NDI Letter Shows CBD’s Position Unchanged at FDA

The 2018 Farm Bill legalized hemp-derived cannabidiol (CBD) at the federal level, but in the nearly three years since then, little has changed from the perspective of the U.S. Food & Drug Administration (FDA). From the start, FDA’s regulatory position has been complicated by CBD’s previous approval as the active ingredient in the prescription drug Epidiolex. Subject to limited exceptions, the active ingredient in a drug cannot be added to food or dietary supplements. This restriction makes sense in the abstract – if a doctor has to prescribe something, it shouldn’t be available over the counter as a dietary supplement – but it has created a hurdle for CBD that many in the industry view as unfair. Ingredients that are commonly added to food or dietary supplements prior to becoming a drug are exempt from this prohibition, but because cannabis has been prohibited as a controlled substance, CBD never had an opportunity to be lawfully marketed in food and dietary supplements. Now that CBD is already approved as the active ingredient in a drug, it’s proving much more difficult for FDA to work around this restriction. Consequently, FDA prohibits adding CBD to a food or dietary supplement, but for practical purposes, it has only taken enforcement action against companies making drug claims in connection to the substance.

The latest development reveals that FDA’s position is unchanged. In August 2021, the agency released a letter to CBD company Charlotte’s Web stating that it will not approve the company’s application to market its Full Spectrum Hemp Extract product as a dietary supplement. This letter was in response to Charlotte’s Web’s submission under the New Dietary Ingredients (NDI) Notification process, by which a company notifies FDA that it wishes to market a dietary supplement with “new dietary ingredients.” Significantly, the process includes the agency’s review of information submitted by the manufacturer showing that the ingredient is reasonably expected to be safe. While FDA rejected the application on the grounds of CBD’s inclusion as the active ingredient in a drug, it also examined the evidence provided. FDA ultimately concluded that it still has concerns about the safety of the product, including that the studies did not address liver and reproductive toxicity. Charlotte’s Web issued a letter disputing FDA’s rationale and pointing to evidence on this issue, but it’s notable that the process even reached this point. Prior to this letter from FDA, and a similar one to Irwin Naturals released recently, the FDA considered NDI notifications solely on the basis of CBD’s presence in Epidiolex and did not evaluate safety information. Since CBD has been legalized, much of the conversation has centered around whether there is any testing showing its safety or benefits. The fact that manufacturers are starting to have that discussion with FDA shows how the industry is growing and developing the substantiation it will need for advertising claims. This may not alone overcome the prohibition on a drug ingredient in dietary supplements, but it is a strong sign for the industry and will be important going forward.

Charlotte’s Web likely won’t stop selling its Full Spectrum Hemp Extract product following this letter, but the unfortunate result is that CBD companies continue to operate without the full imprimatur of legal authority. A murky legal situation is detrimental to both consumers and industry, and it appears increasingly unlikely that FDA will resolve the current uncertainty. Due to the issue with CBD’s presence in Epidiolex, the best path to CBD’s approval is through Congress. Several bills have been proposed to this effect, and we’ll update you here if any go the distance.

Life in Plastic – It’s Fantastic

As the world contends with the ongoing COVID-19 pandemic, activists are sounding the alarm over another pandemic: the plastic pandemic. Environmentalist groups have been warning Americans about our overconsumption of plastic for years, but now states are taking notice and acting. California and Washington state recently enacted legislation establishing a tiered system designed to increase the amount of postconsumer recycled plastic (PCR) content required for sale. PCR is plastic that has completed its life cycle and has been reprocessed into a new product.

California’s AB 793 sets out a schedule for beverage manufacturers to meet. From Jan. 1, 2022, to Dec. 31, 2024, plastic bottles sold in California must contain no less than 15% PCR. From Jan. 1, 2025, to Dec. 31, 2029, plastic bottles sold in California must contain no less than 25% PCR. And by Jan. 1, 2030, plastic beverage containers sold in the state of California must contain no less than 50% PCR. Producers of plastic bottles that do not meet the standard are subject to a penalty. The penalty is decided through an equation: the total pounds of plastic used multiplied by the relevant minimum PCR percentage, less the pounds of PCR used multiplied by 20 cents. Continue Reading

COVID-19 Consumer Protection Act Shows Alternative Path to Monetary Remedies

A recent Federal Trade Commission (FTC) action demonstrates how the FTC has pivoted toward enforcement actions based on specific acts of Congress and rules in light of the Supreme Court’s ruling in AMG Capital. Congress passed the COVID-19 Consumer Protection Act in December 2020, which made deceptive acts or practices involving the treatment, cure, prevention, mitigation, or diagnosis of COVID-19 unlawful. Since the pandemic began, the FTC has sent hundreds of warning letters to companies allegedly making deceptive or scientifically unsupported claims regarding their products’ ability to treat or prevent COVID-19.

Despite the hundreds of warning letters, the FTC did not file its first complaint under the COVID-19 Consumer Protection Act until April 15, 2021. In United States v. Nepute et al., the FTC and Department of Justice alleged that Quickwork and its chiropractor CEO, Eric Nepute, deceptively advertised that its vitamin D and zinc products are scientifically proven to treat or prevent COVID-19. Notably, the FTC had previously sent Nepute a warning letter in May 2020 regarding the same practices. After receiving the warning letter, however, the advertiser continued to make claims such as “COVID-19 Patients who get enough Vitamin D are 52% less likely to die.” Continue Reading

Everywhere Commerce: Top Strategies for Mitigating Risk

Recent changes to our way of living have made it clear just how important it is for marketers and retailers to be thinking about the convergence of brand experience and commerce and redefining how consumers shop and interact with brands online. Join us virtually from 11-3:30 ET on June 15-16 for an opportunity to connect with peers and learn from business leaders and regulators as our advertising, digital risk advisory and cybersecurity, and class action defense teams host a mix of engaging panels and breakout sessions that will cover the latest developments, enforcement trends, and risk mitigation strategies. Approved for 8.0 hours CLE credit.

