Tag: monetary sanctions

FTC’s First Monetary Sanctions Against Six CBD Companies

On December 17, 2020, the Federal Trade Commission (“FTC” or “Commission”) announced that the Commission entered into settlements with six sellers of CBD-containing products.  The settlements were the result of the Commission’s enforcement sweep called “Operation CBDeceit,” which is the Commission’s ongoing effort to protect consumers from false, deceptive, and misleading health claims made by CBD companies.  In the settlements, the FTC has ordered each of the companies and the officers to immediately stop making unsupported health claims and pay monetary judgments to the FTC.  This recent enforcement is a significant development in the CBD industry for reasons discussed below.
This is the first enforcement action whereby the FTC imposed monetary sanctions upon CBD companies as well as the corporate officers for claiming unsubstantiated health claims.  The FTC claims that the violators including the corporate officers made a wide range of scientifically unsupported claims about their products’ ability to treat serious health conditions, including cancer, heart disease, hypertension, Alzheimer’s disease, and others.  These allegations are no different than the ones made by the FTC or the Food and Drug Administration (“FDA”) in prior enforcement actions.  What is unique about the recent settlements is that the Commission is holding the corporate officers responsible for participating in the illicit marketing of the CBD products.  It is axiomatic that the Commission will continue to enforce strict regulations over not only the CBD companies but also the corporate officers. Moreover, the violators were ordered to notify consumers about the settlements through various means.  For example, one of the companies was ordered to provide a notice on all of its social media accounts including Facebook, Twitter, Instagram, or YouTube as well as on the first page of the company’s website.  The notice must include a copy of the order.  Furthermore, five of the six settlements required the violators to pay damages ranging from $20,000 to $85,000.
Certainly, the FTC’s recent enforcement action is a key development in the CBD regulation while the industry has proliferated exponentially over the last couple years.  Additionally, there has been a series of lawsuits, which mimicked allegations raised in the FDA’s warning letters, filed against CBD companies.  It is imperative that CBD stakeholders promoting their products in line with applicable Federal and State laws.
How Frier Levitt Can Help
Given the possibility of lawsuits as well as conflicting state and federal law that only complicate regulations on hemp and its derivative products, CBD stakeholders should seek competent counseling to mitigate the risks of unwanted attention by the government or civil lawsuits.  Also, a cursory search using the search terms hemp revealed over 4,000 trademarks and applications. Clearly, the United States Patent and Trademark Office has opened the door for hemp containing products.  The trademarkabilty of such products and services is a nuanced and evolving issue.  If your company handles hemp and its derivatives, contact us today to speak to an attorney.