FDA and FTC take hard line on CBD, warn manufacturer of federal law violation

FDA and FTC take hard line on CBD, warn manufacturer of federal law violation

The FTC and FDA announced yesterday that they sent yet another joint warning letter to a CBD manufacturer and retailer, warning them that their marketing of CBD products violates federal law. The letter gave the seller 15 days to correct the violations or face “legal action without further notice, including, without limitation, seizure and/or injunction.” This letter again emphasizes that CBD cannot be marketed as a “dietary supplement.” In addition, this letter calls into question whether customer testimonials may violate the law when they make health-related claims.

This warning letter should be alarming to CBD manufacturers and retailers because the allegedly illegal claims are run-of-the-mill marketing for CBD products:

“This blend also works great for jaw and TMJ dysfunction pain.”

“Pain relief . . ..”

“CBD oil may improve depression, anxiety, and PTSD.”

In fact, the letter even indicated that a website post quoting the following customer review was illegal:

“1500 mg CBD Oil . . . ‘I purchased this in anticipation of pain and inflammation following rotator cuff surgery. I am also a type 2 Diabetic. So pleased to see my fasting blood sugars lower since beginning to use the product!!’”

It was previously thought that customer testimonials might give greater leeway with respect to health-related claims about CBD. One possible explanation for this apparent harder line is the fact that the retailer here marketed the products specifically for babies and children. For example the company made a claim that:

“Instead of synthetic chemical 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.”

The letter explains that these statements violate a number of federal laws. First, the statements constitute marketing of an unapproved new drug in violation of sections 505(a) and 301(d) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act), 21 U.S.C. 355(a) and 331(d). Any statement that any product affects the function of the body in any way potentially constitutes marketing of a new drug.

Second, the letter says the CBD products are misbranded drugs within the meaning of section 502(f)(1) of the FD&C Act, 21 U.S.C. 352(f)(1), because their labeling fails to bear adequate directions for use.

Third, the marketing of the CBD products allegedly violates the FTC Act, 15 U.S.C. § 41 et seq., which makes it illegal to advertise that a product can prevent, treat, or cure human disease unless the seller possesses competent and reliable scientific evidence, including, when appropriate, human trials.

The sellers at issue here attempted to get around these laws by marketing their CBD products as “dietary supplements.” But in its letter, the FDA again reiterated that CBD products cannot qualify as dietary supplements. This is because CBD is an active ingredient in a drug product that has been approved under section 505 of the FD&C Act, 21 U.S.C. 355, namely the prescription drug, Epidiolex, and under federal law, once a substance has been approved as a prescription drug, it can not be a dietary supplement. Therefore, CBD products are excluded from the dietary supplement definition under sections 201(ff)(3)(B)(i) and (ii) of the FD&C Act, 21 U.S.C. 321(ff)(3)(B)(i) and (ii).

We previously warned that federal enforcement actions could be coming this fall, and now it looks like those actions are here. The FTC is tasked with protecting consumers from deceptive business practices, and it appears to have taken the position that it is deceptive to make medical claims about CBD. We anticipate that more warning letters, and perhaps enforcement actions with no warning letter, will follow.

About Kennyhertz Perry’s CBD Regulatory Practice Group

Kennyhertz Perry advises clients on a wide range of CBD compliance and regulatory matters.  Kennyhertz Perry has broad experience assisting clients with business formation and compliance in highly-regulated industries.  In addition, we have defended multiple companies from FTC enforcement actions. The FTC has powers beyond what most people understand—it can seize your property and freeze all of your assets through a temporary restraining order before you even learn there is a case filed against you. We believe that an ounce of prevention is worth a pound of cure, and that by far the best course of action is to avoid such actions in the first place. We understand the complexities of federal and state CBD regulations, and can bring your business into compliance.

Kennyhertz Perry partner Braden Perry spent time as a Senior Trial Attorney with the Commodity Futures Trading Commission and is highly qualified to assist with the banking and other financial issues related to the CBD industry. He has defended multiple FTC enforcement actions involving allegedly deceptive claims and asset freezes.

Kennyhertz Perry partner John Kennyhertz is former in-house counsel at a private equity firm, and has structured transactions for very small and very large clients alike. He has substantial experience in highly-regulated industries such as online lending, and industries with rapidly-evolving regulations, such as cryptocurrency. He provides CBD operational and compliance counseling, and offers advice on appropriate modifications of transaction structure and documentation. John has also defended multiple companies from FTC enforcement actions.

Kennyhertz Perry attorney Ben Tompkins is a former federal prosecutor in Los Angeles as well as serving as tax enforcement counsel for the U.S. Department of Justice. He is well equipped to provide advice regarding the ever changing tax landscape in the CBD industry. In addition, he has defended multiple FTC enforcement actions involving allegedly deceptive claims and asset freezes.

Kennyhertz Perry attorney Arthur Chaykin is a former law school professor and head of litigation at Sprint. He is an expert on intellectual property law, and devises creative solutions to protect client’s IP in the CBD industry, even when certain federal protections are unavailable.

Kennyhertz Perry attorney Jeff Donoho is an expert in small business formation and government compliance. His knowledge of the labyrinthine CBD regulatory landscape helps him provide detailed guidance to clients.

Kennyhertz Perry attorney Mit Winter is a former partner at an AmLaw 100 law firm.  An expert litigator, his skill in anticipating issues before they become serious problems is valuable to all clients, and particularly those in the CBD industry.

Kennyhertz Perry attorney Jon Dedon has advised numerous clients in Kansas and Missouri specifically on state and federal CBD regulatory compliance matters. He understands the current state of federal and state regulations and makes it his job is to stay on top of the latest developments in this fast developing area. In addition, Jon has defended multiple FTC enforcement actions involving deceptive claims and asset freezes.

Clients also benefit from Kennyhertz Perry’s experience in related areas of law, such as litigation, banking, securities, tax, intellectual property, employment, insurance, and its regular practice before the Missouri administrative agencies and courts. CBD clients choose Kennyhertz Perry because the firm’s lawyers tailor their advice to the unique issues presented by each matter they handle.

To learn more about Kennyhertz Perry, LLC, please visit kennyhertzperry.com.

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