FTC’s CBD Crackdown: Something Old and Something New
This week the FTC announced settlements with six companies accused of making a broad range of unsubstantiated health claims, including that CBD can treat cancer, heart disease, hypertension, Alzheimer’s disease, bipolar disorder, and chronic pain, among others. Nicknamed, “Operation CBDeceit,” the enforcement sweep 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 companies such as Twitter.
For those who have been monitoring regulatory enforcement relating to CBD claims, the types of claims listed in the FTC’s Complaints are familiar reading. As we’ve chronicled here, here, and here), prior FTC and FDA enforcement have focused on aggressive express health claims that were very similar to the claims at issue in today’s settlements. In that respect, these settlements do not differ from prior enforcement.
This announcement is noteworthy for other reasons, though, including the following:
- Bigger Than Before. This is the first big FTC enforcement announcement regarding CBD health claims involving settlements with multiple companies. Prior to this, the FTC coordinated with FDA on dozens of warning letters relating to CBD and false COVID treatment and prevention claims in addition to other CBD warning letters. The FTC also announced a settlement with Marc Ching regarding the “Thrive” CBD supplement in July 2020 relating to claims that the product could “treat, prevent, or reduce risks from COVID-19”. Yesterday’s announcement seemed intended to convey a more coordinated and authoritative message than prior settlements and warning letters.
- Individual Liability. These settlements also name not just the company as a respondent, but also individuals in their official capacity as corporate officers. Given the significant degree of entrepreneurial activity in the CBD and hemp industries, this should be understood as an indication that the FTC will look to hold individuals liable particularly where the respondent company is comprised of only a few people.
- Monetary Relief. In addition, five of the six settlements included monetary components ranging from $20,000 to $85,000. The Marc Ching settlement did not involve a financial component, although it is not unusual for there to be a financial component where the FTC believes that the conduct warrants it.
- Prescribed Consumer Notification. The respondent companies are also required to notify consumers about the settlements per prescribed terms. For example, the Easybutter, LLC, settlement requires the company to provide a notice on all of their social media accounts (including any Facebook, Twitter, Instagram, or YouTube accounts) and on the first page of their websites. Such notice must link to a copy of the Order, along with a toll-free telephone number and an email address for the redress administrator. The notice must be posted not later than three days after the effective date of the Order and for at least one year after the redress period ends. In addition, the companies must use a form letter (see page 18) attached to the Orders to directly notify consumers who purchased their products about the FTC’s charges.
So, what does this mean? Although these settlements didn’t break new ground on the kinds of claims the regulators are targeting with regard to CBD products, they signal heightened attention on an industry that has proliferated exponentially over the last couple years. It’s also notable that Commissioner Chopra called for the FTC to pursue larger companies with regard to spurious claims and to focus on unlawful opioid treatment claims, which can be couched as treatment for chronic pain and related conditions. Health claims have long been of interest for the FTC. Given this and the upcoming change in the federal administration, the CBD industry should expect more settlements like these in 2021.