Ole Miss strikes $5M deal with company warned for claiming essential oils can cure COVID

In a $5 million agreement, the University of Mississippi is researching essential oils for doTerra, a multi-level marketing company the Federal Trade Commission warned in 2020 to stop claiming its products could cure or prevent COVID-19. 

doTerra, a Utah-based company, calls this partnership "a natural fit." 

The partnership was born several years ago after Ikhlas Khan, the award-winning director of UM's National Center for Natural Products Research, and doTerra's chief medical officer, Russell Osguthorpe, got to talking at a conference in Oxford. 

The pair came to an initial agreement for Khan's center to study lavender oil, doTerra's best-selling essential oil. In that deal, worth half a million dollars, doTerra provided 42 lavender essential oil samples in the hopes that Khan would publish a study in a peer-reviewed journal, which he did last year.

In early March, UM announced it had extended the partnership with doTerra by five years. The research will be funded with $5 million from doTerra, UM told Mississippi Today. In a press release, Osguthorpe extolled the partnership: "Together, we can help to create higher standards that will allow the world to see the true benefits of doTERRA essential oils."

Companies have long sought to partner on research with public universities, which, starved for state funding, eagerly take private dollars. But UM's partnership with doTerra raises questions about how a university's stamp of approval can help multi-level marketing companies obscure an exploitative business model. 

In interviews, UM and doTerra both told Mississippi Today the partnership is focused on researching essential oils and is not related to doTerra's business setup. John O'Hara, who leads the Better Business Bureau of Mississippi, questioned if consumers will understand the nature of the pair's relationship. 

"Think about the credentials," O'Hara said. "If they (doTerra) throw the University of Mississippi logo on their products, it does give them credibility."

"Is the average Joe on the street going to understand that?" O'Hara continued, "Or would they look at it as, 'the University of Mississippi is doing it? It must be good.'"

The Food and Drug Administration does not regulate essential oils as drugs, so companies are prohibited from claiming essential oils are medicine that can treat diseases. That hasn't stopped doTerra. 

In 2020, the company was warned by the Federal Trade Commission for advertising its products as cures to COVID-19. In the letter, the FTC described multiple claims made by doTerra's distributors, employees of the company that not only sell essential oils but recruit others to do the same. "An image of doTERRA-brand peppermint and lemon essential oil bottles, accompanied by the hashtags '#covid #prevention.'" 

doTerra responded to the FTC's letter by saying it was "working to address concerns." But earlier this year, a watchdog group asked the FTC to take further action against doTerra in a letter alleging its distributors were continuing to claim the company's essential oils can prevent COVID.  

Josh Gladden, UM's vice chancellor for research and sponsored programs, told Mississippi Today the university's partnership with doTerra is focused on studying a potentially beneficial product. Gladden said it was his understanding that the FTC commonly issues warning letters. 

"In that particular case, you know, our understanding is that that was a claim made by someone in their (doTerra's) sales department on social media, it was not an organized marketing strategy by the company leadership or company direction," he said. 

Mississippi Today replied that doTerra's leadership picked a multi-level marketing strategy. 

"That's true," Gladden said. "And how they actually get their product out there, you know, they've chosen a multi-marketing level approach, and that's their choice on marketing. What we do feel confident, though, in is that the company itself is dedicated to producing a high quality product however it goes into the market.

"And honestly, in terms of the multi-level marketing strategy, I'm not gonna comment on that," Gladden continued. "That's their business model that they've decided on. But, you know, every company needs some strategy to do their marketing." 

"What would you do with an extra $300 a month? $2,000 a month? $10,000 a month?" doTerra asks on a page on its website. "The more you put into your business, the greater the compensation." 

Declarations like that pervade doTerra's website. But the truth is that most of doTerra's distributors don't make thousands of dollars a month. In fact, a little over half didn't make a single dollar in 2020, according to doTerra's recent income statement. That same year, just 5% of doTerra's distributors made more than $1,370 a month, a poverty-level wage — and that was before business expenses.

doTerra was founded in 2008 by former executives at Young Living, another multi-level marketing company that sells essential oils. To make money, doTerra's distributors commit to buying at least $100 worth of products at a wholesale discount each month. Distributors also get bonuses by recruiting people to work in their "downline." Even though this business model takes on a pyramid-like structure, multi-level marketing is legal. 

The gap between the promises MLMs make and the reality has led to numerous stories of harm: Distributors, driven into thousands of dollars in debt, forced to declare bankruptcy; strained or broken relationships; friends promising the new product they're selling can cure illnesses. 

Still, doTerra claims it's different. 

"There are many Multi-Level Marketing companies out there, but not all MLMs are created equal," the company says on a webpage explaining why people should join. One reason doTerra stands out, the webpage says, is because its essential oils are the "most tested, most trusted" on the market. 

That kind of claim — "most tested, most trusted" — is where partnerships with universities come into play, said Robert FitzPatrick, an expert on multi-level marketing who authored the book "Ponzinomics." These relationships help MLMs fight public perception, FitzPatrick said, but UM studying doTerra's essential oils ultimately "doesn't matter to the scheme itself. That has nothing to do with (doTerra) being a multi-level marketing company." 

doTerra has partnerships with Oklahoma University, the University of Utah, and Southern Adventist University. But the multi-level marketing company is most proud of its relationship with Khan and the National Center for Natural Products Research. 

