Examining the Ethicality of Airborne’s Marketing Strategy

Patrick Legendre Business Ethics Prof. Martin

Wednesday, October 16, 2013

I. Case Overview Dietary Supplement Industry The growing dietary supplement industry, which includes the hundreds of weight loss and immune support supplements on the market, grosses approximately $20 billion annually (Burke). As established by the Dietary Supplement and Health and Education Act of 1994 (DSHEA), these supplements are not required to undergo testing or receive approvals from the Food and Drug Administration (FDA). Instead, companies must notify the FDA of all new products and ensure that they are safe for consumers. The Federal Trade Commission (FTC) does not prohibit dietary supplements from claiming health benefits but rather requires thorough clinical trials to support such statements. In 2012, the Department of Health and Human Services investigated 127 supplements and found that 20 percent of them were illegally labeled and lacked the necessary scientific evidence to support the proclaimed health benefits (Ibid). Many of these illegal labels included confirmatory statements on curing or preventing diseases such as diabetes or cancer. The report also revealed that 7 percent of the surveyed supplements did not have the mandatory disclaimer stating that the FDA had not evaluated statements on the label for validity (Ibid). Airborne Case Airborne, a popular vitamin and herbal supplement known for its controversy over preventing the common cold was invented by Victoria Knight-McDowell. McDowell, a former second grade schoolteacher in California developed the product in the mid 1990s in response to constantly getting colds from her students (Walker). It was her husband, Thomas Rider McDowell, who decided to market the remedy of vitamins, antioxidants, electrolytes, amino acids, and herbal extracts and name it Airborne. Endorsements from several celebrities and a feature on the Oprah Winfrey Show in 2004 brought much public attention to the Airborne product (Sefcik). By 2006, the company was making over $100 million per year and continued to flourish. Like many other herbal supplements and vitamins, Airborne is also considered a dietary supplement and is therefore free from FDA restrictions. Labels include disclaimers affirming that the FDA has not evaluated any of its statements and that the product is “not intended to diagnose, treat, cure, or prevent any disease.” Alternatively, instructions on Airborne’s packaging recommended that consumers take the supplement “at the first sign of a cold symptom, or before

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entering crowded, potentially germ-infested environments” (Sefcik). The marketing pitch also incorporated the slogans, “created by a school teacher” or “sick of catching colds?”. (See Exhibit A) To further encourage the use of Airborne for colds, the product was strategically placed next to cold medicine such as Nyquil in stores (Nizza). In February 2006, “Good Morning America” released information questioning the legitimacy of clinical trials that were referenced on Airborne’s labels. According to ABC News, there were no clinics, scientists, or doctors involved in the double-blind, placebo-controlled study performed by GNG Pharmaceuticals Services Inc. for Airborne. The inquiry found that GNG, comprised of only two individuals, was created and sponsored by Knight-McDowell Labs (Shermer). They also discovered that the lead man on the study did not have the appropriate credentials to perform such clinical trials. Elise Donahue, CEO of Airborne, responded to the Good Morning America segment saying, "I would never sit here and tell you that it's a cure for the common cold." "We don't know if Airborne is a cure for the common cold. What Airborne does is it helps your body build a healthy immune system. When you have a healthy immune system, then it allows your body, on its own, to fight off germs", Donahue continued (ABC News). Soon after, a class action lawsuit against Airborne was filed on the grounds of false advertising. The Center for Science in the Public Interest (CSPI), a food health and safety advocacy group, was then asked to join as co-counsel by the two California law firms representing the plaintiff. David Schardt, a senior nutritionist at CSPI, argued that Airborne is ineffective and could have harmful effects given its recommended dose of hazardous amounts of vitamin A. Directions for Airborne allows for up to three tablets to be taken per day, with each tablet containing 5000 IU of vitamin A (Shermer). Consuming 3 tablets would cause customers to exceed the maximum daily level of 10000 IU causing vitamin A toxicity. Side effects include fatigue, vomiting, and brittle bones and skin (Williams). The lawsuit eventually caught the attention of the Federal Trade Commission, which sparked a separate investigation. In 2008, Airborne agreed to a $23.3 million settlement of the class action lawsuit without admitting any wrongdoing or illegal conduct (Nizza). The word “cold” was completely removed from the website and the company ceased to mention the clinical trials on all labels. Instead, Airborne began marketing products as immune system boosting (Nizza).

