor's office of the Russian Federation on the basis of a fabricated research which showed that some iHerb products contained toxic ingredients. These products are allowed for free sale in the United States and Europe. This research intentionally substituted vitamin B6 and vitamin B12, which formally led to its dangerous dosage according to documents. The Prosecutor's office launched a lawsuit involving Alexander Zhestkov as an interested party and decided to remove the iHerb app from the Russian App Store and Google Play Store.

The trial lasted 2 years and led to the decision of both the Ulyanovsk regional court and the court of Appeal to ban the company's mobile apps. At the moment, iHerb has appealed to the Supreme court of Russia.

In addition to the disproportionately harsh court decision, there are other signs of unfair competition, including the fact that Alexander Zhestkov's mother, Larisa Zhestkova, according to Russian media, works in the documentation support Department of the Office for supervision of the execution of laws of the Prosecutor General's office of the Russian Federation.

The Director of the Union is also a very ambiguous person - Russian beauty bloggers subjected his actions to serious criticism when he said that they are "tongue-tied young ladies" working in the shadow business. Earlier, he also made a number of unflattering remarks about women, and his words were widely discussed in the country's press.

The lawsuit against iHerb raises many questions from international law experts. Despite the fact that the company restricted access to the dietary supplements, which raised questions from the Prosecutor's office, on the Russian web page, the court still decided that the removal of information about these supplements generally "does not have legal significance" for this case. At the same time, the court never mentioned which products should be banned. This ban is compared by various media outlets to "demolishing a hypermarket with a bulldozer if there were expired goods in the grocery department". Thus, in this case, there is clear pressure on the court to provide the necessary solutions.

Of course, American companies such as Herbalife and Pfizer can not directly violate the FCPA, but they can use intermediaries to fight competitors in Russia, for example, a branch non-profit organization such as the Union of Dietary supplements producers.

This loud protest alerted the public – many organizations and citizens of Russia expressed their support for iHerb, as it is the only online store that sells a number of cheap and vital dietary supplements for different groups of patients. Citizens have submitted a petition on the website Change.org, which collected more than 10,000 votes in just a few weeks. A study of the most popular websites and online stores of dietary supplements, conducted by the all-Russian centre for public opinion research, showed that iHerb is in the top 3 in Russia.

In addition, the Centre for Autism Problems in Russia addressed the Government of the country (Prime Minister Mikhail Mishustin) with an open letter about blocking the iHerb store. In their opinion, the court's decision is discriminatory for children with autism, since Russia does not produce dietary supplements of the required quality and does not import them in sufficient quantities. In response to this letter, SRO UDSP published its open letter to the Prime Minister of the Russian Federation, which states that their organization "is not a direct participant in the events taking place around iHerb in the Russian Federation". However, the NPO has already been caught in a deception, since it was Alexander Zhestkov who initiated the trials from the very beginning.

In this case, many questions remain unanswered, but the most important of them is why other members of the Union, large and respected companies in the field of health and dietary supplements, such as Bayer, Amway, Pfizer, Stada and Solgar, support the activities of SRO UDSP and, consequently, their way of doing business, which even to an outsider looks questionable, with a behind-the-scenes and misogynistic approach?

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