FTC Settles Enforcement Actions Against CBD Companies: The Writing Was On The WallJanuary 7, 2021 – Legal Alerts
For several years, pursuant to the Food Drug and Cosmetic Act and Federal Trade Commission Act,[i] the Food and Drug Administration (FDA) and Federal Trade Commission (FTC) have issued joint warning letters to CBD companies alleging labeling claims they made are false or misleading. According to the agencies, the claims being made by these CBD companies include assertions that their CBD products will treat or cure serious health conditions. The alleged violations occurred despite the FDA and FTC posting Guidance on their web pages for CBD businesses about their threshold limitations related to labeling and marketing. The warning letters have now been followed by enforcement actions. The FTC, which has “shared jurisdiction” with the FDA for false advertisements that are “misleading in material respects” under the Federal Trade Commission Act Section 5(a) and 12[ii] and “misleading” under the Food, Drug and Cosmetic Act, has recently settled enforcement actions which asserted six CBD companies made misleading claims.
Under the Trump Administration, the ramifications of making scientifically unsupported health claims related to CBD products on labeling or marketing material are becoming clear: If CBD companies make labeling or marketing claims without competent scientific evidence or are unsupported by medically proven studies, the FDA and FTC can and will enforce their regulations. How these positions may change under the new Biden Administration are yet to be seen.
These enforcement actions are not new for the FDA, FTC, or pharmaceutical companies. The enforcement process is well-known in the pharmaceutical industry. From what appears to have been a somewhat hands-off approach, perhaps due to the proliferation of CBD products across the United States, the FDA, and for a time, the FTC, seemed to be taking a back seat to state lawmakers when it came to decisions related to the sale of CBD products. However, the 2018 Farm Bill, otherwise known as the Agricultural Marketing Act of 2018, was clear. That is, the FDA retained authority to regulate hemp products that fall within its regulatory authority.[iii] Further, the FTC Act prohibits representations to consumers that are false or misleading, and nothing has changed to impact that mandate.[iv]
As far back as 2018, the FDA, through acting Commissioner Scott Gotlieb, issued a press announcement indicating, “We’ll continue to use our authority to take action against companies illegally selling these types of products when they are putting consumers at risk. I am deeply concerned about any circumstance where product developers make unproven claims to treat serious or life-threatening diseases, and where patients may be misled to forgo otherwise effective, available therapy and opt instead for a product that has no proven value or may cause them serious harm.”[v]
The FTC and FDA have worked under a memorandum of understanding since 1954 wherein the commission assumed primary responsibility for regulating food advertising and the FDA took primary responsibility for regulating food labeling.[vi] That memorandum may come into play with some of the at issue CBD products. However, both agencies have authority to enforce Labeling and Packaging regulations.
The current settlements against six companies’ are evidence the FDA and FTC have been monitoring these types of labeling claims since 2018 and intend to enforce the regulations. The marketing claims asserted by the companies at issue reportedly include claims CBD “treats pain better than prescription medications like OxyContin;” “is able to prevent a wide range of serious conditions including cancer, diabetes and heart disease;” and “effectively treats, prevents, or mitigates serious diseases and conditions like artery blockage, cancer, glaucoma, autism and schizophrenia.” The settlements include anything from monetary settlements from as high as $85,000 to as low as $30,000. The settlements also prohibit the companies from continuing to make such health claims without competent and reliable scientific evidence or human clinical testing to substantiate the same. Finally, and perhaps the most costly, each of the companies are required to notify consumers of the commission’s order.
[iv] Federal Trade Commission Act Section 5 and 12.