Notwithstanding the lack of national standards and patchwork of state laws regarding the sale and marketing of hemp-derived products, one matter has always been clear: product manufacturers shall not make health claims (showing that a product may reduce the risk of disease or a health-related condition) or drug claims (showing that a product is intended to diagnose, treat or cure disease).
In multiple pronouncements, the Food and Drug Administration (FDA) has iterated that health claims are subject to FDA approval, and the ability to make drug claims is a privilege afforded only to pharmaceutical manufacturers who make extensive investments in, and commitments to, research and development and the highest manufacturing standards. These rules apply to hemp products and non-hemp products alike and have been consistent for more than 50 years.
Yet, in an effort to gain market share and in the name of “consumer education,” some hemp product manufacturers simply cannot resist touting the purported health benefits and curative properties of hemp-derived products, particularly when it comes to CBD. Enforcement of the prohibition on health and drug claims has typically originated with the FDA, in joint cease-and-desist-style letters with the Federal Trade Commission (FTC), which, to date, have generally been tantamount to a slap on the wrist.
However, in December 2020, the FTC announced its first solo law enforcement sweep against deceptive claims in the hemp industry, escalating matters beyond a mere wrist slap. Operation CBDeceit commenced with actions taken against six sellers of CBD products 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.” The six sellers were Bionatrol Health, LLC (Utah), CBD Meds, Inc. (California), Epichouse, LLC (Utah), HempmeCBD (Florida), Reef Industries (California) and Steves Distributing (Colorado). They will be required to immediately cease making such health claims, and some of them will pay monetary settlements to the FTC.
Drug and health claims fall within the purview of the FDA and the FTC. The FDA has broad regulatory authority over the production and sale of food, drugs, biologics, medical devices, consumer electronics that give off radiation, cosmetics (including moisturizers and color additives in makeup and personal care products), veterinary products (including food and feed) and tobacco products (including e-cigarettes and vape pens). Hemp consumer packaged goods generally fall into these categories.
The FTC, on the other hand, operates to protect vibrant competition and consumer safety by preventing anticompetitive, unfair and deceptive business practices. Widely known for large-scale litigations against companies that engage in false advertising or illegal monopolistic activities, it educates, advocates and takes enforcement actions to regulate commerce and trade.
It is long-standing policy of the FTC that, “before disseminating an advertisement, the advertiser must substantiate all claims, express and implied, that the ad conveys to reasonable consumers,” and that advertisers are liable for all reasonable interpretations of their advertisements — whether true or false. The FTC now seeks to make clear that the hemp industry is not the Wild West, and health-related hemp product claims are subject to the same substantiation standards as all other consumer products.
In determining how much claim substantiation is required, the FTC requires advertisers to possess at least the level of substantiation express or implied in the advertisement. So, for example, claims indicating that “studies show” or “doctors recommend” must be backed by adequate extrinsic evidence, such as consumer surveys and/or expert testimony. In the absence of references to a given level of support in an advertisement, the FTC assumes that the advertiser had a “reasonable basis” for making the claim — an objective standard not easily qualified. Factors used to determine what is “reasonable” include, among other things: the type of claim, the benefits if the claim is true, consequences if the claim is false, the ease and cost of developing substantiation for the claim, the type of product and the level of substantiation that experts in the field would agree is reasonable.
As indicated in the FTC’s CBDeceit enforcement orders, “competent and reliable scientific evidence” is required to substantiate most health-related product claims, while certain health-related product claims, such as drug claims, require “human clinical testing.” Both standards of substantiation are relatively high.
The FTC defines competent and reliable scientific evidence as “tests, analyses, research, studies, or other evidence based upon the expertise of professionals in the relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.” Anecdotal evidence (such as customer testimonials), newspaper or magazine articles, manufacturer-developed sales materials, low return rates or money-back guarantees — all of which are prevalent among hemp product manufacturers — would not qualify.
Claim substantiation is not always straightforward. Sometimes, disclaimers may be appropriate to qualify a claim and mitigate the likelihood of consumer misinterpretation. It is critical that hemp product advertisers know how to identify claims in advertising, determine which claims require substantiation and understand the FTC’s substantiation standards — or risk FTC enforcement.