5 Key Takeaways from the FTC CBDeceit Crackdown on CBD Businesses

By Caitlin Wightman, Michelle Bodian

Dec 23, 2020

On December 17, 2020, the Federal Trade Commission (FTC) announced robust enforcement actions against companies making deceptive claims about CBD and CBG products. FTC’s enforcement efforts started similarly to past CBD enforcement actions, with a letter. However, unlike past FTC actions, these letters resulted in comprehensive public settlements with six companies. You can read the very public settlement statements here.

The FTC enforcement action, nicknamed “Operation CBDeceit,” accuses these CBD businesses of making a variety of unsubstantiated health claims. However, don’t let the cute name fool you, Operation CBDeceit, is the first law enforcement effort by FTC as part of an 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.

Operation CBDeceit highlights the following lessons:

1. FTC will target all types of products:

• The CBD companies targeted sold the following types of products:

  • CBD-infused shea butter, gummies, lozenges, honey sticks, vape pens, oils, dietary supplements, and foods

  • CBD and CBG products, including tinctures, gummies, capsules, topical balms, suppositories, bath balms, and coffee

2. FTC is concerned about the following types of unsubstantiated claims:

• The CBD companies targeted made the following claims:

  • CBD effectively treats, prevents, or mitigates serious diseases and conditions like artery blockage, cancer, glaucoma, autism, and schizophrenia

  • CBD products could treat or cure serious ailments like cancer-related symptoms, substance abuse, and AIDS

  • CBD can prevent, cure, mitigate, or treat diseases and serious health conditions, including Alzheimer’s disease, arthritis, autoimmune disease, and irritable bowel syndrome

  • CBD and CBG products have antibacterial properties, prevent or reduce the risk of heart attacks, strokes, and other diseases, and that certain of these claims were supported by scientific evidence

3. Individuals can be held personably liable for unsubstantiated claims:

• In addition to filing complaints against CBD companies, the FTC also included individual managers and owners, making them personally liable

4. Monetary Penalties:

• Most of the settlement agreements require that the companies pay a monetary penalty

• While not record-breaking amounts (like the $5 billion dollar settlement entered into with Facebook), the following monetary penalties are not paltry sums for a small or mid-size CBD company:

  • $20,000
  • $30,000
  • $36,254
  • $75,000
  • $85,000

5. Ongoing Business Requirements:

• Notably, these businesses cannot just pay the fine and walk away; there are also ongoing requirements to which they must adhere

• Claims

  • The companies are prohibited from making disease-related claims unless backed up by methodically sound clinical testing

  • Other health-related claims may not be made without reliable scientific evidence

  • This is not a new standard and only requires the companies to follow current FTC regulations

• Customer Notification

  • The settlements require the companies to notify their customers of the settlement

  • Some settlements require that a notification be sent through the mail or email, while others also require that the notice be displayed publicly on social media accounts and websites

• Compliance Monitoring

  • The settlements also subject the companies to compliance monitoring for up to twenty years and require submission of compliance reports to the commission

This crackdown signals the FTC’s willingness to subject CBD companies to stiffer penalties. Operation CBDeceit could be an ongoing operation and not a one-time action, so businesses should closely monitor whether this is a growing enforcement trend. CBD retailers should be aware of the risks of making health-related claims about products and should analyze all marketing materials, including social media.

Please reach out to a member of our hemp team if you would like assistance with CBD product and advertising compliance.  

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