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False Advertising, Unfair Competition, and New CBD Regulatory Hurdles for Hemp
September 18, 2019

By Susan L. Ford

CBD products have been making headlines this year, not only for the impressive growth in the CBD market after the passage of the 2018 Farm Bill—which removed hemp-derived CBD containing less than .3% THC from the Controlled Substances Act—but also for the enforcement actions brought this spring by both the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) against some of the country’s largest medicinal cannabis and CBD companies in North America. These enforcement actions stand to test the CBD market as it looks to further legitimize itself in the national and global economy. A brief look at some of the actions provides a good indication of how and where the FTC and FDA will be setting boundaries for the CBD market.

Scope of FDA Warnings
By example only, the FDA warning letter sent to Curaleaf stated that advertisements for its CBD products, including pain-relief patches, tinctures and vape pens, violated FDA regulations relating to unapproved new drugs, misbranded drugs, improper dietary supplement labeling and unapproved new animal drugs. The FDA pointed to advertising statements in blogs, articles and posts on Curaleaf’s website and social media outlets that claimed the products were intended for use for the diagnosis, treatment and/or prevention of chronic pain, ADHD, anxiety, Parkinson’s, Alzheimer’s, heart disease and high cholesterol. It is also noteworthy that the FTC joined the FDA in warning letters sent to at least three other companies marketing CBD products. These joint letters warned the companies about the potential legal consequences of making unsubstantiated health and efficacy claims in advertising and demanded that the companies notify the agencies within fifteen working days of the steps they have taken to correct the violations.

These warning letters show the tightrope those in the CBD market are walking to balance the freedom to advertise with consumer protection. As a result, the FDA is undertaking new regulations for CBD, and the market should be prepared for even stricter scrutiny of CBD products—not only at the federal level, but also at the state and local level as those governments take guidance from the FDA and the FTC.

New Unfair Competition and False Advertising Claims
CBD companies should expect increased litigation over unfair competition and false advertising claims by consumers. Such claims have been brought in both New York and California, with the basis for damages being that the plaintiffs failed their employer’s drug tests and lost their jobs.

In the New York case, Horn v. Medical Marijuana, Inc., the plaintiffs (a truck driver and his wife) relied on four sources of information from defendants in purchasing and consuming the CBD. Of those sources, three stated that the CBD did not contain any THC, with the fourth stating that the hemp used to extract the CBD contained less than 0.3% THC. Although the case was dismissed because the “transaction” (an online purchase) did not take place in New York, it is on appeal.

In the California case, Thurston v. Koi CBD, LLC, the plaintiff purchased CBD vape juices from the defendant under the belief that the products would help with her knee pain. She also believed that, based on the labeling, the products had 0% THC and were “THC FREE.” The plaintiff filed her class action after being fired under the “unlawful” and “unfair” prongs of the  California State Unfair Competition Law, the California Consumer Legal Remedies Laws, and the Pennsylvania Unfair Trade Practices and Consumer Protection Laws. The case is currently pending.

Takeaways for the CBD Industry
These regulatory hurdles and consumer claims make it clear that CBD manufacturers, distributors and marketers should be very careful about how they label and promote their products. They need to ensure that there is no deception, unintentional or otherwise (which can mean omitting material information), and that the advertising is truthful. What we currently know from the regulations is that—at the federal level—CBD cannot be added to food, and it cannot be marketed as a drug or dietary supplement. It can, however, be added to cosmetics so long as it does not cause the product to be "adulterated or misbranded." Finally, if they are to learn anything from advertising regulations for cannabis, CBD companies would be wise to avoid any packaging, labeling or marketing that is likely to be attractive to children. And good insurance coverage against enforcement actions and lawsuits (including class actions) is also recommended.

Susan Ford is an intellectual property attorney and business litigator at Jordan Ramis PC. Contact her at susan.ford@jordanramis.com or (503) 598-7070. She handles claims of unfair competition and false advertising.
   
Thank you for your interest in this blog. The information contained in this blog is for the general interest of our readers and should not be regarded as legal advice. If you have questions, or to obtain more information on this topic, please contact Susan Ford.
 
 



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