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II. Ethical Analysis Marketing strategies for dietary supplements must be meticulously thought out to avoid making statements that can be misconstrued. In order to beat the competition, a company wants to boast about how their supplement can provide better benefits than the competitor. However, this competitive marketing strategy can sometimes lead to claims by the dietary supplement company that must be proven. In this case, the marketing strategies performed by Airborne and other dietary supplements were unethical according to stakeholder theory and Kant’s categorical imperatives. Stakeholder Theory Developed in his book, Strategic Management: A Stakeholder Approach, Edward Freeman created Stakeholder theory as a framework for addressing ethical issues in the workplace. Freeman describes the traditional view of the firm, as a view that focuses on creating the most value for shareholders. However, Freeman argues that there are other parties involved in the business model that must be considered in the decision process. These parties include the community, consumers, employees, the media, the government and several other stakeholders. Freeman then describes the ultimate goal of managing for stakeholders which “is about creating as much value as possible for stakeholders, without resorting to tradeoffs” (Freeman, pg 48). The question for Airborne is then whether or not the company was creating value for all stakeholders with its marketing campaign and “cold curing,” claims. Exhibit B shows key (but not all) stakeholders in the dietary supplement and pharmaceutical industries. Most important here is how the stakeholders are then changed and the responsibility gained as a company moves from the dietary supplement to pharmaceutical arena. The red dots in the pharmaceutical graph

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show the added stakeholders that are involved in the pharmaceutical industry—the medical community and public health organizations. Dietary supplements provide the vitamins and minerals needed to stay healthy, but have little regulation by the FDA and often lack the scientific evidence necessary to make medical claims. As demonstrated in Exhibit B, once the company begins to make medical claims and cites scientific evidence, however, the product then becomes a pharmaceutical drug. By claiming to provide medical benefits, pharmaceutical drugs, have a higher responsibility to its stakeholders. Expectations of customers for the product are higher and groups like doctors and public health organizations become stakeholders in the product. When Airborne claimed to “cure colds” and used slogans like “sick of catching colds” and “take at the first sign of a cold symptom,” it stepped out of the dietary supplement arena into pharmaceutical product. By claiming to provide medical benefit, Airborne increased its responsibility to its stakeholders and needed to provide value without tradeoffs. However, because customers might take Airborne and then believe they do not need to go to the doctor, the customer is trading value in that they may not be getting proper medical attention. The medical community and public health organizations are also defrauded when a product like Airborne is placed in front of consumers as a “medicinal cure” but does not have the scientific evidence to prove this claim. Therefore, according to Freeman’s Stakeholder theory, Airborne was unethical in their marketing tactics because they did not provide value to all stakeholders—some stakeholders like the customers and medical community actually lose value. The increased responsibility that pharmaceutical companies bare is similar to the Merck & Co. case study. According to stakeholder theory, as a pharmaceutical company, Merck had a responsibility to its stakeholders to research a potential cure to river blindness. Merck’s position

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and potential to find a medical cure increased the ethical responsibility that Merck had. This is similar to Airborne in that they too increased their responsibility to act ethically when they began making medical claims that were not scientifically proven. Not only did Airborne make claims that were not scientifically proven, but the case description also explains how the instructions for Airborne encouraged consumers to take over the necessary dose of Vitamin A. This increased vitamin intake can have effects on the liver and other organs. These side effects are clear negative trade offs for the consumer and therefore are unethical practices according to stakeholder theory. The Exxon mobile case is similar to this in that Exxon marketed the construction of a pipeline as beneficial to the economy for job creation and prosperity in Chad and Cameroon. Similar to Airborne’s initial value proposition, the pipeline appeared to provide value to all stakeholders, but upon closer examination the pipeline would devastate the Pygmy population by destroying their indigenous environment. This devaluation for certain stakeholders proves both the building of the pipeline and Airborne’s marketing tactics to be unethical acts. Although we suggest that stakeholder theory proves Airborne’s actions to be unethical, it is possible to use stakeholder theory to advocate that Airborne was ethical in the marketing of their product. For example, while Airborne’s product is not scientifically proven to cure colds, there is scientific evidence that shows that Vitamin C intake as well as other vitamins found in Airborne can help to fight colds (Douglas). Also, Airborne stated that “over 40,000 customers contact the company every year” to thank the company for benefits that Airborne provides (Nizza). Using stakeholder theory, one could argue that since customers were finding Airborne useful, value was being created and therefore Airborne was being ethical. Despite the argument

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suggesting Airborne’s actions were ethical, the tradeoffs that come from Airborne’s marketing claims, confirming that their product “cures” colds, is what pushed them into being unethical.