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Podcast: AD-ttorneys@law: The Future of Consumer Redress after Supremes Rule in AMG Capital Management v. FTC

In a highly anticipated recent Supreme Court decision in the case of AMG Capital Management v. FTC, the court ruled in favor of putting the brakes on consumer redress and the commission’s ability to protect consumers from unfair or deceptive practices in the marketplace. BakerHostetler partner Randy Shaheen discusses the ramifications.

Questions and Comments: rshaheen@bakerlaw.com

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COPPA Compliance Back in Congressional Crosshairs

With more children getting online, the Federal Trade Commission (FTC) is not the only stakeholder concerned about reevaluating regulations related to children’s online privacy. Certain members of Congress are also seeking to review the current landscape of compliance with the Children’s Online Privacy Protection Act (COPPA). Note that the FTC received public comments regarding possible changes in implementation of the enforcement of COPPA in December 2019, and will be responding soon.

Sen. Edward Markey (D-Mass.) and Rep. Kathy Castor (D-Fla.) sent a letter to the FTC on April 21 asking the government agency to investigate around 150 mobile applications accessible through mobile app stores. Their concerns are related to how app store platforms address apps directed to children, including providing apps with a way to market the application through platform-approved family-friendly designation. The letter alleges that the apps are marketed as COPPA-compliant even though an investigation found the apps to be tracking user behavior and disclosing children’s personal information (including for advertising purposes), both without verifiable parental consent. Sen. Markey and Rep. Castor are also concerned that the app stores may have violated Section 5 of the FTC Act, which prohibits unfair and deceptive business practices. Continue Reading

SCOTUS: No Equitable Monetary Relief for FTC Under § 13(b)

Well, the buck stops here (for now). Last week, in AMG Capital Management, LLC v. Federal Trade Commission, the Supreme Court unanimously ruled that Section 13(b) of the Federal Trade Commission (FTC) Act does not authorize the FTC to obtain equitable monetary relief such as restitution or disgorgement. This highly anticipated landmark decision reverses decades of precedent and strips the FTC of one of its key enforcement tools for obtaining consumer redress. The decision will likely represent a sea change in FTC enforcement practices.

How did we get here? In 2012, the FTC sued race car driver Scott Tucker and a payday lending company he ran, AMG Capital Management (collectively, Tucker). The FTC alleged that Tucker engaged in unfair or deceptive acts or practices in violation of Section 5 of the FTC Act by failing to clearly and conspicuously disclose that the loans issued would automatically renew, even after the customer paid off the loan, unless the customer affirmatively opted out. The FTC sued in federal district court under Section 13(b) and asked the court for restitution and disgorgement of Tucker’s ill-gotten gains in addition to injunctive relief. The court granted the FTC’s motion for summary judgment and its request for a permanent injunction and ordered the equitable monetary relief sought. Tucker appealed, arguing that Section 13(b) does not authorize the FTC to obtain the monetary relief granted because Section 13(b) only expressly authorizes the FTC to obtain injunctive relief against those who are violating or are about to violate the law. The Ninth Circuit upheld the district court’s decision, pointing to long-standing precedent giving district courts broad power “to grant any ancillary relief necessary to accomplish complete justice, including restitution.” Continue Reading

Podcast: AD-ttorneys@law: Marketing a Subscription-Based Service? Beware

We used to think of subscriptions as mostly for newspapers and magazines, but today you can subscribe to get cosmetics, cars, clothes, mental health counseling – even a curated selection of cat toys and treats that will show up on your doorstep every month. Is your brand offering a subscription-service? Linda Goldstein explains how to mitigate your legal risk.

Questions and Comments: lgoldstein@bakerlaw.com

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PA Supreme Court Finds Intent Is Not Nine-Tenths of the Law

We regularly tell clients that intent is meaningless when it comes to deception under Section 5 of the FTC Act. And that’s true (or we wouldn’t say it). But fewer people realize that it’s not necessarily true when it comes to a minority of the states. As of a couple weeks ago, however, that number has shrunk by one, courtesy of the Pennsylvania Supreme Court. In Gregg et al. v. Ameriprise Financial Inc. et al., the Pennsylvania Supreme Court held that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (CPL) does not require a showing of intent to hold defendants liable. This 4-3 decision, which was nearly 20 years in the making, makes clear that the statute functions in a strict liability manner. There no longer needs to be a finding of fraud or negligence for a court to deem a business’s practices deceptive. This broadens the power of the law to regulate unscrupulous business practices.

In 1999, Gary and Mary Gregg enlisted the expertise of Robert A. Kovalchik, a financial adviser and insurance salesman for Ameriprise Financial Inc. Kovalchik engaged in what the trial court described as deceptive sales practices, as Kovalchik misrepresented his investment strategy for the Greggs. It was not disclosed to the Greggs that Kovalchik would earn a significant amount of money in commission while the Greggs would incur additional costs. Continue Reading

Podcast: AD-ttorneys@law: False Advertising or Just Puffing?

Absolute truth in advertising is something of a rarity, but not every untrue statement is false advertising. In this episode, BakerHostetler partner Randy Shaheen is going to ply you with pointers on avoiding puffery’s promotional pitfalls and potential problems.

Questions and Comments: rshaheen@bakerlaw.com

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