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As 2020 drew to a close and Congress scrambled to reach a deal to continue funding the federal government, tucked in amidst the 2124 pages of the 2021 Appropriations Bill is a new power for the FTC:  civil penalty authority for deceptive COVID-related acts and practices.  Titled the COVID-19 Consumer Protection Act (see page 2094 here), the law states as follows:

(b) For the duration of a public health emergency declared pursuant to section 319 of the Public Health Service Act (42 U.S.C. 247d) as a result of confirmed cases of the 2019 novel coronavirus (COVID–19), including any renewal thereof, it shall be unlawful for any person, partnership, or corporation to engage in a deceptive act or practice in or affecting commerce in violation of section 5(a) of the Federal Trade Commission Act (15 U.S.C.45(a)) that is associated with—

(1) the treatment, cure, prevention, mitigation, or diagnosis of COVID–19; or

(2) a government benefit related to COVID–19.

(c) ENFORCEMENT BY THE FEDERAL TRADE COMMISSION.—

(1) VIOLATION.—A violation of subsection (b) shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).

The civil penalty authority is granted through the duration of the current public health emergency.  The current maximum civil penalty amount per violation is $43,280.

Here’s why this is significant:  The FTC generally does not have authority to seek civil penalties for a first violation of the FTC Act.  However, if a company or individual is subject to an order and then violates that order or where the FTC has obtained a final cease and desist order via litigation and subsequently put a non-party on notice of a violation, the FTC can seek civil penalties.   With the authority granted in the COVID-19 Consumer Protection Act, though, the FTC can identify practices relating to COVID-19 treatment, cure, prevention, mitigation, diagnosis, or a government benefit that the agency considers deceptive per Section 5 of the FTC Act and seek civil penalties for that violation.

The law does not specify how each violation will be calculated.  However, at a recent webinar, the Rose Sheet reports that Richard Cleland, FTC Assistant Director for Advertising Practices, indicated that “Every ad is a separate violation and every day that that ad runs or is disseminated to the public is a separate violation.”

As we chronicled, the FTC issued hundreds of COVID-related warning letters relating to deceptive COVID claims during 2020.  And yet, the agency faced criticism from members of Congress who questioned why the FTC did not pursue financial remedies on consumers’ behalf.  With the rollout of the vaccines, potentially more financial assistance in the works, and the virus raging on, the FTC has a larger hammer than it did just a year ago and advertisers of COVID-related products should expect them to use it.

The FTC announced yesterday 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.

FDA and FTC Joint Warning Letters Target Amazon Affiliates Making False COVID-19 ClaimsFDA and FTC Joint Warning Letters Target Amazon Affiliates Making False COVID-19 ClaimsEarlier this week, federal regulators continued their efforts to combat the spread of products featuring allegedly false and misleading claims that products can diagnose, treat, cure, or prevent COVID-19.  In warning letters issued to CBD Gaze, Alternavita, Musthavemom.com, and Careful Cents LLC, the agencies identify the respective recipients as participants in the Amazon Affiliate program.  Amazon Affiliates are marketers who earn commissions by promoting products sold on Amazon.  The letters state that the products at issue, which include essential oils, grapefruit seed extracts, cod liver oil, and others, feature false treatment and prevention claims such as the following:

  • CBD Gaze:  “Find the best CBD Oil to help fight Coronavirus.”
  • Alternavita:  “4 Proven Ways To Protect Yourself Against Coronavirus,” you represent that “Everyone is concerned about Coronavirus and looking for ways to protect themselves,” and then state the following:

“Grapefruit Seed Extract If you want a little extra daily protection GSE is a safe antibiotic . . . [Amazon associate link].”

  • Musthavemom.com:  “NATURAL REMEDIES FOR CORONAVIRUS. . .There are plenty of things you can do to boost your immune system and fight off any virus including coronavirus. Here are a few!”  … “2. Vitamin D . . . This important vitamin plays a crucial role in immune health. Being deficient in Vitamin D can increase your risk of infection. I recommend this brand of Vitamin D [Amazon associates link] and starting at a minimum dose of 5,000 IU.” [from your website https://musthavemom.com/coronavirus-prevention-treatment-plan/]
  • Careful Cents LLC:  “How to Boost Your Immune System Naturally With Essential Oils to Fight Coronavirus” you state: “Can you use essential oils to boost your immune system and fight coronavirus? Yes! Essential oils are one of the best tools to strengthen your immune system naturally . . .”

