Earlier this year, I enjoyed reading the many “top of 2015” lists that appeared: top stories, top retailers, etc. But the list I didn’t see was “The top words most used in this industry in 2015.” I think “deeming regulations” would be at the top of the list.
If you’re in this business, especially if you have anything to do with the tobacco category, you know that the FDA’s deeming regulations have been much discussed and long awaited—and they’re still not here. It often seems as if retailers are in limbo until these regulations are released. Retailers must not forget that there are plenty of products in stores that are already regulated by the FDA, such as cigarettes, tobacco, papers, filter tubes and smokeless tobacco. Retailers need to ensure that these FDA-regulated items are compliant.
I’ve heard stories of manufacturers telling retailers that paperwork proving FDA compliance can be viewed at their corporate office but not distributed. Red flag! Retailers should request written documentation from manufacturers claiming that their products are FDA-compliant and should keep the paperwork easily accessible in the event of a FDA inspection. More important, the written documentation should state that if any of the products is banned by the FDA, it is returnable and full credit will be issued.
How ‘New’ Is It?
Since 2007, a “new” item regulated by the FDA can be “new” only if it falls into one of two categories: It received new product approval, or it was found substantially equivalent to a predicate product. Either of these processes is long, expensive and time-intensive. Many manufacturers are continually adding employees to help with such processes.
It would be very difficult for a new, small manufacturer to endure this process. If you are pitched a “new,” low-priced, FDA-regulated product by a new or small manufacturer, ask for FDA approval documentation before the red flag hits you in the face. New, low-priced products contradict the spending it takes to endure the approval process.
Remember that ignorance of law excuses no one. We know the rules; they’re published everywhere by the FDA, our associations and publications for everyone to see. Just because a manufacturer didn’t follow the rules doesn’t mean retailers aren’t liable. In fact, most FDA enforcement actions have been against retailers. Non-approved product could be seized, and retailers can be fined and even closed for business. It’s really a risk-vs.-reward decision for retailers. In my opinion, no short-term product is worth jeopardizing my long-term business.
Can this really happen? Yes—it already has. In September 2015, the FDA restricted the sale and distribution of several well-known brands of cigarettes by a major manufacturer. Fortunately for wholesalers and retailers, this ban involved a well-known, reputable manufacturer that guaranteed its products and allowed them to be returned for full credit. Even in this case, a domino effect of tasks had to be completed at wholesale and retail. Wholesalers had to put a return procedure in place and communicate it to all customers. Retailers’ store personnel had to follow detailed instructions on which items were returnable. They then had to attempt to explain to customers why the products were no longer available. It’s an interruption that costs time, and time is money.
In Good Form
A month after the above incident, the FDA issued warnings to three major cigarette manufacturers for deceptive marketing. Again, these were reputable companies that took quick action to correct this issue, but what if that hadn’t been the case? Could your company survive if you had to write off all that product?
One large industry wholesaler is now having manufacturers sign a form that not only assures that their products are FDA-compliant, but also guarantees that they will accept returns and provide credit should their products be banned. This at least provides some legal recourse for wholesalers and retailers should manufacturers refuse to take back product. Some national industry organizations are looking into providing harmonized language for all their members to use to help minimize their risk.
As a former retailer, I think this is a good idea. We all know about the costs of inventory. We all know how much work goes into getting an item developed, manufactured, presented to wholesale and retail and eventually put on a shelf for sale. It’s a long, often expensive process. To go through that entire process only to have the items banned from sale is a waste.
Do your homework on the front end, and it will pay off on the back end.
Andrea Myers is president of Oxer LLC, Riverwoods, Ill. Reach her at amyers@oxerllc.com.
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