Kant’s Categorical Imperatives Kant’s categorical imperatives provide another framework for testing the ethicality of Airborne’s marketing campaign. According to Kant, the categorical imperatives are broken down into three rules that an act must pass in order to be considered ethical. The three concepts, or maxims are: universality, mere means and the subject or sovereign principles. Universality, according to Kant, suggests that one can only “act on maxims which you can will to be universal laws of nature” (Kant, pg 57). The act that applies to this maxim and showed Airborne to be unethical was its claims that its products serve as a cure for colds. As reported by the Department of Health and Human Services, "consumers rely on a supplement's claims to determine whether the product will provide a desired effect, such as weight loss or immune support" (Burke). Applying Kant’s universality maxim, the question is

whether or not it is acceptable for every dietary supplement company to make health claims similar to Airborne’s without scientific evidence. If this were acceptable, then we would not be able to place any trust in our healthcare systems or pharmaceutical products. Therefore this practice cannot be universalized, making Airborne’s marketing scheme unethical. The second maxim, mere means, states that a person can never be used as a means to an end. In Airborne’s case, the company does not pass this maxim because it was deceiving it’s customers for financial gains. Airborne made false statements (that their product yielded medical benefits) in order to generate sales. Airborne’s actions can also be compared to the Enron fiasco in that Airborne is essentially using bluffing as a method to sell their product. Airborne overstated the benefits of their dietary supplements by claiming that it will cure a cold. This is 7

similar to Enron when CEOs bluffed and overstated the benefits of investing in Enron stocks. Enron’s example does not pass the second maxim because Enron was using its employees in attempts to increase the value of Enron stock. Enron was also using the citizens of California as a mere means in their manipulations of the energy grid in the state by cutting off the power in order to artificially inflate the prices of energy that was provided to the state and subsequently increasing the profits of the company. Another way in which Airborne used its customers as a mere means is through creation of a pharmaceutical company to conduct fake clinical trials to falsify the benefits of Airborne. The fake clinical trial that is discussed in the case description demonstrates how Airborne was duping its customers into believing their product yielded positive results. This is similar to the Marge Norman and Miniscribe case in which fake shipments were sent to a factory in Singapore. Norman, a plant manager in Singapore, opened boxes that were supposed to contain new inventory and found “ a jumble of scrap parts she knew were obsolete”(Kant, pg 57). Miniscribe was inflating its assets by creating false inventory in order to make the company seem like a better investment than it actually was. The company hoped that the suggested health of the company would encourage other people to invest. Miniscribe was then using people as a mere means, failing Kant’s maxim and thus making the act unethical. Airborne was similar in that it created false clinical trials in order to make false claims that would encourage sales of the product, which ultimately took advantage of their consumers. Kant’s third maxim is the sovereign or subject principle. This maxim states that one should “act as if you were a member of an ideal kingdom of ends in which you were both subject and sovereign at the same time”(Kant, pg 57). In the case of Airborne, if one were to imagine Airborne as the king of this “ideal kingdom,” would the company then be comfortable if its role

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were altered to being the consumer or subject in this “kingdom”? Since the product does not meet the cold curing claims that they make, then the answer to that question would be no— Airborne as the subject of this “kingdom” would be duped into believing the false claims they make in their marketing pitch. Because Airborne would not want to be the subject in this example this does not meet Kant’s third maxim and therefore the company was being unethical in its actions. Even though Airborne appears to fail Kant’s three maxims, one could argue that Airborne’s actions do pass the three maxims and are therefore ethical. For example, it can be argued that the marketing tactics of the dietary supplement industry are acceptable forms of bluffing. In Albert Carr’s article, “Is Business Bluffing Ethical”, Carr quotes Henry Taylor stating, “falsehood ceases to be falsehood when it is understood on all sides that the truth is not expected to be spoken” (Carr, pg 136). This is similar to Kant’s first maxim, that an act is ethical if it can be proven to be universally true. As it was mentioned in the case overview, dietary supplement companies commonly overstate the benefits of their products. Since it is assumed that all companies are making these overstatements then one could argue that the act can be universalized and Airborne was acting ethically. One could also argue that Airborne does pass Kant’s second maxim in that the supplement does provide Vitamin C and other nutrients necessary for fighting colds and therefore Airborne is not using consumers as a mere means and their marketing strategy was ethical. Despite the ambiguities that exist in Airborne’s case, the claims of “curing” colds and the fake clinical trials are what ultimately pushed Airborne’s acts into being unethical ones.

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Conclusion When claiming to provide medical benefits or “cures” to consumers, a dietary supplement company moves from only participating in the dietary supplement industry to becoming a part of the pharmaceutical industry. As mentioned, the pharmaceutical industry has a higher responsibility to its consumers and the medical community. This distinction is what ultimately makes Airborne’s marketing campaign an unethical one. Airborne’s false clinical trial then further exacerbates their list of unethical acts. Using Kant’s categorical imperatives and the stakeholder theory as frameworks for analyzing Airborne’s acts, the company’s marketing pitch and clinical trials are proven to be unethical acts.

