Updated: Dec 7, 2022
There is no escape for companies making serious disease claims. The FTC is cracking down on claims made on blogs and social media including Tik Tok.
There are four primary lessons to be learned from this FTC action.
So Why Did The FTC Choose This Company?
An FTC official once told me their enforcement actions are a shot across the bow as a warning to the entire industry. This is a clear Marketer Beware Signal as hundreds of CBD companies are still making similar claims. Here is my analysis of the FTC action against six CBD companies in December.
The FDA or FTC looks at the 30,000-foot view of an entire website and socials. One claim may not attract a letter or enforcement action, but a disease claim in a video, a claim hashtag on socials, and a testimonial claim can elevate your risk. The authorities piece them all together for one big picture of non-compliance. They like to make examples out of companies not following rules, especially in areas they want to highlight which is what we see in this complaint.
There are many common mistakes referenced in this enforcement action. I review many of these in my blog posts
Blogs can be looked at as claims
Education is ok but blogs can easily cross the “claims” line when used for the purpose of selling a product. Most of the cited claims in this complaint come from blogs. Here is a LinkedIn discussion about blogs and claims.
I moderated an AHPA regulatory panel where we discussed blogs and compliance with a top FTC official.
The FTC official would say “Why is a company using blogs on their commercial website if not to sell products”. This is the lens the FTC and FDA look at when reviewing marketing statements.
I often use this example when educating about how “informational” blogs can easily cross the line into claims.
From FTC Complaint: Excerpt from “CBD Lotions – Do They Really Work?” Kushly (Kushly.com), posted Mar. 24, 2020, https://Kushly.com/blogs/news/cdb-lotion: [CBD] also affects the brain positively, allowing for the minimization of symptoms related to anxiety, depression, and other mental disorders. CBD has also shown some promise with regards to the treatment of seizures as well as neurological problems such as Parkinson’s or Alzheimer’s disease….
Asa commentary: This blog has all the high-risk words we continue to see in warning letters. I am not surprised this was called-out by the FTC.
Claims on social media are under increased scrutiny.
As marketers look for new ways to reach consumers, the FDA and FTC are paying extra attention to claims made here, This complaint is the first time I have seen claims made on Tik Tok mentioned, and I expect to see more in the future. This is one of the many reasons to follow FDA/FTC enforcement trends.
Clinically proven statements are high-risk and must be substantiated.
“Clinically proven” enforcement action by the FTC, FDA, and plaintiff attorneys are common in the dietary supplement world and are becoming more common in the hemp product world as well. We discuss this here.
Disease claims are high-risk.
It is high risk to imply that products treat, mitigate, or cure diseases or health conditions. This is no surprise . We discuss this here.
What penalties does the company face?
Fines of $30,000+ to be paid within 5 days.
Although not commonly reported the administrative requirements are in many ways more onerous than a sizable fine. These include:
Contacting all customers who purchased certain products May 26, 2019 through August 27, 2020 See letter below
This is not only costly but embarrassing.
Provide notice of the FTC order for one year on the web and all social media platforms.
Report on compliance and keep records for 10 years.
Disclose this order to any new company officers or investors.
In my opinion, this could likely hinder any future M&A activity.
This is the letter the FTC is requiring be sent:
What is the difference between the FDA & FTC?
There are differences between the FDA and the FTC although there is much overlap. Here is my oversimplification:
The FDA governs the manufacturing and labeling of products (such as food and supplements). In the digital era, labeling has a broad meaning and can mean anything that markets the product. This could be a social media post, hashtag, video, or even an influencer statement.
The FTC oversees advertising practices to ensure consumers are not misled. They are one of the good guys in my opinion and protect consumers from everything such as sweepstakes scams targeting seniors, to products marketed with erroneous health benefits for the purpose of material gain.
A claim may be allowable by the FTC if not misleading and has met their scientific substantiation standard. This same claim however could be unallowable under FDA regulations as certain claims (disease claims e.g. hypertension) are never allowed. Remember the FDA Disclaimer Not intended to treat, diagnose, prevent, or cure any disease.
Are these actions different than a warning letter?
This FTC action has a lot more teeth than a warning letter! The FDA and the FTC can issue warning letters, Warning letters are not good and should be avoided as they can alert class action attorneys, require resources to respond to, are a matter of public record, and can scare away investors to name a few. We discuss this in more detail here.
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Disclaimer: The educational information provided on this website is for informational purposes only. Contact an attorney for specific legal advice.