An increasing number of celebrities and social media personalities are endorsing the use of cannabidiol (CBD) products through social media. Many of these “influencers,” however, fail to take into account and comply with the complex regulatory environment surrounding CBD advertisements, which can have consequences for CBD companies themselves. In the United States, the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) both limit the use of certain language in CBD endorsements. As these advertisements attempt to reach the broadest possible audience, possible violations are especially noticeable to regulators, who have stepped up their enforcement efforts in this area.

What is CBD?

With the passage of the 2018 U.S. Farm Bill, hemp-based CBD products were removed from the Drug Enforcement Administration’s list of scheduled substances, thereby decriminalizing the possession of such CBD products. The Farm Bill defines hemp as a strain of the Cannabis sativa plant species that does not contain more than 0.3% of the psychoactive component tetrahydrocannabinol (THC). Instead, hemp has significantly higher concentrations of CBD. The legalization of recreational and medicinal marijuana in certain states refers to the cannabis plant containing high levels of THC, which may also contain some CBD. Certain states, such as California, have stringent requirements regarding advertising cannabis products, but these rules do not apply to hemp-based CBD products.


Continue Reading CBD Advertisements: What CBD Companies and Celebrity Influencers Need to Know

In February, we highlighted constitutional challenges that Axon Enterprise, Inc. (“Axon”) brought against the FTC related to a merger challenge against Axon. To briefly recap: Axon brought a declaratory judgment action alleging that the administrative trial procedures and the structure of the FTC violated Axon’s due process rights and Article II of the Constitution. Last week, the District of Arizona dismissed Axon’s claims, finding the Court lacked subject matter jurisdiction over Axon’s declaratory judgment claims where the administrative proceedings before the FTC were still pending. The Court’s lengthy opinion, which was consistent with prior unsuccessful challenges to the FTC’s administrative trial process, demonstrates the importance of raising a constitutional challenge early in a proceeding, even if that is the very proceeding, before the very agency, being challenged.

As previously discussed, Axon makes two constitutional arguments. First, the procedures authorizing the FTC to bring an enforcement action before an FTC Administrative Law Judge violate Axon’s Fifth Amendment due process rights. Second, the structure of the FTC violates the president’s “at will” removal power under Article II because FTC commissioners and administrative law judges are not subject to such removal. Though the Court acknowledged in dismissing the case that Axon’s constitutional claims “are significant and topical[,]” the Court determined that it “is not the appropriate forum to address Axon’s claims.”


Continue Reading On the Chopping Block: District Court Axes Constitutional Challenge to FTC’s Structure

The FTC has issued a Proposed Notice requesting public comment on whether to make changes to its Endorsement Guides (“Guides”) as part of the agency’s periodic retrospective review. This review will serve as a key opportunity for industry participants to shape what happens next by showing what they are seeing in the marketplace when it comes to endorsements and testimonials, consumers’ understanding of them, and the effects of new technology and platforms.

While the FTC’s standard practice is to review its rules and guides every 10 years, this review promises to be anything but standard. This is particularly true considering that FTC Commissioner Chopra weighed in with a separate statement, noting that he hopes that the Commission will consider taking steps beyond the issuance of voluntary guidance, including codifying elements of the existing Endorsement Guides into formal rules that could trigger civil penalties and damages. He also suggested that the FTC develop requirements for technology platforms that facilitate and profit from influencer marketing and specify the requirements that companies must adhere to in their contractual arrangements with influencers. The Guides were first issued in 1980, and the Commission last sought public comment on them in 2007. Since that time, endorsement-related practices (and the media where they appear) have changed dramatically, with new platforms and apps emerging that provide new ways for companies and their endorsers to reach consumers. In an attempt to keep up with the changing times, the FTC issued an FAQ-type of document, Endorsement Guides: What People are Asking, and has modified it multiple times over the years.


Continue Reading FTC Aims to Shake Up Endorsements, Seeks Public Comment on Its Endorsement Guides

On January 3, 2019, Axon Enterprise, Inc. (“Axon”), a manufacturer of body-worn cameras for law enforcement, filed a complaint against the Federal Trade Commission seeking a declaratory judgment in the District of Arizona. In the complaint, Axon alleges that the FTC’s administrative procedures and structure are unconstitutional, and seeks to enjoin the FTC from pursuing an administrative enforcement action against Axon. Although an antitrust case, the matter provides interesting issues that also involve the FTC’s consumer protection mission.

