On December 17, 2020, the Federal Trade Commission (“FTC”) announced that it had concluded its first enforcement action against six cannabidiol (“CBD”) companies (the “Sellers”), stemming from allegations that the Sellers had deceptively advertised their CBD-based products. The FTC alleged that the Sellers made a wide range of claims, including that their CBD products could treat serious health conditions, such as cancer, heart disease, hypertension, and Alzheimer’s disease, without providing any clinical support that they could do so. As a result of their FTC CBD marketing settlement, the Sellers are prohibited from making future deceptive advertising claims, are required to provide scientific evidence to support any health claims, and, for some of them, pay a substantial fine. Businesses that sell CBD products must be aware of FTC CBD marketing regulations when advertising, or risk FTC investigation.
What are FTC CBD Marketing Regulations?
CBD Legalization
In 2014, President Obama signed into law the 2014 Farm Bill that defined hemp, which includes CBD, as any part of the Cannabis sativa L. plant that contains no more that 0.3% of Tetrahydrocannabinol (“THC”), on a dry weight basis. In 2018, Congress signed into law the Agriculture Improvement Act of 2018 (the “Farm Bill”), which removed hemp from the Controlled Substances Act’s (“CSA”) list of illegal drugs. Following passage of the two bills, CBD companies were enthusiastic that sales of their CBD products would soon increase exponentially. CBD sales have boomed since then; however, these federal laws did not give CBD companies carte blanche to sell and advertise their CBD products without restriction. There are various state and federal regulations that must be considered in the advertisement and sale of CBD products, including regulations enforced by the FTC.
FTC CBD Marketing Regulations
The FTC prohibits unfair and deceptive advertising under Sections 5(a) and 12 of the FTC Act. “Specifically, it is unlawful to advertise that a product can prevent, treat, or cure human disease unless the advertiser possesses competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies substantiating that the claims are true at the time they are made.” Unfair or deceptive advertising includes express or implied statements made by third party endorsers.
In the cases at hand, the Sellers made claims, without supporting scientific evidence, that CBD oil is “medically proven,” able to treat pain better than prescription medications (such as OxyContin), and that the U.S. government has confirmed certain health benefits associated with use of CBD. FTC CBD marketing regulations are meant to protect public health and enhance competitiveness in the industry. Making unsubstantiated claims about the efficacy of CBD products will likely end in an FTC investigation. This is not a favorable outcome as many FTC investigations lead to reputational harm and imposition of large monetary fines.
To avoid an FTC investigation, businesses should consult with a knowledgeable advertising attorney early in the planning stages of any CBD marketing campaign.
If you are the subject of an FTC investigation or need assistance with a CBD product marketing campaign, please email us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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