A few days ago, I posted about a problem with government provision of information and government’s mandates that private firms provide information. The problem: there’s no guarantee and, moreover, no reason to think, that the government will provide or mandate the right information.

Then I came across an excellent piece by Walter Olson that makes the point well for a particular case: the case of herbal supplements. In this case, the government misled and never, once it was discovered that it misled, tried to correct the record. So it left people, including, in this case, me, thinking it had a point. I actually had started to change my sources for herbal supplements that I take because I had thought, until I read Olson’s article, that many of the herbal supplement providers were as fraudulent as the New York state attorney general, Eric Schneiderman, had claimed.

Last February, Schneiderman announced a big enforcement action against herbal supplement providers. Olson gives the details:

The initial news coverage was breathless. “Many pills and capsules sold as herbal ‘supplements’ contain little more than powdered rice and house plants, according to a report released Monday by the office of New York state attorney general Eric Schneiderman,” ran The Atlantic’s report. “An investigation found that nearly four of five herbal supplements do not contain the ingredients listed on labels, and many supplements–tested from among leading store-brand products sold at GNC, Target, Walmart, and Walgreens–contain no plant substance of any kind at all.”

I had read this at the time. I had been buying many of my herbal supplements from GNC and had started to switch providers.

But then the plot thickened or, as my mother used to say, sickened. Olson writes:

But the fraud turned out to be of a rather different sort. Almost at once, experts in relevant biochemical fields–including some longtime vocal critics of the herbal-supplement industry–began to speak out: Schneiderman’s office had gotten nonsensical results by using an inappropriate test, one that neither the industry nor its regulators use to assay final purity. DNA barcode testing, which searches for a particular snippet of DNA distinctive to a plant, may be fine when checking the authenticity of a sample of unprocessed raw plant material. But dietary supplements are made by extracting the so-called active ingredient, which often means prolonged heating, use of solvents, and filtering that removes or breaks down the DNA. The better the purification methods used to isolate the active ingredient, in fact, the likelier that the original plant’s identifiable DNA will be lost. Harvard Medical School’s Pieter Cohen, a leading critic of supplement marketing, told Forbes that it was “no surprise” that Schneiderman’s tests came out negative: “Even if DNA got in, we’d expect it to be destroyed or denatured.” Meanwhile, GNC, the biggest player in supplements retailing, went back and retested the accused products from its line and found, Schneiderman notwithstanding, that all contained the labeled active ingredient.

We’ve become accustomed to government regulators shaking down the regulatees even when they have done nothing wrong. John Cochrane recently wrote at length about this. So, when a company fights back, it’s a “man bites dog” story. But that’s not what happened. Olson quotes from Bill Hammond of the Daily News:

The company admitted no wrongdoing, paid no fine and was allowed to go back to selling exactly the same products manufactured in exactly the same way.

The AG who weeks earlier had strongly implied that most of GNC’s products were fake was now affirming that he found “no evidence” that the company deviated from federal regulations.

GNC did agree to conduct DNA testing going forward–but on its raw materials, not the finished products [emphasis added]. It also agreed to post signs explaining the difference between plants and processed extracts, in case consumers were confused about that.

As Olson summarizes:

The whole affair inflicted millions of dollars in economic damage on companies that had done nothing wrong, while sending consumers around the country into needless spasms of anger, worry, and outrage. As Hammond writes: “It turns out the one peddling snake oil was Schneiderman himself.”