Done with warning letters, feds file lawsuit against CBD company’s bogus coronavirus claims

Jun 9, 2020

Following a spate of Food and Drug Administration warning letters sent throughout the CBD industry in the wake of COVID-19, and a rise in consumer class-action lawsuits against individual businesses, the Federal Trade Commission took an unprecedented step recently, filing a lawsuit of its own to stop what it claims were deceptive marketing practices. 

According to a report in the New Jersey Law Journal on Monday, the FTC filed an administrative complaint against Whole Leaf Organics and company owner Marc Ching on April 22, demanding that Whole Leaf cease and desist with deceptive marketing practices and false advertisements for several of the company’s CBD products. The complaint alleged that such advertising violated the Federal Trade Commission Act.

Only two days later, according to the New Jersey Law Journal, the FTC filed a petition in the United States District Court, Central District of California, seeking a preliminary injunction and restraining order seeking to bar Ching and Whole Leaf from continuing to present false information about their CBD products.

Ching and Whole Leaf agreed to a preliminary cease and desist order, complying with what was seen by many as a rare move by the federal government.

As per the FTC, Whole Leaf Organics advertised several of their CBD products, including products under the brand names CBD-EX, CBD-RX, and CBD-Max as a treatment for cancer. More recently, the company marketed its “Thrive” product as a potential preventative for the novel coronavirus, telling customers that it prevents or reduces risks associated with COVID-19. 

Recent claims by companies that CBD can be used as a cure or preventative for COVID-19 have sent the federal government into overdrive, as no such evidence exists to back up these statements. “At a time when Americans are looking for any hope and solutions to the COVID-19 pandemic, we’re increasingly concerned about the deceptive practices some marketers can, have, and will employ,” said the FTC in an April 20 statement.

Over the past few months, the FDA has sent out multiple warning letters to CBD companies, reaffirming CBD cannot cure COVID-19. In April alone, the FDA warned at least five companies, including NeuroXPF, CanaBD, CBD Online Store, Indigo Naturals, and Native Roots Hemp. 

"This FTC action really seems to be targeting the marketing of relief of Covid-19 symptoms, as opposed to increased scrutiny of the hemp-derived CBD market overall," said Seth A. Goldberg, a partner at Duane Morris who serves as a team lead for the law firm's Cannabis industry group. "[The] FDA has also recently issued warning letters to CBD manufacturers for similar Covid-19 related marketing but has maintained a steady flow of CBD-focused warning letters targeting other health claims since summer 2019. The FTC action does not seem to be a shift in that ongoing practice of preventing CBD manufacturers from making “over the line” health claims about their products. It does, however, further emphasize the need to formulate policies and regulations that provide clarity and support a market for a product in high demand." 

But even as the federal government tries to come down hard on the CBD industry, their inaction in developing rules and regulations to guide businesses have put consumer lawsuits on hold. As national law firm Duane Morris noted in an action alert on Tuesday, consumer class action lawsuits against the CBD industry are on the rise. However, the lack of guidance from the FDA has caused several cases to be put on pause.

In the U.S. District Court for the Central District of California, for example, the judge presiding over Colette v. CV Sciences, Inc. — a case in which the plaintiffs claim fraudulent and deceptive advertising practices over the sale of CBD products — issued a stay until the FDA institutes rules and regulations over the industry. The same thing occurred in the Southern District of Florida, where the judge presiding over Snyder v. Green Roads of Florida decided to stay the case “until the FDA completes its rulemaking regarding the marketing, including labeling, of hemp-derived ingestible products.”

While it appeared that the FDA would be content with sending out warning letters, it may be that the novel coronavirus added some urgency to their initial delay in rulemaking. Although warning letters typically come with a 15 day grace period in which companies can address deficiencies, CBD businesses making COVID-19 claims have now been given only 48 hours to comply. The FTC action may not be a precursor to a broader move by the federal government, however, there is a clear desire to see the CBD industry clean up its act.

(Header Image: U.S. Air Force photo by Staff Sgt. Joshua Magbanua)

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