The letters state that the products are unapproved new drugs and misbranded pursuant to the Food Drug and Cosmetic Act.  Causing the introduction or delivery for introduction of these products into interstate commerce is prohibited under sections 301(a) and (d) of the FD&C Act, 21 U.S.C. § 331(a) and (d).  The letters also state that “it is unlawful under the FTC Act, 15 U.S.C. 41 et seq., to advertise that a product can prevent, treat, or cure human disease unless you possess 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.  For COVID-19, no such study is currently known to exist for the product identified above.  Thus, any coronavirus-related prevention or treatment claims regarding such product are not supported by competent and reliable scientific evidence.”

What’s the lesson?  The difference between these letters and the warning letters that FDA and the FTC issued earlier this year is that these are targeted not to the company making the product or even the retail platform on which they are sold.  They were sent to the middleman marketer, who likely does not produce or possess the product, but who is promoting and profiting from its sale.  This is consistent with the FTC’s letters to product influencers in other marketing contexts but is a departure from FDA’s typical enforcement approach.  Although we have seen FDA pursue retailers (particularly online ones), FDA has not made pursuit of marketing affiliates a priority.  Clearly, regulators want affiliate marketers (Amazon or otherwise) to understand that they are not immune from enforcement if they are making aggressive or unsubstantiated health claims.

Ad Law Access Podcast

 

Today, the FTC issued warning letters to three companies selling CBD products.  The companies, which FTC did not identify publicly, allegedly illegally advertised CBD products as being able to treat or cure serious diseases and health conditions without competent and reliable scientific evidence to support such claims. As we have written about previously, FTC and the FDA issued similar joint warning letters to three other CBD sellers earlier this year.

According to the FTC’s press release, the companies claimed their products could cure serious diseases such as cancer, alzheimer’s, fibromyalgia, and multiple sclerosis.  At least one company’s website, however, took it a step further by claiming “CBD ‘works like magic’ to relieve ‘even the most agonizing pain’ better than prescription opioid painkillers” and “the company . . . has participated in ‘thousands of hours of research’ with Harvard researchers.”

The letters directed the recipient companies to review all claims, including testimonials, to ensure they are supported by competent and reliable scientific evidence.  As readers of this blog likely know, advertisers are required to substantiate all objectively provable claims and cannot use testimonials as a means to make claims that they cannot otherwise substantiate. Given that cannabis, including hemp, was a controlled substance for decades, there has been limited research conducted to date.  Put another way, although users may have experienced favorable results, this does not excuse the advertiser from properly substantiating their claims.

Get a quick update on enforcement and related CBD issues in our webinar, Wednesday, September 11, at 12:30 pm Eastern.  Here is a link to the registration page.

The FDA and FTC jointly issued warning letters to three companies selling CBD products online. The letters allege violations of the Federal Food, Drug, and Cosmetic Act (“FDCA”) and the Federal Trade Commission Act (“FTCA”). Although this is the first time the FDA and FTC have issued joint warning letters relating to CBD, the FDA has been involved in CBD enforcement for the past few years.

Since the passing of the 2018 Farm Bill, which descheduled hemp and hemp derivatives under the federal Controlled Substances Act, the FDA has become the primary federal regulator relative to foods, drugs, cosmetics, and dietary supplements that contain CBD from hemp. The FDA’s most visible enforcement on CBD products to date has been in the form of warning letters issued to online retailers of products labeled as dietary supplements that feature aggressive disease treatment claims. The FDA also tested CBD products in conjunction with warning letters issued in 2015 and 2016 to determine whether they contained the CBD levels listed on the labels.

In the letters from last week, the FDA turned its focus onto various CBD products marketed online as “drugs,” including “CBD Salve,” “CBD Oil,” “CBD for Dogs,” “Hemp Oil,” “CBD Softgels,” “Liquid Gold Gummies (Sweet Mix),” “Liquid Gold Gummies (Sour Mix),” and “blue CBD Crystals Isolate 1500mg.” The FDA determined that the companies’ websites contained claims about their CBD products that established them as unapproved “drugs” under section 201(g)(1) of the FDCA. The letters also referenced the FTC’s substantiation standard, stating the FTC had concerns that certain efficacy claims that were made may not be substantiated by competent and reliable scientific evidence. They also warned that violations of the FTCA may result in legal action seeking a Federal District Court injunction or Administrative Cease and Desist Order, possibly including a requirement to pay back money to consumers.

As noted above, these letters are unique, as it is the first time the FDA has issued a joint FDA/FTC warning letter relating to CBD. This is also the first time the FDA has referenced the FTC’s substantiation standard or threaten any specific penalty for violations of the FTCA. For companies marketing CBD, it is important to keep in mind that although the market has flourished despite a host of regulatory uncertainties, it is the regulators’ opinion that the rules regarding advertising and health claims are clear. Competent and reliable scientific evidence remains the standard.

