The FTC sends a holiday warning with Operation CBDeceit - so be good for goodness sake!

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On December 17, 2020, escalating the federal government’s enforcement against hemp derived cannabidiol (CBD) products, the Federal Trade Commission (FTC) announced “Operation CBDeceit”. Operation CBDeceit is the FTC’s first law enforcement “crackdown” on deceptive claims made in connection with cannabidiol (CBD) products. 

The subjects of the “crackdown” are six sellers of CBD-containing products; the FTC alleges that these sellers made numerous scientifically unsupported claims regarding the products’ abilities to treat serious health conditions. Specifically, the companies claimed that CBD-containing products like gummies, lozenges, oils and balms were able to prevent or treat serious diseases, including cancer, heart disease, hypertension, and Alzheimer’s disease, among others. 

Five of the six companies must pay monetary judgments to the FTC, ranging between US$20,000 and US$85,000. All six of the companies are required to immediately stop making unsubstantiated health claims, and are barred from making similar deceptive claims in the future. Additionally, to the extent that the sellers make health claims in the future, those claims must be supported by competent and reliable scientific evidence. The companies are likewise required to notify customers of the FTC order.

The consent orders include carve outs for the companies, allowing them to (1) for a drug, make claims that comply with either the Food and Drug Administration (FDA) labeling requirements for an over-the-counter drug or an FDA-approved label, or (2) for a food or dietary supplement, as applicable, make certain health or nutrient content claims that are explicitly authorized or otherwise permitted under specific FDA regulations.

In taking this action, the FTC is making abundantly clear that health-related representations for CBD products face the same scientific substantiation standards and scrutiny that has been imposed on all other advertised health claims for decades.

This “crackdown” is a notable escalation of the FTC’s prior enforcement activity (largely limited to warning letters, and litigation against a company last spring). Operation CBDeceit serves as notice that the CBD industry is firmly on the FTC’s radar. Indeed, though some activities by the FTC have been delayed by the COVID-19 pandemic, we expect the FTC to become more active in this space - starting now. To that end, Andrew Smith, the director of the FTC’s Bureau of Consumer Protection, has stated: “Don’t make spurious health claims that are unsupported by medical science.” He continued: “Otherwise, don’t be surprised if you hear from the FTC.” 

Companies touting the health benefits of CBD products must ensure that their express and implied claims are supported by competent and reliable scientific evidence (as defined by the FTC).

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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