An era of consumer lawsuits alleging false advertising and unfair competition against producers of cannabis-derived products has begun. What does this mean for cannabis companies, and what do you need to know to protect yourself and your business?
What are truth in advertising laws?
Truth in advertising laws require companies to leave falsehoods out of their marketing. Businesses must be truthful and not misleading in their advertising. If applicable, claims should be backed by scientific evidence and other market research.
Which bodies govern truth in advertising laws?
The U.S. Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) are two major bodies that write and enforce truth in advertising laws. These two regulatory bodies primarily focus on companies that sell products or services that directly affect someone’s life, health, or money. As a consumable product, cannabis falls underneath this umbrella.
Consumers also have the ability to file private civil suits under state false advertising and unfair competition laws or federal law, including the Lanham Act, which prohibits false advertising that “misrepresents the nature, characteristics, qualities, or geographic origin” of goods or services. As cannabis and hemp businesses compete for market share, even mere allegations of false advertising may cause irreparable reputational damage.
Are cannabis companies required to follow truth in advertising laws?
Yes. Even though cannabis is still federally illegal, cannabis and hemp-derived cannabinoid companies are still obligated to follow truth in advertising laws. This applies to businesses as well as individuals such as social media influencers who offer marketing services for brands and products.
It’s especially important for businesses to pay attention now — as consumers increase scrutiny on marketing claims, consumer class actions threaten to derail growing consumer confidence and the normalization of cannabis products.
What’s considered deceptive under truth in advertising laws?
Before analyzing whether a “claim” may be appropriately substantiated and, thus, not “unfair,” “false” or “deceptive,” when distinguishing themselves from competitors, operators must first be attuned to what constitutes a “claim.”
While there are many different types of “claims,” common types of marketing claims made by cannabis operators include:
- Health claims, such as a product’s purported pain-relieving properties
- Comparative claims, such as stating that your product is of better quality than a competitor’s
- Environmental claims, such as stating that your product is eco-friendly
Claims may appear on labels, which are typically affixed to the product, but may also include any written, printed or graphic materials that accompany the product at any point in the distribution process or in its marketing materials, on its website and in all other marketing collateral.
How deceptive claims may appear in advertising in the cannabis industry
Health claims
Health claims show that a product may reduce the risk of a disease or condition. These claims require a higher level of substantiation than other types of claims, a policy that is responsive to the billions of dollars that Americans spend every year on foods, supplements, weight-loss programs and other goods and services designed to improve one’s health.
Health claims must be supported with competent and reliable scientific data, which includes an assortment of tests, analyses, research studies and other evidence, including at least one randomized, well-controlled, human clinical trial. No CBD company in the United States, except for GW Pharmaceuticals, in the context of Epidiolex for the specific treatment of certain seizure disorders, has completed this undertaking. Thus, no CBD company, except for GW Pharmaceuticals, may make a health claim.
Comparative claims
These are assertions that a product or service is superior to those offered by its competitors. These include head-to-head comparisons between similar features of competing products or absolute claims, such as the “best tasting” product or “fastest” onset of wellness attributes. Comparisons must be truthful and free of misleading omissions, and absolute claims should be supported by product performance testing and consumer behavior surveys.
Importantly, comparative claims may become inaccurate over time, even if they were accurate when made. For that reason, extreme caution should be exercised when making a comparative claim. Production runs should be kept low to avoid recalls and rebrands.
Environmental claims
Environmental claims involve the marketing of a product as environmentally friendly in some regard. Such claims amid recognition of the climate crisis are gaining popularity.
Between the high energy demands of indoor cannabis production facilities and required use of bulky, child-resistant packaging, the cannabis industry has been maligned for alleged environmental waste. Notably, cannabis regulatory agencies in emerging markets, such as in New York, New Jersey and Massachusetts, now require, as a condition for licensure, applicants to submit a plan for environmental conservation. This makes environmental claims tempting for marketers, but they could land companies in hot water.
Any company proffering environmental claims must be fully versed in the “Green Guides” published by the FTC. Among other things, the Green Guides address specific claimed environmental attributes of products, including, for instance, claims that products are “biodegradable,” “compostable,” “sustainable,” “non-toxic,” “recyclable,” “made with renewable energy” or similar sentiments. They address general claims, such as “earth-friendly” and “eco-friendly.” The Green Guides also establish basic principles for truth, clarity, substantiation and qualification for all environmental claims.
Charlotte’s Web CBD: regulatory enforcement in action
Among lawsuits that made headlines several years ago was a consumer class action lawsuit brought against Charlotte’s Web Holdings Inc., the maker of Charlotte’s Web, a hemp cultivar rich in CBD.
Charlotte’s Web has been known to successfully treat certain seizure disorders, including those suffered by the late Charlotte Figi, the cultivar’s namesake. For years, Charlotte’s Web has been credited with saving lives and popularizing and normalizing CBD. Charlotte’s Web was the first U.S.-based hemp company to go public on the Toronto Stock Exchange and the first cannabis company to secure a plant variety patent. But its high visibility and “iconic” status has left it vulnerable to attack.
Against Charlotte’s Web, consumers have alleged, among other things, that positioning and branding its CBD tinctures as “dietary supplements” violates the federal Food, Drug and Cosmetic Act, causing a violation of California state laws. According to the FDA, it is a violation of the Food, Drug and Cosmetic Act to sell CBD as a dietary supplement.
The FTC got involved shortly after, announcing in 2021 that they would similarly enforce penalties against CBD companies in violation of truth in advertising laws. Litigation involving false advertising may be brought through the FTC, which enforces false advertising laws on behalf of consumers.
Prioritize smart, compliant marketing at your cannabis company
Proper claims scrutiny will ultimately protect against legal exposure, as well as the cannabis industry’s integrity. If a marketing message seems dubious or that it may run afoul of the law, it’s best to err on the side of caution and avoid making those claims until they have been properly documented and thoroughly vetted.
Don’t take the risk for big, highly-visible campaigns or small actions alike. When in doubt, reach out to cannabis law professionals like the attorneys of Rudick Law Group, who can help you navigate these laws and protect your business from civil claims or other kinds of enforcement.
A version of this article originally appeared in Marijuana Venture: https://www.marijuanaventure.com/scrutinizing-claims-for-truth-in-advertising/
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