Hemp industry darling, Charlotte’s Web (OTC:CWBHF), which bills its product line as “the world’s most trusted hemp extract” and was ranked as the top brand by market share for CBD by Nasdaq in 2019, is one of the most recent examples of a large-scale CBD producer to be targeted by a class-action lawsuit. Litigation ranging in focus from CBD content to marketing (e.g. treatment claims) and stock pricing are on the rise as the Federal Drug Administration issues increasingly tighter restrictions on what is permissible in the world of hemp products.
In the case of Charlotte’s Web, a class-action lawsuit was filed in the state of California alleging that the company has been marketing its products as “dietary supplements”. This is a designation strictly prohibited by the FDA due to the fact that CBD is an ingredient in an FDA-investigated and approved drug (the anti-epileptic, Epidiolex). The FDA claims that this occurred before any CBD products were marketed as dietary supplements which, under the dietary supplement act, are regulated as food. This timeline distinction is crucial, as companies may have been able to avoid this scrutiny if the dietary supplement designation in their marketing had occurred before CBD came under investigation as a drug by the FDA. Charlotte’s Web and Infinite Products, another big name in CBD also based in Colorado, are both standing by their products and marketing and are determined to fight the litigious wave currently on the rise.
Big companies make big targets, but there are still thousands of products and retail outlets across the country slipping through regulatory loopholes. Which is not to say that they are necessarily angling for this state of affairs to continue. The longer FDA guidelines remain inconclusive and enforcement inconsistent, the more vulnerable companies (particularly smaller operations) become the kind of litigation that could drive them out of business permanently. A recent article on cnbc.com went so far as to say that producers are begging for regulations in order to better protect themselves from these risks.
Though the first lawsuits against CBD product companies date back to the earliest days of the CBD boom, these mostly pertained to an inconsistency between the advertised versus actual potency of products or baldly inflated claims about the products curative capacity, particularly in regards to chronic or life-threatening illnesses. With more definitive censure from the FDA of CBD brands that market themselves as dietary supplements, the field is wide open for litigators to go after any product that has CBD as an ingredient, even if the company is not making unsubstantiated claims or falsifying CBD content.
This being the case, the hemp industry can expect to see more lawsuits crop up in the weeks and months to come. In the meantime, the FDA continues to play a game of catch up to try to get a handle on hemp and how to ensure consumer safety before even more serious consequences of a still-arbitrarily regulated industry come calling.