Cannabis Industry News Alert
On Tuesday, the Federal Trade Commission (FTC) sent warning letters to three companies that sell cannabidiol (CBD) products regarding the health claims found in the companies’ advertisements. The FTC did not make the letters public, but in a press release, it described the claims it found problematic – namely, that CBD "can prevent, treat, or cure" a variety of serious diseases, health conditions, and chronic pain. The FTC "urge[d] the companies to review" their claims to ensure they are "supported by competent and reliable scientific evidence," and warned that "selling CBD products without such substantiation could violate the FTC Act and may result in legal action."
These letters follow several similar letters issued by the FTC and the Food and Drug Administration (FDA) earlier this year, many of which also targeted health-based CBD claims. We discussed these letters in a previous blog post, where we summarized key federal laws that govern the advertising of CBD products and provided a list of marketing dos and don'ts for CBD companies.
While it does not appear the FTC or FDA has initiated formal enforcement actions following these warning letters, the letters have resulted in negative publicity for both the warned companies and the broader CBD industry. And plaintiffs' attorneys have noticed. Curaleaf – which was the target of an FDA warning letter issued on July 22, 2019 – now faces a securities class action based in large part on the decline in its stock's value following the warning letter. Another company, Just Brands, is facing a consumer class action alleging that its products contain less CBD than advertised. The number of class actions like these, as well as individual lawsuits against CBD companies, will likely increase as the cannabis industry continues to grow.
Given this heightened attention by regulators and plaintiffs' attorneys, it is imperative that CBD companies ensure compliance with the various state and federal regulations governing the labeling and advertising of their products. We provided high-level pointers regarding some of these federal regulations in our previous blog post. But cannabis companies seeking to navigate this complex field should consult outside counsel regarding their marketing practices to lessen the risk of ending up on the wrong side of an enforcement action or lawsuit.