Over the last few years, however, the FTC’s health claim enforcement has featured several false cure-type products. Cases against Regenerative Medical Group, Cellmark, iV Bars, and Nobetes challenged unproven representations for products promising to treat Parkinson’s disease, macular degeneration, cancer, multiple sclerosis, and diabetes. Although we have yet to see the FTC announce any settlements relating to CBD products, these letters signal that FDA is not alone in its concern over aggressive CBD treatment claims.

The warning letters can be found here:

Welcome to our weekly roundup of CBD and hemp-related legal and regulatory news:

CBD

FTC Approves Final Administrative Consent Orders against Sellers of Deceptively Marketed CBD Products

Following a public comment period, the Federal Trade Commission has approved final administrative consent orders against six companies selling cannabidiol (CBD) products nationwide.

In December 2020, the Commission announced its first law enforcement crackdown on deceptive claims in the growing market for CBD products. The FTC took action against the six sellers for allegedly making a wide range of scientifically unsupported claims about their ability to treat serious health conditions, including cancer, heart disease, hypertension, Alzheimer’s disease, and others. In the sweep, the FTC filed complaints against: 1) Bionatrol Health, LLC; 2) Epichouse LLC (First Class Herbalist CBD); 3) CBD Meds, Inc.; 4) HempmeCBD; 5) Reef Industries, Inc.; and 6) Steves Distributing, LLC. A description of the FTC’s specific allegations against each company can be found in the press release announcing the crackdown. FTC

Hemp

Advocates urge D.C. judge not to dismiss suit to block DEA from regulating hemp crops

Hemp industry advocates urged a D.C. federal judge to not dismiss their suit seeking to block the DEA from regulating the crops, arguing their suit is distinct from a pending case they filed in an appellate court. The Hemp Industries Association (HIA) and S.C.-based CBD company RE Botanicals pushed back against the DEA’s argument that their suit seeks relief from an interim final rule holding cannabis byproducts in excess of 0.3% THC are controlled substances. The plaintiffs say the 2018 Fa`rm Bill is the focus of their challenge. In their complaint, the HIA and RE Botanicals said the DEA’s rule “threatens every stage of the hemp production supply chain” and claimed the agency was flouting the 2018 Farm Bill, which legalized hemp.  Kelo Land

Opinion: Indigenous tribes reviving hemp economies

The potential exists for Native people to benefit economically in the hemp industry, according to Winona LaDuke, executive director of Honor the Earth, a national Native environmental organization. Though tribes have been reluctant to get into the hemp and cannabis industry, she writes, particularly under the Trump era, there’s a growing interest among Native people in a New Green Revolution. Last year, the Fort Berthold Reservation, Colorado River tribes, Iowa Tribe (Kansas and Nebraska), Yurok, Sisseton and Santee Dakotas, to name a few, got their hemp plans approved by the USDA, but more than that, tribal growers and thinkers are considering hemp as part of the future for Indian Country. If hemp’s potential is realized, she argues, they can transform the materials economy. Tribes are in a unique position amid relaxed laws around CBD and hemp production LaDuke writes. Tribal sovereignty provides their governments’ leeway in the development of cannabis policies and will be a stabilizing force in turbulent times. Today, confusing regulations and lucrative growth in the cannabis industry set a complex scene, but tribal nations are in a position to continue a course they set.  Civil Eats

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Subscribe here to Kelley Drye’s Cannabis Law Update blog to receive future roundups and blog posts.

Any parent who has tried in vain to soothe a child suffering from a painful ear infection or comfort a teething baby knows that feeling of desperation when you may be willing to try just about anything to get the crying to stop.  Both yours and the child’s…

It is just this issue that appears to have caught the attention of the FDA and FTC as the target for their most recent CBD enforcement.  Similar to the three CBD companies previously targeted, Rooted Apothecary made allegedly unsubstantiated claims that its products could prevent, diagnose, treat, or cure serious diseases.  Particularly concerning this time, however, was the fact that some of the claims targeted use on infants and children.

Some examples of the company’s claims included the following:

  •  “Instead of synthetic chemical[s] that can have safety concerns, this blend uses the best of nature to help calm the inflammation and pain of teething, while also promoting sleepiness for your little one.”
  • “No matter what age, ear aches are a terrible, no good way to live each day! Our main priority was safety, effectiveness . . . as we formulated this for the entire family including our precious little ones. When the pain is bad, this roller goes to work for soothing pain, inflammation, and to battle against the bacterial/viral critters to blame.”
  • “Increasing evidence suggests that CBD oil is a powerful option for pain . . . anxiety . . . and autism . . . It seems like an attractive and safe option for children.”
  •  “[P]ossible uses for CBD include helping with skin problems such as acne, autism, ADHD, and even cancer. It’s often used in conjunction with traditional treatments to provide extra help. Children can use high amounts of CBD safely and without any risk.”