A little background: On June 14, 2018, the FTC opened an investigation into Axon’s attempted acquisition of Vievu, which also sells public safety camera systems. Axon contends that it cooperated with the FTC’s investigation over an 18-month period, only to result in the FTC threatening to sue in an administrative proceeding unless Axon “surrender[ed] a ‘blank check’ divestiture.” Axon protested that it did not violate the Clayton Act or any other antitrust laws in its acquisition of Vievu and filed the pending lawsuit, arguing that the FTC’s structure and administrative adjudication procedures violate the U.S. Constitution.

As for the constitutional challenges, Axon first argues that the FTC’s administrative procedures — whereby it acts as prosecutor, judge, and jury — violate Axon’s Fifth Amendment due process rights. Essentially, Axon asserts that when the FTC brings an administrative proceeding against a party, it infringes on that party’s right to a fair trial before a neutral judge in accordance with the Fifth Amendment. Accordingly, subjecting Axon to an FTC administrative proceeding will force it to “submit to a hearing process with a preordained result.” As Judge Posner noted years ago, “It is too much to expect men of ordinary character and competence to be able to judge impartially in cases that they are responsible for having instituted in the first place.” Remember, however, that Axon is not the first company caught in the FTC’s crosshairs to raise this argument, and these prior challenges have failed.


Continue Reading A Constitutional Challenge to Watch: Axon Sets Its Sight on the Structure of the FTC

As part of the 2019 year-end congressional appropriations wrap-up free-for-all, Congress adopted a new Section 642 of the Communications Act that significantly changes how a cable operator advertises and bills video subscribers. The law applies to both stand-alone video programming packages and the video portion of bundled plans that combine video programming with broadband Internet service.

Under the law, cable operators must change their billing practices as follows by June 20, 2020.


Continue Reading Congress Adopts New Cable Operator Advertising and Billing Requirements Affecting Both Video and Broadband Internet Offerings

Two Executive Orders Continue Trump Administration Efforts to Restrain Agency Policymaking

Last week, President Trump signed two executive orders designed to limit the ability of federal agencies to make and enforce policy through the use of guidance documents. While this may seem like a mere technical issue, the ramifications could be significant.

A federal agency may issue a guidance document for a variety of reasons. Some agencies, such as the U.S. Food and Drug Administration (“FDA”), use it as the primary instrument for announcing and explaining significant policies. Many FDA guidance documents clarify agency positions regarding complex and ambiguous laws and regulations governing the broad range of companies it regulates. This includes manufacturers and marketers of food, dietary supplements, cosmetics, drugs and medical devices.

Some question whether agencies (including FDA) have gone too far. Agencies are supposed to promulgate a regulation when creating a new rule. In contrast, an agency may convey an interpretation of a currently existing rule through the issuance of a guidance document or other, less formal means. While it is often challenging to distinguish a new rule from an interpretation, the distinction has serious implications. The cost, time and effort required to publish a guidance document are far lower. Notably, a regulation may only be finalized after the agency has received and addressed all public comments. No such requirement exists for guidance documents.


Continue Reading A New Challenge for FDA?

In two recent decisions, federal district courts have dismissed at least some of the claims brought by federal and state authorities, finding the complaints insufficiently specific in alleging that a defendant’s conduct met the relevant statutory requirements and/or insufficiently clear regarding their allegations as a whole. These rulings may provide a useful roadmap for future challenges to complaints brought by federal and state regulatory agencies and/or attorneys general.

Federal Trade Commission and People of the State of New York, by James, v. Quincy

We’ve blogged previously about the FTC and State of New York’s challenge to the advertising for cognitive supplement Prevagen. If your memory is good, you will recall that Judge Stanton dismissed the case, but the Second Circuit reversed on the issue of whether the studies Prevagen mentions in its ads support the claims in its ads. In addition to the product manufacturer and marketer, Quincy Bioscience, LLC, Prevagen, Inc., and Quincy Bioscience Manufacturing, LLC, the government also named as defendants Quincy’s co-founders and two largest shareholders, Mark Underwood and Michael Beaman.


Continue Reading Of Specificity and Shotgun Pleadings: Southern District of New York and Southern District of Florida Toss Claims Lacking Sufficient Specificity and Clarity

On May 17, 2019, the U.S. Supreme Court announced it would not hear an appeal in Supply Pro Sorbents, LLC v. RingCentral, Inc., apparently satisfied with a Ninth Circuit ruling that the inclusion of a one-line company identifier on a fax cover page was not in violation of the TCPA’s bar on unsolicited advertisements.

Winding down the 67th Antitrust Law Spring Meeting last week, Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection (the “Bureau”), provided an overview of the FTC’s consumer protection priorities. Director Smith reiterated that Chairman Simons’ focus on law enforcement applies across the Bureau’s five major areas: marketing, finance, advertising, privacy, and