December 2, 2021

Volume XI, Number 336

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The FTC’s Operation CBDeceit, A Piece of the CBD Regulatory Pie

Since 2019, the Federal Trade Commission and the U.S. Food and Drug Administration have warned companies that make or sell cannabidiol (CBD) products that it is illegal to label and advertise that their products prevent, treat, or cure human disease without FDA approval or competent and reliable scientific evidence to support their claims. Both agencies have issued warning letters to makers and sellers of CBD products.

Our Cannabis Industry Team, which has been following key legislative and regulatory developments impacting industry retailers, takes a close look at who does what. The FTC’s and the FDA’s authority to regulate CBD products overlaps, but there are differences in the agencies’ enforcement powers and how they are using them.

Who’s Regulating What?

According to the Memorandum of Understanding between the FTC and the FDA, the FTC is generally responsible for regulating product advertising, except for labeling, which falls under the FDA’s jurisdiction. The MOU also states that where both agencies seek to regulate a particular product or industry, those instances should be “restricted to those highly unusual situations where it is clear that the public interest requires two separate proceedings.” For example, the FDA and the FTC appear to have determined that COVID-19 presents an unusual situation and have issued warning letters to companies that have falsely advertised that their products can treat COVID-19.

In the CBD context, the FTC has focused on marketing practices. The FDA, on the other hand, has focused on product labeling. Because CBD and CBD products are generally characterized as “drugs” under the Federal Food, Drug, and Cosmetic Act, many observers expected the FDA to lead the way in regulating the industry. So far, however, the FTC has taken a stronger enforcement stance than the FDA.

Recent FTC Enforcement Actions

In December 2020, the FTC initiated “Operation CBDeceit” to take action against six companies that allegedly made deceptive claims regarding their CBD products. The six companies made claims, among others, that their products could treat serious medical conditions like cancer, autism, diabetes, heart attacks, autoimmune disorders, depression, chronic pain, multiple sclerosis, and PTSD.

Those six actions settled, and in March 2021, the FTC’s consent orders prohibiting the companies from making certain health-related claims regarding their CBD products took effect. All six consent orders include similar language regarding the type of evidence required if companies are making health-related claims. With these consent orders, the FTC’s message to makers and sellers of CBD products is clear:  any marketing claims that a CBD product has health-related benefits must be based on reliable scientific evidence.

The six consent orders address two categories of claims about CBD products’ health benefits: (1) claims that speak to a product’s specific ability to prevent, treat, or cure medical diseases or conditions must be substantiated by competent and reliable human clinical testing; and (2) claims that speak generally to a product’s health benefits, performance, safety, efficacy and side effects, must be substantiated by competent and reliable scientific analyses, research, or studies (a less stringent requirement).

The FTC’s consent orders also distinguish companies’ claims between “representations” (a claim about what the product can do) and “misrepresentations” (a statement that mischaracterizes studies and research being used for the companies’ health claims). The orders also impose monetary fines ranging from $20,000 to $85,000.

What This Means for the Future

The FTC’s and the FDA’s actions show that the agencies view CBD regulation as one of those “highly unusual situations” where both agencies must act for the public interest. The FTC is the first to move beyond warnings and into enforcement action. But there is no indication that the FDA will not move in that same direction in the future. In fact, the FDA has repeatedly stated that it is working on CBD regulations, though the agency has not indicated when those regulations will be published.

CBD product makers and sellers should continue to monitor both the FTC’s and the FDA’s efforts to regulate the CBD market. At least for now, the FTC Operation CBDeceit’s consent orders provide guidance for what kind of evidence and records companies should maintain to substantiate any health-related advertisements.

Finally, companies should also be wary of potential consumer lawsuits targeting their products, which often follow after a warning letter is issued. While many consumer actions related to CBD products are currently stayed pending the publication of FDA regulations, a recent decision by a district court judge in California denied defendants’ motion to stay pending FDA action, allowing plaintiffs to amend their complaint. [1]

[1] Rodriguez v. Just Brands USA Inc., No. 2:20-cv-04829, ECF No. 75 (C.D. Cal. May 18, 2021).

© 2021 Schiff Hardin LLPNational Law Review, Volume XI, Number 173
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About this Author

Ariel Hairston Lawyer Schiff Hardin Chicago Dispute Resolution Real Estate
Associate

Ariel has worked on matters in a number of practice areas. She has experience drafting mediation memoranda, dispute resolution documents, real estate closing documents, life planning documents, finance closing documents, and various pleadings. An inquisitive and attentive attorney, Ariel is always looking for opportunities to better serve her clients’ needs.

312.258.5649
Malerie Ma Roddy, Schiff Hardin, Products Liability Lawyer, Automotive Manufacturing Attorney
Associate

Malerie Ma Roddy is a member of the firm’s Product Liability Group. She has automotive manufacturing, asbestos, and class actions experience. Malerie has also worked on multidistrict civil litigation and governmental investigations.

Before joining Schiff Hardin, Malerie was a litigation associate in the New York office of an international law firm.

312.258.5563
Joel M. Wallace Patent & Trademark Lawyer Schiff Hardin Law Firm
Associate

Joel M. Wallace works primarily in intellectual property litigation, with significant experience in patent and trademark litigation and non-litigation analyses across a range of industries including pharmaceuticals, medical devices and consumer goods and services. As part of his practice, he regularly prepares Hatch-Waxman Paragraph IV letters, advises clients on patent and regulatory issues, and advocates for clients in litigation, including fact discovery, expert discovery, trial, and appeal. Joel also has experience in post-grant review practice before the PTO,...

312.258.5619
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