When an aggressive Internet marketer upsets a marriage of convenience between a health clinic and a vitamin manufacturer, it's a regular business soap opera
From all outward appearances, Northport Wellness and Standard Process had a good business marriage. For more than 15 years, Northport, a 12-person holistically-oriented clinic on Long Island, N.Y., purchased nutritional supplements from Standard Process, a Palmyra (Wis.) manufacturer, for resale to some of its 100 daily patients.
It was more a marriage of convenience than anything else, but it worked. Northport's Mariahel Sammis, a naturopath and the person in charge of purchasing supplements, says she would buy from $3,000 to $5,000 worth of Standard Process products each month. The clinic would then re-sell the products to patients at the recommended 100% markup.
Sammis isn't certain exactly when the relationship began going sour. She suspects it all started in December, 2005, when Standard Process's President, Charles DuBois, sent a letter to the thousands of chiropractors, acupuncturists, physicians, and others who resell its 175 different vitamins, warning of a new "zero-tolerance Internet policy as part of our resale policy." It promised "immediate account termination" for violators (see BusinessWeek.com, 1/24/06, "A Family Outfit vs. the Internet").
At the time, Sammis didn't think anything of the memo, since Northport Wellness didn't sell the products via its Web site. In fact, its site was then, and still is, decidedly undeveloped, with "About Us" and "Services" pages showing messages reading "Coming Soon!"
Unbeknownst to Sammis, Standard Process executives were apparently becoming ever more disenchanted with Northport. They suspected that Northport was cheating on them with another Long Island company, 45-employee Total Health Discount Vitamins, which sells vitamins both via the Internet and out of a 12,000-sq.-ft. store in Farmingdale.
Standard Process had refused to sell to Total Health because of its Internet sales, but Total Health was somehow obtaining Standard Process products and displaying them prominently on its Web site. Standard Process apparently became convinced Northport was supplying Standard Process supplements to Total Health, in violation of the 2005 Internet no-no order, possibly because the two companies are both located on Long Island. (Total Health states on its site that it isn't authorized by Standard Process, but rather obtains its products "from authorized third parties for resale.")
He Said, She Said
Last month, Standard Process lowered the boom on Northport. The marriage was over. A Standard Process sales rep "Told us we were purchasing too much product and that we were selling online," recalls Sammis. She pleaded for another chance—to start over. Nothing doing, Sammis says she was told, this was a divorce. She now had to deal with the company's attorney rather than the sales rep.
Standard Process declined to comment specifically about Northport, but in a prepared statement says that one way it "enforces [the no-Internet sales] policy is by actively investigating and pursuing entities that make Standard Process products available on the Internet."
In denying any connection to Total Health, Sammis says, "I've been practicing 20 years. I've never seen anything like this. It's bizarre." The situation got more bizarre when she visited the Total Health retail store in Farmingdale, N.Y., recently. "The store was packed…and their shelves are packed with products from Standard Process." So what does Total Health, the marriage-wrecker, have to say about all this? First off, says its President, Martin Meyer, he's not aware he wrecked a marriage, since he says he has never heard of Northport Wellness.
Form of Price Control?
Not that Meyer is above meddling in business marriages. He says he has relationships with other companies that provide him with Standard Process supplements, and, always discreet, he's not about to name them for fear of actions against them by Standard Process. He offers this clue, though: "I don't get [Standard Process products] from Long Island or New York. I have seven different states [outside New York] I get them from."
According to Meyer, Standard Process filed suit against Total Health a little over a year ago in Wisconsin for selling its products online. Both he and Standard Process declined to provide a copy of the suit, and it doesn't show up on the Wisconsin circuit court search site.
Meyer says he's fighting the Standard Process suit, and accuses the Wisconsin company of engaging in "a form of price control" by attempting to limit distribution of its product to health-care practitioners. He says practitioners are prohibited from discounting the product, requiring patients not only to pay full price but also often pay for extra visits to practitioners to obtain refills.
The outcome of this shattered love triangle? While Meyer and Sammis claim not to know each other, they have, by virtue of their shared problems, begun their own relationship. Sammis now refers patients who used to buy Standard Process products from Northport Wellness to the Total Health Web site or Farmingdale store—in effect increasing online sales of Standard Process products.
Trying to stand up against the tidal wave that is the Internet is akin to trying to plug a leaking dike with your finger. And there will, fortunately or unfortunately, always be a Martin Meyer out there to meddle in the most convenient marriages.