January 27, 2021
While most cannabidiol (CBD) manufacturers and sellers focus on the U.S. Food and Drug Administration (FDA), federal agencies outside the FDA have put their focus on the CBD industry.
On Dec. 17, 2020, the Federal Trade Commission (FTC) announced a “crackdown on deceptively marketed CBD products.” Notably, the FTC alleged that the “companies made unsupported claims that their oils, balms, gummies, coffee, and other goods could treat serious diseases such as cancer and diabetes.” As a differentiation point, FTC enforces under the Federal Trade Commission Act and focuses on whether a product claim is supported by competent and reliable scientific evidence, or whether it is not, such as a disease or health claim on a product that lacks evidence to support that claim or is otherwise unapproved by FDA.
In its first installment of Operation CBDeceit, the FTC announced six settlements that it claims “send a clear message to the burgeoning CBD industry: Don’t make spurious health claims that are unsupported by medical evidence.” Here is a summary of the alleged unsupported claims related to the six settlements:
Company #1 allegedly “claimed without substantiation that their CBD product is safe for all users, treats pain better than prescription medications like OxyContin, and prevents and treats age-related cognitive decline and chronic pain. [Company #1] also claimed, without scientific evidence, that CBD oil is ‘medically proven’ to improve a variety of conditions.”
Company #2 allegedly claimed “CBD as safe for all users, able to treat pain better than prescription medications such as OxyContin, and able to prevent a wide range of serious conditions, including cancer, diabetes, and heart disease. In their advertising, they also [allegedly] falsely claimed that CBD is scientifically proven to improve many serious health conditions — including chronic pain and hypertension — and provide neurological benefit — such as preventing age-related cognitive decline[.]”
Company #3 allegedly claimed “CBD effectively treats, prevents, or mitigates serious diseases and conditions like artery blockage, cancer, glaucoma, autism, and schizophrenia, among many others. [Company #3] also [allegedly] falsely represented that some of the efficacy claims were scientifically proven or that the U.S. government has confirmed the health benefits of CBD.”
Company #4 allegedly “claimed its CBD products could treat or cure serious ailments like cancer-related symptoms, substance abuse, and AIDS. The complaint alleges [Company #4] lacked the scientific substantiation for such health claims and falsely claimed to have studies showing CBD is effective at treating autism.”
Company #5 allegedly claimed “CBD can prevent, cure, mitigate, or treat diseases and serious health conditions, including Alzheimer’s disease, arthritis, autoimmune disease, and irritable bowel syndrome. The complaint also alleges the respondents falsely claimed that studies or scientific research prove that CBD is effective at treating, curing, or mitigating these diseases and conditions.”
Company #6 allegedly claimed that its products, both CBD and cannabigerol (CBG), “are effective alternatives to prescription medications and treat a wide range of diseases and serious health conditions, including Alzheimer’s disease, cancer, and diabetes. The complaint also alleges the respondents falsely claimed that their CBD and CBG products have antibacterial properties, prevent or reduce the risk of heart attacks, strokes, and other diseases, and that certain of these claims were supported by scientific evidence.”
While this operation is another reminder that CBD companies need to be careful about what they advertise and/or put on the product labels, this is just the tip of the iceberg. Often the focus is on FDA and enforcement risk from the marketing and sale of product under the Federal Food, Drug, and Cosmetic Act. Not only should CBD companies be aware of government enforcement, but civil litigation is also on the horizon. Indeed, along with many common law doctrines that are asserted, most states have civil statutes targeting allegedly deceptive trade practices. See, e.g, California Business and Professions Code § 17500, et seq.; New York General Business Law §§ 349, 350, et seq; Florida Deceptive and Unfair Trade Practices (Fla. Stat. §501, et seq.); Illinois Unfair Deceptive Trade Practices Act (815 ILCS 510).
These statutes, however, are not like Operation CBDeceit and limited to alleged unsupported health claims. Instead, plaintiff’s attorneys bring civil litigation under these statutes for a wide variety of alleged violations, including arguments that the plaintiff was unable to understand the claims made on the label or was confused by the label.
While they may appear thin at first blush, these claims are real with significant risk exposure. For example, some deceptive trade practices acts allow for civil penalties per violation, multiple damages and/or the recovery of attorneys’ fees. Such special damages greatly increase the amount of recovery a plaintiff could obtain if a violation occurred.
In the end, CBD companies should be aware of these risks — from both government enforcement and civil litigation. The risks are real and significant.
If you need assistance considering these risks and/or developing appropriate strategies, please consult one of the authors of this alert or your regular McGuireWoods attorney. Our team is ready to assist with challenges arising in the CBD industry.