It's easy to see why: For one, Khan's reputation precedes him. In a video promoting the center, the dean of UM's school of pharmacy described Khan as a "world-renowned individual" who has won "possibly every award that you can."

"We've got other partnerships," Osguthorpe told Mississippi Today. "But personally, we're most proud of what we do with NCNPR." 

Corporate-sponsored research at University of Mississippi is facilitated by the Industry Engagement Council, an office in the Brandt Memory House, a historic building that also contains the university's foundation. In 2019, its director, Hughes Miller, helped form the council, which calls itself "your gateway to Ole Miss." 

As director, Miller assists a wide variety of research partnerships at the university. That could be a contract with Viking Range for students to study manufacturing or a law school fellowship program with companies like FedEx, C-Spire, or Yates Construction. In Miller's work, "discovery calls" and non-disclosure agreements are common. But the particulars of each agreement vary. In doTerra's case, Khan cultivated the partnership. 

"It's never cookie cutter," Miller said. 

As Miller sees it, corporate-sponsored research supports economic development in Mississippi. It's also beneficial to the university. Each year, sponsored-research contributes $60-$75 million to UM's Oxford campus alone, Gladden told Mississippi Today. The University of Mississippi Medical Center brings in just as much. 

That's money the Legislature could be providing in public funding, but appropriations for the Institutions of Higher Learning have never recovered from the Great Recession. Public universities in states that have seen a decline in funding for higher education have more of an incentive to take dollars for privately funded research. 

In pursuing sponsored-research, the university contemplates the appearance of each partnership, Gladden told Mississippi Today. "We ask, what is the history of this company? What is the reputation of this company? Do we want to hitch our wagon? What is this gonna look like from the outside?" 

Gladden said UM has turned down corporate sponsors whose business practices it does not support, but he would not name those companies.

"That's gonna be a case-by-case assessment," Gladden told Mississippi Today. "Now, our scientists and our researchers probably wouldn't be focusing so much on that. But our university leadership could be focused on that. So, if you're asking where do we draw the line, that's sort of an impossible question because it depends a lot on the details." 

UM has more uniformity in the guidelines it provides researchers for how to ethically conduct a corporate partnership that include disclosing conflicts of interests. Companies are still able to have input on study design and framing. Khan said NCNPR kept doTerra updated on the results of the lavender oil study but the company did not have a say in whether the article was published. 

In late March, hundreds of scientists, researchers and policymakers, including officials at the Food and Drug Administration, gathered in Oxford for the International Conference on the Science of Botanicals. Since it was first held in 2000, ICSB has grown into the largest annual event at the Oxford Conference Center, a brick building just off MS-Highway 7. 

Under Khan's leadership, ICSB became known for its "nonthreatening atmosphere," according to NutraIngredients-USA, a publication that covers the dietary supplement industry. At the conference, private companies and FDA officials mingle and discuss the often contentious topic that is federal regulation. This year, doTerra was a title sponsor. Osguthorpe, the company's chief medical officer, spoke during a session called "industry perspectives" that also included a scientist from Amway, another multi-level marketing company.  

The initial lavender oil study that Khan worked on proposed a new way to measure the quality of essential oils, including ones that are adulterated, or mixed with another substance. Khan said he hopes his new framework will become "a tool for everybody," including regulatory agencies. 

"I think that what we're using our relationship to do is to substantiate and scientifically better understand the product," Osguthorpe said. "It has nothing to do with a business model." 

Almost a year after Khan published the study, doTerra is using it to claim its lavender oil is the "purest on the market" and "the gold standard against which all other lavender oils are measured." On a website called "Source to you," doTerra says NCNPR's study shows that "2/3rds of lavender oils on the market are contaminated and of inferior quality." 

"I mean, they can extrapolate that," Khan said, "but in our paper, I don't think it says anywhere that DoTerra products are superior quality. I don't see any mention of anything superior to anything." 

The study actually found 51.9% of the 27 unidentified lavender essential oil samples doTerra provided were adulterated or of poor quality, while 62.5% of samples NCNPR sourced from other places were adulterated or of poor quality. 

This year, Khan's center is studying peppermint oil with its funding from doTerra. After that, it might be cinnamon oil. He said the market will decide which essential oil doTerra would like NCNPR to study next. 

Khan said he views the partnership with doTerra as a matter of uncovering scientific knowledge and that it has nothing to do with the company's multi-level marketing model. 

"I don't think we're going to not partner with them because they have a bad reputation," Khan said. "For us to tell them, 'we can't help you because you had an FTC violation before' — where else are they gonna go to get it (the study) done right?"

"The thing is, the company does exist, they're here, they are selling it," Khan continued. "If they're asking us a scientific question that we can solve, I really don't think it's the right thing to turn down anybody or any place, if they're trying to do things right."

This article first appeared on Mississippi Today and is republished here under a Creative Commons license.