Once again, CBD marketers should take a lesson from the rules that apply to conventional products, and not just as to claim substantiation.  Product claims that target vulnerable populations, such as infants, children, or the elderly, are likely to receive greater scrutiny regardless of the product type.  These populations (along with sleep-deprived parents of young children) may be more susceptible to believing outrageous claims and less likely or able to articulate it if a product is not working or is potentially causing harm.  And that – more than the ear infection – is reason for concern.

For guidance on claim substantiation and health marketing considerations, check out our affiliated blog, Ad Law Access.

On August 9, Governor Phil Murphy signed into law Assembly Bill 5322, establishing the state’s program for cultivation, handling, processing, transport, and sale of hemp.  The bill also repeals the New Jersey Industrial Hemp Pilot Program, which was passed in late 2018.  Here are some key takeaways from the new law:

  • Under the new law, titled the New Jersey Hemp Farming Act, “hemp” is defined the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (“THC”) concentration of not more than 0.3 percent on a dry weight basis.
  • Hemp and hemp-derived cannabinoids, including cannabidiol (“CBD”), are not considered controlled substances or adulterants.
  • Derivatives of hemp, including CBD, may be added to cosmetics, personal care products, and products intended for human or animal consumption to the maximum extent permitted by federal law (As we’ve written about here, it is FDA’s position that CBD-infused foods are in violation of the Food, Drug and Cosmetic Act).
  • Farmers must receive a license to cultivate, handle, or process hemp from the New Jersey Department of Agriculture (“NJDA”).  However, subject to future regulations, it is lawful to sell legally-produced hemp products in New Jersey without a license.
  • Retail sales of hemp products processed outside New Jersey may be conducted in the New Jersey when the products and the hemp used in the products were processed and cultivated legally in another state or jurisdiction that has the same or substantially similar requirements for processing hemp products or cultivating hemp.

No later than 90 days after the bill was passed, NJDA must adopt interim regulations to implement the new law. The regulations will be effective immediately upon filing with the New Jersey Office of Administrative Law and will be in effect for a period not to exceed 18 months, and thereafter, be amended, adopted, or readopted by the NJDA in accordance with the provisions of the “Administrative Procedure Act.” After adoption of the regulations, NJDA will also submit the regulations for federal approval from the United States Department of Agriculture (“USDA”) as a state plan.  Stay tuned here for further updates.

Last February, FDA issued three warning letters to companies marketing cannabidiol (CBD) products as dietary supplements. FDA reviewed the companies’ websites and concluded that claims that CBD products could treat post-traumatic stress disorder, lupus, cancer, and other conditions rendered the products unapproved new drugs.

This February, FDA again turned its attention to CBD products, issuing eight new warning letters. For the first time in an enforcement context, FDA contended that CBD products fail to meet the FDCA definition of a “dietary supplement.” The agency explained as follows:

FDA has concluded that CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B)(ii) of the Act [21 U.S.C. § 321(ff)(3)(B)(ii)]. Under that provision, if a substance (such as CBD) has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, then products containing that substance are outside the definition of a dietary supplement. There is an exception if the substance was “marketed as” a dietary supplement or a conventional food before the new drug investigations were authorized; however, based on available evidence, FDA has concluded that this is not the case for CBD.

The existence of substantial clinical investigations regarding CBD has been made public. For example, two such substantial clinical investigations include GW Pharmaceuticals’ investigations regarding Sativex and Epidiolex. FDA considers a substance to be “authorized for investigation as a new drug” if it is the subject of an Investigational New Drug application (IND) that has gone into effect. Under FDA’s regulations (21 C.F.R. § 312.2), unless a clinical investigation meets the limited criteria in that regulation, an IND is required for all clinical investigations of products that are subject to section 505 of the FD&C Act. FDA is not aware of any evidence that would call into question its current conclusion that CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B)(ii) of the FD&C Act, but you may present the agency with any evidence that has bearing on this issue.

The cited portion of the “dietary supplement” definition is discussed in FDA’s controversial 2011 draft guidance on new dietary ingredients. FDA committed to revising that guidance in 2012. Revised guidance has yet to be released.

In each of the new warning letters, FDA again identified claims that it believed rendered products unapproved new drugs. This time, however, identified claims were drawn from not only company websites, but also product descriptions on Etsy and company posts on Facebook, Twitter, and Pinterest.  We discussed FDA and FTC regulation of social media in an article published in Nutritional Outlook. In general, regulators treat social media posts by companies the same as any other labeling or advertising. Regulators may treat posts by consumers as labeling or advertising where a company “likes,” comments on, or republishes a post.