The Food and Drug Administration’s (FDA) recent enforcement action against cannabis and CBD producer Curaleaf exemplifies the need for awareness and understanding of the federal and state laws applicable to advertising these heavily regulated products.
The hemp-derived CBD market has been booming following passage of the 2018 Farm Bill which removed hemp-derived CBD (containing less than .3% THC) from the Controlled Substances Act. Nevertheless, uncertainty persists around how products containing CBD can be labeled, marketed, and advertised. At the forefront in this area is the FDA, which has expedited its consideration of regulations of products containing CBD.
Similarly, in states that have approved cannabis for adult-use like California, regulators, legislators, and advertisers alike have struggled to find the appropriate balance between consumer protection and freedom to advertise in a flourishing cannabis market.
This advisory identifies regulatory and legal trends affecting CBD and cannabis-related advertising and offers takeaways for advertisers and marketers to help mitigate risk in a rapidly changing regulatory and legal landscape.
FDA Enforcement & Warning Letters
On July 23, 2019, the FDA issued a warning letter to Curaleaf, one of the largest medicinal cannabis and CBD companies in North America, for Curaleaf’s advertisements related to various CBD products, including pain-relief patches, tinctures and vape pens.
The warning letter stated that those CBD products constituted unapproved new drugs (21 U.S.C. 355(a); 331(d)), misbranded drugs (21 U.S.C. 352(f)(1)), improper dietary supplement labeling (21 U.S.C. 321(ff)(3)(B), 321(ff)(2)(A)(i)); and unapproved new animal drugs (21 U.S.C. 321(g)(1)(B)).
As for the unapproved new drugs and misbranded drugs warning, the FDA specifically highlighted advertising statements in blogs, articles, and posts on Curaleaf’s website and social media that CBD products were intended for use in the diagnosis, mitigation, treatment and/or prevention of diseases, including chronic pain, ADHD, anxiety, Parkinson’s, Alzheimer’s, heart disease, high cholesterol. The FDA made similar findings with regard to certain pet products.
As for the dietary supplement warning, the FDA took issue with the characterization of CBD as a dietary supplement on the label for CBD Tinctures, CBD Pain-Relief Patch, CBD Lotion and CBD Vape Pen. The FDA has taken the position that CBD products cannot constitute “dietary supplements” because the FDA’s definition of “dietary supplement” excludes articles that have been approved as an active ingredient in an approved drug product, or have been authorized for investigation as a new drug for which substantial clinical trials have been instituted.
Here, because Epidiolex, an FDA-approved epilepsy medication, contains CBD, the FDA has determined that CBD is not a dietary supplement. Interestingly, the FDA signaled possible flexibility on the dietary supplement issue, inviting Curaleaf to present the FDA with evidence that may bear on the issue notwithstanding their warning on the matter.
The Curaleaf warning letter comes on the heels of a flurry of similar warning letters in late spring 2019 to other CBD product retailers. Those letters contained analogous charges of violation of the FDA’s new drug and misbranding restrictions, as well as violations of the unapproved new animal drug restrictions and unsubstantiated advertisements.
As the FDA undertakes new regulations for CBD (public comment period closed July 16 following an initial May 31 hearing), we expect significantly more scrutiny of CBD-related products—particularly those marketed as dietary supplements linked to the treatment and/or prevention of medical ailments.
State and Local Prohibitions on CBD-Infused Food Products
In light of the FDA guidance, state and local governments have begun cracking down on the sale of CBD-infused products. For example, in New York City, the Department of Health and Mental Hygiene “embargoed” the sale of CBD-infused food products, citing the FDA’s ruling in December 2018 that it is “unlawful to add CBD to food or drink.”
Similarly in Massachusetts, the Department of Agricultural Resources issued a policy statement expressly stating that food products containing CBD, products containing hemp-derived CBD with therapeutic or medicinal claims, products containing hemp-derived CBD as a dietary supplement, and animal feed containing hemp-derived CBD are not approved for sale in light of FDA guidance.
Unfair Competition & Consumer Protection Disputes
Outside of the regulatory enforcement context, CBD companies are also increasingly having to defend against unfair competition and false advertising claims. Consumers have filed unfair competition and false advertising cases in both New York and California arising out of consumption of CBD products leading to the failure of drug tests.
See Horn v. Med. Marijuana, Inc., (W.D.N.Y. 2019) (pending appeal); Thurston v. Koi CBD, LLC. In fact, in the Horn case, the plaintiff even attempted to assert RICO claims arising out of the CBD products at issue.
Furthermore, CBD companies are now beginning to see an uptick in trademark infringement disputes related to CBD-related marks—a previously untested area of federal law. This increase follows from guidance by the USPTO that hemp-derived CBD marks filed on or after December 20, 2018 (passage date of the Farm Bill of 2018) may qualify for federal trademark protection, assuming those CBD-related marks also comply with “lawful use” requirements by the FDCA.
To that end, the USPTO emphasized “Use of a mark in commerce must be lawful under federal law to be the basis for federal registration under the U.S. Trademark Act.” Thus, much of the federal protectability of CBD-related marks by the USPTO will hinge on the FDA’s position on CBD (including its current position excluding CBD as a lawful dietary supplement).
State Level Advertising Laws & Regulations
Lastly, many adult-use cannabis legal states have increased consumer protection and public safety campaigns related to the sale of cannabis goods by unlicensed retailers. Currently, California is poised to pass AB1417, which would require advertisers to make certain disclosures and to post the licensing information in connection with the advertisement of cannabis goods.
If AB1417 passes, not only will cannabis retailers (and potentially manufacturers and cultivators) face potential enforcement risk arising out of non-compliant advertisements, but violation of the proposed provisions of the Business & Professions Code could also give rise to unfair competition claims under the “unlawful” prong of California’s unfair competition law.
Mitigating Risk in Regulatory Uncertainty
It should be clear that the legal and regulatory landscape for cannabis and CBD marketing and advertising is complex. Publishers and brands are subject to civil and criminal enforcement actions at the state and federal level, private civil suits, and reputational damage if they are not aware of and act within the network of applicable laws and regulations.
Businesses engaged in the sale of cannabis goods and hemp-derived CBD products should be particularly sensitive to the FDA’s heightened attention to drug claims and aggressive marketing of CBD products as dietary supplements. On the THC and cannabis goods side, advertisers must be aware of increasing state and local scrutiny surrounding consumer protection, particularly in California, regarding licensure status and the need to provide consumers with truthful and substantiated advertisements from licensed retailers of cannabis goods.
Both the CBD and cannabis goods markets continue to experience significantly accelerated growth—and substantial margins—and thus must balance appetite for risk with advertising practices that support sustainable business models.