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Exhibit A The initial Airborne packaging showed a cartoon man sitting on a plane surrounded by germs and sick people. It also asks “Sick of Catching Colds??”

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Exhibit B Stakeholder Makeup from Dietary Supplement to Pharmaceutical Companies

Customers

Supplementing vitamins and Dietary Competitors Suppliers other minerals Supplements*

Government (FDA)

Medical Community

Public Customers Health Orgs

Pharmaceutical*

Making medical claims and using scientific Suppliers Competitors evidence

Government (FDA)

*Please note: these stakeholder groups are simplified and do not encompass all groups (media, financiers, employees, etc) or primary vs secondary stakeholders. This example shows the changes to the most important stakeholders from dietary supplements to pharmaceutical groups.

Increase in Responsibility

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Works Cited Airborne Agrees to Pay $23.3 Million to Settle Lawsuit Over False Advertising of its “Miracle Cold Buster”. Center for Science in the Public Interest. 3 March 2008. Web. 9 Oct 2013. http://www.cspinet.org/new/200803032.html Does Airborne Really Stave Off Colds? ABC NEWS. 27 Feb 2006. Web. 9 Oct 2013. http://abcnews.go.com/GMA/OnCall/story?id=1664514&page=1 Bowie, Norman. (1999). A Kantian Approach to Business Ethics. In Thomas Donaldson & Patricia Werhane (Ed.), Ethical Issues in Business, 8th edition (pp. 56-66). Upper Saddle River, NJ: Pearson Prentice Hall. Burke, Garance. Dietary Supplements Illegally Labeled: Dozens Make False Claims, Report Says. Huffington Post. 03 Oct 2012. Web. 09 Oct 2013 http://www.huffingtonpost.com/2012/10/03/dietary-supplements-illegally- labeledweight-loss-immune_n_1936670.html Douglas RM, Hemilä H, Chalker E, Treacy B. Vitamin C for preventing and treating the common cold. Cochrane Database Syst Rev . 2007 Jul 18;(3) Freeman, Edward. (1999). Managing for Stakeholders. In Thomas Donaldson & Patricia Werhane (Ed.), Ethical Issues in Business, 8th edition (pp. 39-53). Upper Saddle River, NJ: Pearson Prentice Hall. Gibney, Alex (Director). (2005). Enron: Smartest Guys in the Room [Documentary]. United States: Magnolia Pictures. Mead, J., & Wicks, A. & Werhane, P. H. (1999). ExxonMobil and the Chad/Cameroon Pipeline. In Thomas Donaldson & Patricia Werhane (Ed.), Ethical Issues in Business, 8th edition (pp. 513). Upper Saddle River, NJ: Pearson Prentice Hall.

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Nizza, Mike. “Makers of Airborne Settle False-Ad Suit with Refunds.” The New York Times, 4 March 2008. Web. 15 Oct 2013. http://thelede.blogs.nytimes.com/2008/03/04/makers-ofairborne-settle-false-ad-suit-with-refunds/?_r=0 Sack, R. J., & Werhane, P. H., & Wicks, A., & Mead, J., & Williams, L. Source: Darden School of Business 12 pages. Publication Date: May 20, 2003. Sefsik, Lisa. Airborne Cold Remedy Facts. Livestrong Foundation. 16 Aug 2013. Web. 9 Oct 2013. http://www.livestrong.com/article/135289-airborne-cold-remedy-facts/ Shermer, Michael. Airborne Baloney. Scientific American. 16 Dec 2006. Web. 10 Oct 2013. http://www.scientificamerican.com/article.cfm?id=airborne-baloney The Business Enterprise Trust. Merck& Co., Inc. In Thomas Donaldson & Patricia Werhane (Ed.), Ethical Issues in Business, 8th edition (pp. 250). Upper Saddle River, NJ: Pearson Prentice Hall. U.S. Food and Drug Administration; Center for Food Safety and Applied Nutrition. Dietary Supplement Health and Education Act (DSHEA) of 1994. December 1, 1995. Available from: http://vm.cfsan.fda.gov/~dms/dietsupp.html. Walker, Rob. Cold Call. The New York Times. 08 Jan 2006. Web. 11 Oct 2013. http://www.nytimes.com/2006/01/08/magazine/08wwln_consumed.html?_r=0 Williams, Carolyn. Airborne Side Effects. Livestrong Foundation. 4 May 2011. Web. 14 Oct 2013. http://www.livestrong.com/article/133460-airborne-side-effects/

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