The FTC and CBD: Is Your Hemp Business a Target?

The FTC and CBD: a powerful federal agency has set its sights on the hemp industry.

As many readers of this blog already know, the Federal Trade Commission (FTC) recently announced the first monetary sanctions for cannabidiol (CBD) product manufacturers for making medical claims. Specifically, on December 17, the FTC issued fines and sanctions to six CBD product manufacturers who were accused of providing misleading information to consumers about the benefits of hemp extract. 

In an official FTC press release, Andrew Smith, Director of the Agency’s Bureau of Consumer Protection, stated: “The six settlements announced today send a clear message to the burgeoning CBD industry: Don’t make spurious health claims that are unsupported by medical science. Otherwise, don’t be surprised if you hear from the FTC.”

Historically, the Food and Drug Administration (FDA) has been far more aggressive in attempting to regulate health and medical claims made by many CBD product manufacturers. In fact, the FDA recently issued another series of warning letters to companies for selling products containing CBD that violate the Federal Food, Drug, and Cosmetic Act (FD&C Act).

Title 15, Chapter 2 of the United States Code (USC) created the FTC, and among other things, mandated that the FTC be responsible for preventing unfair methods of competition, including preventing the dissemination of false advertisements. This includes disseminating false advertisements through the United States mails, but more importantly for purposes of this post:

“by any means, for the purposes of inducing, or which is likely to induce, directly or indirectly, the purchase in or having an effect upon commerce, of food, drugs, devices, services or cosmetics.” 15 USC § 52 (emphasis added)

The FTC requires advertisers and ad agencies to have a reasonable basis for advertising claims before they are disseminated. Specifically, a claim must be substantiated. It is important to note that the “claims” mentioned above can be either express or implied. A claim is implied if twenty percent (20%) or more of reasonable consumers would construe a particular meaning from the claim.

The FTC has identified and published several factors an advertiser should consider in determining whether a claim is substantiated, including “the type of claim, the product, the consequences of a false claim, the benefits of a truthful claim, the cost of developing substantiation for the claim, and the amount of substantiation experts in the field believe is reasonable.” For example, health claims require competent and scientific evidence to support them.

In addition to policing written claims made about products, the FTC also regulates a variety of other methods of advertising. Particularly relevant for many participants in the hemp and CBD industry are claims made by product endorsers, including social media influencers and company employees. When determining whether an endorsement or review of a product is deceptive, misleading, or false, the FTC looks at the totality of circumstances surrounding the endorsement, review, or social media post.

Contact the attorneys at Kight Law Office for information on how to avoid and manage interactions with the FDA and FTC based on your language contained on your website, product packaging, advertising, and/or endorsements.

January 3, 2021

This article was written by Kight Law attorney U. Kight Law represents hemp and CBD businesses in the US and throughout the world. To schedule a consultation with Philip, please click here and mention this article.