Warning to CBD Marketers: The FTC is now on the Beat

When the CBD craze first began to gain steam in 2017, and dubious claims of its “amazing” health benefits began to proliferate, I said it would be only a matter of time before the Federal Trade Commission took notice and pounced.  Indeed, I even predicted that the game of Russian Roulette that deceptive CBD marketers were playing with the FTC would end badly for some, and in 2018.  (See “FDA Moves Against CBD Marketers Again. Is the FTC Next?,” Jan. 2018).  I was wrong. The FTC didn’t strike last year.  What I didn’t understand, until recently learning from a senior FTC official, is that as long as CBD was still a banned illegal substance under federal law and within the jurisdiction of the Drug Enforcement Agency, it made no sense “programmatically” for it to be an FTC enforcement priority.

Well, now it’s 2019 and unless you’ve been on vacation on the other side of the world and disconnected from all your devices, you know that last December, Congress, as part of the “Farm Bill,” legalized hemp-derived CBD containing less than 0.3% THC (the psychoactive compound that distinguishes hemp from its cannabis cousin, marijuana, which remains on the ban list).  With this green light, and the new surge of momentum it was bound to give to the “CBD Rush,” it didn’t take long for the FTC to get in the game. 

Acting jointly with the Food and Drug Administration, this month the FTC sent out its first set of warning letters to companies making false and unsubstantiated “disease treatment” claims for CBD products. The letters, which went to Nutra Pure LLC, Pot Network Holdings, Inc., and Advanced Spine and Pain, LLC (d/b/a Relievus), address advertising for a range of CBD supplements, such as “Hemp Oil,” “CBD Softgels,” “Liquid Gold Gummies,” and “CBD Oil.” Ads for these products claim they can effectively treat diseases, including cancer, Alzheimer’s, fibromyalgia, and “neuropsychiatric disorders.” In addition, ads for the Nutra Pure products claim that, “Science also shows that CBD has anti-emetic, anti-convulsive, anti-inflammatory and analgesic properties,” and that, “CBD is a viable option for minimizing these effects within the brain.”  The joint FTC-FDA letters warn the companies about the potential legal consequences of making unsupported health and efficacy claims in advertising, and instruct them to notify the FTC of the specific action taken to address the agencies’ concerns.

Unlike the FDA, which routinely sends warning letters to companies making unsubstantiated health claims or unapproved drug claims and gives them a chance to voluntarily comply, the FTC usually will open an investigation in the first instance and take enforcement action against an advertiser unless it determines that no violation occurred.  Occasionally, however, and especially in the case of an emerging (or newly legal) product category or marketing method (think social influencer marketing), it will initially use the softer “warning letter” approach. That almost certainly was the reasoning behind its decision to only “warn” these three companies.  They should consider themselves lucky, though, because make no mistake:  the FTC’s forbearance is limited and the warnings are clearly a shot across the bow.  The next move the FTC makes against a CBD marketer – and there will be many more than one – will be a full-blown investigation and law enforcement action leading to a permanent federal court injunction, restitution, and, in the most egregious circumstances, an asset freeze against the company and its principals.

On the FDA side, the warning letters not only demand that the companies cease their deceptive and unlawful drug claims or face legal consequences, but reaffirm its position, as previously explained in this space (see “CBD Is Now Legal – Kind Of, Sort Of,” Jan. 2019), that as it now stands (and notwithstanding the decriminalization of CBD in the Farm Bill), CBD in food or dietary supplement form is illegal under the Food, Drug and Cosmetics Act because the FDA, by virtue of having already approved a drug containing CBD, has deemed CBD to be a drug.  As stated in the warning letters:

FDA has concluded…that CBD products are excluded from the dietary supplement definition under…the FD&C Act….Under those provisions, if an article (such as CBD) is an active ingredient in a drug product that has been approved under…the FD&C Act…then products containing that substance are outside the definition of a dietary supplement….CBD is the active ingredient in the approved drug product Epidiolex.

In plainer English, the FDA Commissioner, in recent Congressional testimony, underscored the present illegality of CBD under FDA law by expressing the hope that “by [the FDA] taking selective enforcement actions, you’re going to see voluntary compliance from the legitimate manufacturers and retailers, because they are marketing an unlawful product.”

At about the same time as these warning letters were being sent and the FDA Commissioner was testifying, however, the FDA announced that it would be holding a public hearing on cannabis, and that it also was forming a high-level internal agency working group to explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed.  While that is welcome news to the burgeoning CBD industry and consumers craving CBD as a perceived elixir for their ailments, it will be months if not years before those pathways are found and codified in FDA law.  Meanwhile, current and would-be “cowboy” CBD marketers have been forewarned:  the FTC has joined the FDA on the CBD beat, and with its immense (and scary) enforcement powers, is looking for its first scalps.  If you are or are thinking about selling a CBD product, good legal counsel can help you avoid being one of them.                           

Talking about Direct Response, FTC

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