Cannabidiol (“CBD”) sales are growing, but there is often confusion about how to lawfully market CBD products. To make matters more serious, the Federal Trade Commission (“FTC”) and Food and Drug Administration (“FDA”) have been targeting CBD companies.
You may have heard a rumor that the 2018 Farm Bill legalized the sale of CBD across the country. Unfortunately, this is an oversimplified analysis of a complicated law that has taken fire in the performance marketing community. The Farm Bill requires you to put on your farmer hat and understand the distinction between two types of cannabis plants—industrial hemp and marijuana. Hemp cannot contain more than 0.3 percent of THC, and even then, its growth remains highly regulated by a combination of state and federal laws. While the Farm Bill exempts hemp-derived products from Schedule I under the Controlled Substances Act, it does not legalize CBD generally. Reliance on the Farm Bill requires you to know the source of your CBD (including the plant and the grower) and its content of THC.
Despite the ambiguities created by the Farm Bill, the CBD supplement market has exploded over the past two years. Not surprisingly, the FTC and FDA have both taken an aggressive stance in an effort to curb this growth and control the representations made to consumers. For its part, the FDA has taken the position that CBD is not a dietary supplement and needs to be regulated like a drug, whether for use by humans or animals. (See Paragraph 9 at https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products-including-cannabidiol-cbd#legaltosell.) However, the FDA's limited enforcement powers have failed to stem the tide of CBD supplements.
Of course, the FTC's enforcement powers are more substantial, but are limited to the issue of whether false misrepresentations were made to consumers. To this end, the FTC has made it clear that it considers it illegal to advertise that a CBD (or other) product can prevent, treat, or cure human disease without competent and reliable scientific evidence to support such claims; and selling products without the requisite substantiation could violate the FTC Act and other laws. The FTC can pursue a number of remedies, including obtaining immediate injunctive relief and an asset freeze, filing a federal lawsuit, commencing an administrative action, serving a civil investigative demand (“CID”), or issuing a warning letter.
For example, in late April 2020, the FTC entered into a stipulated preliminary injunction, barring defendants from making claims that CBD-based products are effective cancer treatments and that Vitamin C and herbal extracts are effective at treating and preventing COVID-19. Moreover, throughout 2019, the FTC sent multiple warning letters and requests for evidence, sometimes in conjunction with the FDA, to companies selling oils, tinctures, capsules, gummies, and creams containing CBD (a chemical compound derived from the cannabis plant).
Promising that a CBD product is proven to cure a specific disease like cancer or Alzheimer's disease, arthritis, diabetes, migraines, hearth disease, or prevent a virus like the Coronavirus/COVID-19, is a sure way to get on the radar of regulatory agencies; however, the specifics of various advertising claims and substantiation records can often be more nuanced. In addition, many sellers pair CBD deals with “free” trials and subscription or negative option billing, with a heavy reliance upon consumer reviews or endorsements, which can be risky by themselves (if not done correctly), not only for a government enforcement action but also for a class action lawsuit. Third-party platforms like Google and Facebook also have evolving requirements and prohibitions relating to CBD, cannabis, and supplement products that sellers and marketers should review.
Thus, to lawfully advertise in the CBD marketplace, companies and individuals should seek experienced legal counsel to review marketing practices to ensure compliance with laws and guidelines. Kronenberger Rosenfeld regularly assists businesses review their advertisements to lower risks of future lawsuits—which could have drastic impacts—and also represents clients who have received FTC requests or are defendants in an enforcement or class action.
Originally Published 19 May 2020
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