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In a significant move, the U.S. Federal Trade Commission (FTC or Commission) announced on December 17, 2020, that it had taken its first ever law enforcement crackdown on companies for deceptively marketing cannabidiol (CBD) and cannabigerol (CBG) products. Nicknamed Operation CBDeceit, the crackdown resulted in lawsuits being filed against six companies and their owners for making unsubstantiated health claims about the ability of their CBD-containing products (lozenges, gummies, vape pens, honey sticks, oils, etc.) to treat serious health conditions such as Alzheimer’s disease, cancer, chronic pain, diabetes, and glaucoma, among others.

FTC, which is authorized to enforce the prohibition of the dissemination of misleading claims for certain categories of products, requires truth in advertising. This means that all claims made by a company in their promotion or marketing of food, drug, device, or cosmetic products must be truthful and non-deceptive, advertisers must have evidence to back up their claims, and advertisements cannot be unfair. Notably, any statement made regarding consumer products must be able to be substantiated, and the type of evidence necessary for substantiation may depend on the product, the claims, and what experts believe necessary—giving the FTC wide berth for enforcement. Ads that make health or safety claims must generally be supported by "competent and reliable scientific evidence"—tests, studies, or other scientific evidence that has been conducted using methods accepted as accurate by experts in the field and evaluated by people qualified to review it.

In each of the six cases filed, FTC alleged that the companies not only lacked scientific substantiation for their claims regarding the health benefits of their CBD/CBG products, but also falsely represented that their claims were either scientifically proven or had been confirmed by the U.S. government.

Under the proposed orders settling FTC’s complaints in each of these cases, the companies and their owners are prohibited from making prevention, treatment, or safety claims similar to the ones the companies made about their products about any dietary supplements, foods, and drugs unless they have the human clinical testing to substantiate such claims, and are required to have competent and reliable scientific evidence for any other health-related product claims. Specifically, the testing must be: (1) randomized, double-blind, and placebo-controlled; and (2) conducted by researchers qualified by training and experience to conduct such testing. All of the companies must also notify consumers of the Commission’s order, and all but one of the companies will also be required to pay monetary judgments to the agency.

Notably, this is not the first time that FTC has warned the CBD industry about making questionable disease-related claims for their CBD products. In 2019, FTC issued a number of warning letters (including joint letters with FDA) against companies selling products containing CBD for making potentially unsubstantiated claims that the products can treat, among other conditions, cancer, multiple sclerosis, autism, ADHD, Parkinson’s and Alzheimer’s. Today’s action is significant, however, because this is the first time that FTC has taken law enforcement action against companies for such claims.  In addition, the Orders exercise the FTC’s authority to prohibit conduct that goes beyond the exact scope of the challenged conduct by covering any product, not just CBD/CBG products.  It also is significant in that it specifies the types of testing that the companies must perform in order to substantiate any future claims.

FTC also provided a list of conditions for which the Commission said there was no evidence that CBD was medically proven to prevent, treat, or cure. Those claims included: Alzheimer’s, anxiety, arthritis, autism, autoimmune disorders, bipolar disorders, cancer, cardiovascular issues, childhood autism, chronic pain, colitis, COVID-19, Crohn’s, depression, diabetes, gastrointestinal disorders, glaucoma, heart attacks, high blood pressure, high blood sugar, hypertension, insomnia, irritable bowel syndrome, multiple sclerosis, overactive bladder, Parkinson’s disease, psoriasis, PTSD, schizophrenia, strokes, and substance abuse. Companies making any of these claims for CBD products should be aware that they are at risk of similar FTC actions based on FTC’s statements.

Noting that Operation CBDeceit is part of the Commission’s ongoing effort to protect consumers from false, deceptive, and misleading health claims made in advertisements on websites and through social media, Director of FTC’s Bureau of Consumer Protection emphasized that the message the CBD industry should be taking away from these six actions is “Don’t make spurious health claims that are unsupported by medical science . . . Otherwise, don’t be surprised if you hear from the FTC.”

This sentiment was echoed in a posting on FTC’s blog published on the same day:

The same substantiation principles the FTC has applied to health claims for close to 50 years apply to similar claims for CBD products. Companies that represent expressly or by implication that what they sell can prevent, treat, or cure serious medical conditions will be held to the highest substantiation standards and marketers can expect careful scrutiny of those promises.

Commissioner Chopra issued a separate supporting statement, which supported the orders and applauded the FTC’s efforts, but noted that the FTC should be focusing on larger businesses and on the for-profit opioid treatment industry.  The Commissioner also advocated for the use of the FTC’s “Penalty Offense Authority,” which gives the FTC authority to impose civil penalties if companies engage in conduct that the FTC has specifically condemned in other matters previously.  However, this Authority is rarely used.

In contrast, Commissioner Wilson noted in her concurring statement that although she supports these orders and the requirement that these companies must now have randomized, double-blind, placebo-controlled human clinical trials to support disease and other serious health claims, she was concerned that such an “unduly high standard of substantiation that risks denying consumers truthful, useful information, may diminish incentives to conduct research, and could chill manufacturer incentives to introduce new products to the market.”

Taken together, it is clear that FTC is signaling that it is actively monitoring advertising around CBD consumer products and is prepared to take action against companies for false and misleading claims, particularly those that express claims about diseases and serious health issues with little to no scientific support. Any company or individual that is looking to market products containing CBD should be especially careful with their advertising moving forward, as these products are increasingly under scrutiny by FTC and other regulators.

Companies should have legal counsel carefully review claims being made about their products by themselves, endorsers, and advertising agencies, and they should take efforts to ensure that they are appropriately substantiated and not deceptive. If any company needs help in ensuring that they are making lawful marketing claims about their CBD products, the experienced team at Buchanan Ingersoll & Rooney is here to help.