Memo to CBD Businesses: Be Wary of Making Unproven Health and Purity Claims About Your Products. The Feds Are Watching.

For entrepreneurs involved with the booming U.S. CBD industry, recent messages about what’s legitimate and what’s not have certainly been mixed
Joan Oleck
Written by Joan Oleck, Cannabis Journalist
Last Updated
CBD Businesses

18 states are now legal for marijuana, 35 for medical cannabis. And in an apparent step toward federal legalization, Democratic senators Chuck Schumer, Cory Booker and Ron Wyden on February 1 promised an upcoming bill to strategize toward that goal.

Then there’s the Federal Trade Commission. On December 17, the FTC announced settlements with six CBD companies with fines ranging from $20,000 to $75,000 (with one company not fined at all). The judgments alleged violations of Section 5 of the FTC Act.

“Basically it’s a false advertising statute among other things,” FTC attorney Richard McKewen in an interview explained of that rule. McKewen coordinated the FTC sting announced in December and dubbed “CBDeceit.” He continued: “We allege that the marketers of CBD [cannabidiol] products engaged in deceptive conduct, making unsubstantiated health claims … making claims for which there is not adequate scientific proof to back them up.”

Warning letters from both the FTC and the FDA (Food and Drug Administration) have been issued against CBD companies in recent months with at least one FTC communication dating all the way back to April 2019. Yet the addition of hefty settlement fees –McKewen labels them “disgorgement of ill-gotten gains” – signals an uptick in enforcement.

With good reason, some might say. “In these cases you had everything from ‘CBD curing autism and cancer’ and any number of things which are pretty egregious health claims,” the attorney said.

The companies targeted by the FTC included Bionatrol Health, Epichouse, CBD Meds, Hemp Me CBD, Reef Industries and Steve’s Goods.

Even the milder claims by these companies crossed the FTC line, McKewen said – regardless of the widespread anecdotal evidence about CBD product success with conditions like anxiety and stress. A case in point is Epic House’s previous online bullet points touting its products “For Pain and Chronic Aches”; “May help Anxiety & Mood”; and “May Help Focus & Memory.”

McKewen remained firm that any lack of scientific back-up for any claims warrants potential FTC action. And while he wouldn’t comment on details of the cases for the six companies targeted, he did say, generally, that egregious health claims would be a factor in FTC actions along with an individual company’s “impact,” size and answer to the question “Is this a good case in which to educate consumers?

“Is it a good use of the agency’s resources [to produce] the bang for the buck at the end of the day?” McKewen said of his agency’s criteria.

Attempts to reach leaders of the targeted companies were unsuccessful but John Ramsay, CEO of the Colorado company Infinite CBD, did agree to comment, recalling in an email how he had received his own cease-and-desist letter from the FTC and immediately removed all claims from his site –including customer reviews and testimonials. “Others may have decided to go in another direction and that’s why the FTC hit them,” Ramsay speculated of the companies cited in the FTC sweep.

Indeed, the apparent failure of those companies to respond quickly to earlier warnings may have contributed to their becoming targets. That possibility seemed a concern of two CBD groups contacted.

Kaelan Castetter, vice chair of the New York Cannabis Growers & Processors Association, wrote, for instance, that while his organization takes deceptive advertising seriously and supports the FTC’s crackdown, it also has “grave concerns about the amount of the fines, seemingly random nature of what brands were targeted and the precedent they may set.”

That gets back to the wide array of developments in CBD today that might be causing confusion. McKewen, for instance, said his agency doesn’t engage with the legalization issue (“We make no mention of the legality itself of CBD,” he said. “What we care about is if you’re making certain kinds of claims – health claims, purity of content claims – [or saying], ‘Our CBD has no THC in it.” He added that other cannabinoids might be included here: CBG was involved in the judgment against Steve’s Goods along with CBD, for example.

Then there’s the FDA’s own crackdown. That agency zeroes in on CBD when claims are made for it as a drug or supplement, when the only product that can legally do that is Epdiolex, which treats seizures.

Certainly it was no coincidence that five days after the FTC announcement, the FDA issued its own warning letters (no monetary settlements) to companies for selling CBD products the agency said violated the Federal Food, Drug, and Cosmetic Act (FD&C Act). All five letters alleged the illegal marketing of unapproved CBD products claiming to treat medical conditions. New drugs must be approved by the FDA or conform to rules for over-the-counter drug review.

With the increased number of warnings and monetary penalties, it’s small wonder that the CBD industry is eagerly, even anxiously, awaiting FDA guidelines on CBD products. The new crackdowns, said Castetter of the New York Growers Group, “shows the need for clear guidance from the FDA on hemp derived cannabinoids being used in supplements so that the industry can fully understand what marketing is allowed.”

Then there’s this from Colorado entrepreneur Ramsay, “At the end of the day, the public has spoken, and they love CBD. Now we just need to see what the FDA will do in regards to regulation.”

 

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Joan Oleck
Joan Oleck
Cannabis Journalist
Joan Oleck is a freelance writer currently specializing in the cannabis industry and cannabis tech. She has been an editor and reporter on staff for such publications as Forbes.com, Business Week, Newsday and The Detroit News. She won the Jesse Neal Award for best feature series in a trade publication, Restaurant Business, and a GLAAD Award for a Salon story about discrimination in adoption against single and gay parents

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