Let’s talk about truth in advertising. For a long time, hemp and hemp-derived products were illegal, so advertising strategies weren’t a hot topic. Since Congress passed the 2018 Farm Bill, though, those that play in this space have learned these strategies—sometimes the hard way.
A few months ago, we discussed how difficult marketing products that contain cannabidiol (CBD) can be. Through much of last year, both the Food and Drug Administration and the Federal Trade Commission were cracking down on the marketing of CBD products. The reason? These federal agencies said the manufacturers were making unfounded health claims. For instance, the FTC’s letters reminded us that it is “illegal to advertise that a product can prevent, treat, or cure human disease without competent and reliable scientific evidence to support such claims.” Far from the puffery usually associated with advertising, the targets of the regulators’ ire had crossed a line; they had made an apparently factual statement about their products that they could not support.
But truthful advertisement requires more than simply avoiding misleading health information. A new class-action lawsuit, filed in the United States District Court for the Central District of California, underscores that point. The case, Ballard v. Bhang Corp., was filed around the same time that federal regulators were cracking down on manufacturers’ unsupported health claims. But this suit came with a twist. The plaintiff, Mr. Ballard, claimed that the defendant, Bhang Corp., falsely marketed its products—chocolate candy bars that contain both CBD and tetrahydrocannabinol (THC)—as having too much of a good thing. More specifically, Bhang said its candy had 30 mg of THC “per segment.” Mr. Ballard says that’s untrue. This alleged false advertising opens Bhang up to a host of legal claims. For example, the lawsuit says that Bhang committed fraud, violated California’s false advertising and unfair competition laws, and breached an express warranty—the one created by California law when Bhang held its candy out as having a definite THC content.
Misleading advertising can have serious consequences. Knowingly misrepresenting the CBD content of your product is fraud. And turning a blind eye toward your marketing, in some jurisdictions, is almost as bad. Often, states have unfair competition or unfair trade practices statutes that can transform a fraud claim from financially damaging to a bet-the-business event. For instance, North Carolina’s unfair trade statute automatically triples a plaintiff’s recovery and, in some cases, allows the plaintiff to recover his or her attorneys’ fees. The results can be devastating.
So how do you avoid misleading advertising? The simplest answer is to avoid making any statements about your product at all—at least, in jurisdictions that allow this practice. Don’t say that it contains a specific percentage of CBD. And certainly don’t tout its medicinal advantages. But while this strategy of silence will make your lawyers happy, it won’t do much to boost your profile in the marketplace. The bottom line is simple: if you’re going to make claims about your product, make sure they’re both factual and verifiable. If you’re going to promote your product as having a certain CBD percentage, for example, make sure a process is in place to verify that percentage.
If you’ve made the decision to sell or manufacture CBD products, this is one of your easier tasks. We’ve discussed previously how complex the ever-changing regulatory framework around CBD can be. While you’re committed to learning that area, don’t miss this basic, but important, step. Doing so could harm your brand, your reputation, or your livelihood.
Ward and Smith’s Hemp Law attorneys provide the insight and counsel needed to navigate through the complex and rapidly changing state and federal regulations governing the industry. If you’re interested in growing your hemp business, we’re here to help.