FTC Sues Company for Unsubstantiated Claims

On April 24, 2020, the Federal Trade Commission (“FTC”) filed a complaint in federal court as well as an administrative complaint against California-based marketer, Whole Leaf Organics for its unsubstantiated product claims.¹ The company sells Thrive, a supplement consisting mainly of vitamin C and herbal extracts that is advertised to combat COVID-19. Additionally, the complaint alleges that the company was also making unsubstantiated medical claims about a line of its CBD products and supplements.

Marc Ching, doing business as Whole Leaf Organics, has sold Thrive since December 2018 but decided to rebrand the supplement in March 2020.² Ching began marketing the product as a way for consumers to combat and strengthen immunity against pathogens like COVID-19.

Advertisements stated that Thrive contains “clinically tested and proven ingredients” and that the formulas are “proven and deliver results.” Ching additionally made claims that Thrive was an “anti-viral wellness booster aimed to treat, prevent, or reduce the risk of COVID-19.”

According to the complaints, Whole Leaf Organics also sells capsules and oils primarily containing cannabidiol (“CBD”) and herbal extracts called CBD-EX, CBD-RX, and CBD-MAX. Ching has allegedly pitched this line of products as “the most effective innovation in cancer and immune-related proactive supplement support in the last ten years.”

Product ads also state claims such as “CBD-EX combines the best cancer-fighting elements into one simple capsule,” and “supplements are effective at slowing mutated cell division and reduce the supply of food and oxygen to cancer cells,” among other similar claims aimed to attract cancer patients.

In response to the CBD supplement claims, the U.S. Food and Drug Administration (“FDA”) issued a warning letter to Whole Leaf Organics in November 2019.³ The letter warned that the company was making unapproved drug claims and gave Whole Leaf Organics fifteen (15) days to remove the claims from all of its advertisements and create new labels. FDA has not issued additional public communications regarding the claims to Whole Leaf Organics.

On April 28, 2020, Ching agreed to a preliminary order in response to the complaint filed in federal court.⁴ The preliminary order bars him from claiming that Thrive is effective at treating, preventing, or reducing the risk of COVID-19. The administrative case, which is set to begin on January 7, 2021, would additionally bar Ching from claiming that his CBD based products are effective cancer treatments.

This FTC action is a serious matter, and the industry should be paying very close attention. It is the first lawsuit brought by the federal government against a CBD company, and it is entirely possible that it is the first salvo in a campaign of escalating enforcement.

It is possible that the FTC could be aiming to make an example out of a company that appears to be attempting to capitalize on pandemic fear, and it has chosen to pursue Whole Leaf Organics in the belief that the company, having already received a warning letter from FDA for its actions, will make it easier for FTC to win a decisive victory in federal court. There is certainly a public policy incentive to deter others from attempting to prey or capitalize on COVID-19-based fear.

Either way, this case further emphasizes the need for FDA to recognize that the consumer CBD industry is not going away any time soon. The administration needs to promulgate rules and regulations that are far more practical than “All consumer CBD products are illegal.”

This head-in-the-sand approach to CBD products ignores the economic reality of the industry, leaves consumers at risk due to the lack of product standardization, and makes it impossible for good actors in the space to operate in compliance with the law while simultaneously providing a “gray-area” that emboldens — if not incentivizes — bad actors to make misleading or false product claims.

If FDA were to permit consumable CBD products to be classified as food and dietary supplements, it would reduce the need for the FTC to bring suits like this. It could allow the free market to help stamp out bad actors as established, reputable companies, who have been staying on the sidelines, would finally be able to enter the industry on a large scale, effectively shutting out some of the smaller, less scrupulous operations.

At the very least we hope that this case will deter all CBD companies from making health claims and disease claims about their products.

  1. https://www.ftc.gov/enforcement/cases-proceedings/202-3110/marc-ching-matter
  2. https://www.ftc.gov/news-events/blogs/business-blog/2020/04/whats-intersection-covid-19-cancer-claims-cbd-ftc-case
  3. https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/whole-leaf-organics-llc-593176-11222019
  4. https://www.ftc.gov/system/files/documents/cases/dkt._13_stipulation_to_pi.pdf

Authors: David Rodman, Rebecca Spence

The information in this blog post (the “Blog” or “Post”) is provided as news and/or commentary for general informational purposes only. The information herein does not, and shall never, constitute legal advice and therefore cannot be relied upon as a legal opinion. Nothing in this Blog constitutes attorney communication and is not privileged information. Nothing in the Post or on this website creates any kind of attorney-client relationship or privilege of any kind.

Originally published at https://therodmanlawgroup.com on May 4, 2020.



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