FTC Crackdown on Health Claims for CBD Products and the Canadian Side of the Story

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The U.S. Federal Trade Commission (FTC) announced last week it had sent warning letters to three companies advertising cannabidiol products with unproven claims that their products were able to treat or cure serious ailments and health conditions like multiple sclerosis, colitis, cigarette addiction and diabetes. 

Cannabidiol, also known as CBD, is an extract from cannabis plants, including hemp, and is regulated under the Cannabis Act in Canada. CBD is a popular product in North America, with Nielsen forecasting CBD sales of up to US$6 billion in the United States by 2025. In Canada, it is predominantly sold as an oil, oral spray, or gel capsule. Later this year it will become available in edibles like chocolates and beverages and in topical applications. 

The fast growth of the market in North America has led to rapid industry expansion, with some companies making health and efficacy claims to promote and differentiate their CBD products. According to the FTC, the companies who received letters from the FTC had websites promoting CBD products for sale in the United States with claims such as "works like magic" to relieve "even the most agonizing pain" better than prescription opioid painkillers. One company claimed its CBD gummies were highly effective at treating "the root cause of most major degenerative diseases, including arthritis, heart disease, fibromyalgia, cancer, asthma, and a wide spectrum of autoimmune disorders."

The regulatory restrictions in Canada are broad and cover all aspects of promoting cannabis. Trademarks, advertisements, brand elements, and packaging should all be reviewed thoroughly to ensure they do not make deceptive health claims. For example, the Canadian Cannabis Act prohibits the promotion of cannabis in a manner that is false, misleading, or deceptive, or that creates an erroneous impression about the health effects or health risks of the product. This limitation applies to CBD products sold for non-medical purposes through authorized licensed sellers and cannabis obtained via a health care practitioner's authorization for medical use. Similarly, the Cannabis Regulations coming into force in October will prohibit express or implied representations of cannabis products (including foods, beverages, and topicals) that could create the impression of any "health or cosmetic benefits". 

CBD-containing health products such as prescription drugs and medical devices can be marketed with health claims under the Food and Drugs Act. However, they must be approved by Health Canada and meet a number of additional stringent requirements. Health Canada may introduce a new category of health products containing cannabis and cannabidiol, known as Cannabis Health Products (CHPs). These products would not require practitioner oversight, but would allow producers to make some health-related claims in Canada. Health Canada conducted a consultation this summer on CHPs and has not yet released further information. 

Generally, Canadian producers of CBD-based products should be aware of the stringent limitations on how they can market and sell their products. Government regulators, including Health Canada and the FTC in the United States, are watching the market closely. They are not the only regulators with an eye on this sphere. The U.S. Food and Drug Administration announced in July that it sent a warning to a company selling CBD products with unsubstantiated health claims. 

Changes are occurring at a rapid pace in the Canadian cannabis space: the market for CBD continues to expand, upcoming regulatory changes will permit edible CBD and cannabis products, and Health Canada may introduce CHPs. As these changes occur and the market matures, government regulators on both sides of the border may move from warning letters to more aggressive enforcement methods in order to ensure both fair competition and the safety of consumers.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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