Reef Industries, Inc.; Analysis To Aid Public Comment, 86928-86932 [2020-29003]

Download as PDF 86928 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Notices likely they will come into compliance voluntarily. In fact, when the Commission employed this strategy four decades ago, it reportedly resulted in a ‘‘high level of voluntary compliance achieved quickly and at a low cost.’’ 12 Going forward, we should pursue this strategy. I thank everyone who made today’s actions possible, and look forward to future efforts that address emerging harms using the full range of our tools and authorities.13 Concurring Statement of Commissioner Christine S. Wilson khammond on DSKJM1Z7X2PROD with NOTICES Today the Commission announces six settlements with marketers of cannabidiol (CBD) products resolving allegations that they made false, misleading, and/or unsubstantiated express disease claims for their products. I support these cases because accurate and complete information about products contributes to the efficient functioning of the market and facilitates informed consumer decisionmaking. In contrast, deceptive or false claims inhibit informed decisionmaking and may cause economic injury to consumers. The Commission’s complaints in these matters allege that the marketers claimed their products could treat, prevent, or cure diseases or serious medical conditions, including cancer, heart disease, Alzheimer’s, diabetes, and Parkinson’s disease, and that scientific research or clinical studies supported these claims. In fact, according to the Commission’s complaints, the proposed respondents did not conduct scientific research on the efficacy of their products to treat these diseases or conditions. In addition, the complaints allege that some of the proposed respondents claimed that their products could be taken in lieu of prescription medication. The Commission has been working with the FDA, and on its own, to combat false and unsubstantiated claims for CBD products, including 12 Commissioner Bailey made this observation in the context of opposing industry efforts to repeal this authority, an authority she described as an ‘‘extremely effective and efficient way to enforce the law.’’ Testimony of Commissioner Patricia P. Bailey Before the Subcomm. on Com., Tourism and Transp. of the Comm. on Energy and Com. of the H.R. Concerning the 1982 Reauthorization of the Fed. Trade Comm’n, at 11 (Apr. 1, 1982), https:// www.ftc.gov/system/files/documents/public_ statements/693551/19820401_bailey_testimony_ before_the_subcorrmittee_on_commerce_ subcommittee_on_commerce_touri.pdf. 13 My colleague, Commissioner Christine S. Wilson, has issued a statement in this matter. I agree that the Commission should not prioritize close-call substantiation cases, especially those involving small businesses. VerDate Sep<11>2014 19:28 Dec 30, 2020 Jkt 253001 through warning letters 1 and a law enforcement action.2 Here, where consumers may have foregone proven measures to address serious diseases and the marketers have made virtually no effort to possess and rely on scientific evidence to support their strong, express disease claims, as we allege in our complaint, I agree that law enforcement is appropriate. The Commission’s proposed consent orders in these matters require respondents to possess and rely on competent and reliable evidence, defined as randomized, double-blind, placebo-controlled human clinical trials to support disease and other serious health claims for these types of products in the future.3 Although I support this requirement in these cases, for these types of claims, I caution that the Commission should impose this stringent substantiation requirement sparingly. Credible science supports the use of CBD products to treat certain conditions—specifically, the FDA has approved a drug containing CBD as an active ingredient to treat rare, severe forms of epilepsy.4 And I understand that many research studies are currently seeking to determine whether there are other scientifically valid and safe uses of this ingredient. I agree with my predecessors who have stated that the Commission should be careful to avoid imposing an unduly high standard of substantiation that risks denying consumers truthful, useful 1 Press Release, FTC and FDA Warn Florida Company Marketing CBD Products about Claims Related to Treating Autism, ADHD, Parkinson’s, Alzheimer’s, and Other Medical Conditions, Oct. 22, 2019, available at https://www.ftc.gov/newsevents/press-releases/2019/10/ftc-fda-warn-floridacompany-marketing-cbd-productsabout-claims; Press Release, FTC Sends Warning Letters to Companies Advertising Their CBD-Infused Products as Treatmentsfor Serious Diseases, Including Cancer, Alzheimer’s, and Multiple Sclerosis, Sept. 10, 2019, available at https://www.ftc.gov/newsevents/press-releases/2019/09/ftc-sends-warningletters-companies-advertising-their-cbdinfused; Press Release, FTC Joins FDA in Sending Warning Letters to Companies Advertising and Selling Products Containing Cannabidiol (CBD) Claiming to Treat Alzheimer’s, Cancer, and Other Diseases, Apr. 2, 2019, available at https://www.ftc.gov/newsevents/press-releases/2019/04/ftc-joins-fda-sendingwarning-letters-companiesadvertising. 2 Press Release, FTC Order Stops the Marketer of ‘‘Thrive’’ Supplement from Making Baseless Claims It Can Treat, Prevent, or Reduce the Risks from COVID–19, July 10, 2020, available at https:// www.ftc.gov/newsevents/press-releases/2020/07/ftcorder-stops-marketer-thrive-supplement-makingbaseless-claims. 3 See, e.g., Part I of Proposed Order, In the Matter of Bionatrol Health, LLC, et al. (Dec. 2020). 4 See FDA Press Release, FDA approves first drug comprised of an active ingredient derived from marijuana to treat rare, severe forms of epilepsy (June 25, 2018), available at: https://www.fda.gov/ news-events/press-announcements/fda-approvesfirst-drug-comprised-active-ingredient-derivedmarijuana-treat-rare-severe-forms. PO 00000 Frm 00028 Fmt 4703 Sfmt 4703 information, may diminish incentives to conduct research, and could chill manufacturer incentives to introduce new products to the market.5 And I agree with the observation of my colleague Commissioner Chopra in his statement that ‘‘[b]aseless claims give patients false hope, improperly increase or divert their medical spending, and undermine ‘a competitor’s ability to compete’ on honest attributes.’’ 6 Although I support these cases, I hope that the Commission’s actions here, which challenge wholly unsubstantiated disease claims, do not discourage research into the potential legitimate benefits of CBD and a wide array of other products. In addition, going forward, I urge the Commission to focus our scarce resources on marketers that make strong, express claims about diseases and serious health issues with little to no scientific support and engage in deceptive practices that cause substantial consumer injury. [FR Doc. 2020–29002 Filed 12–30–20; 8:45 am] BILLING CODE 6750–01–P FEDERAL TRADE COMMISSION [File No. 202 3064] Reef Industries, Inc.; Analysis To Aid Public Comment Federal Trade Commission. Proposed consent agreement; request for comment. AGENCY: ACTION: 5 See, e.g., Statement of Commissioner Maureen K. Ohlhausen, In the Matter of Health Discovery Corporation and FTC v. Avrom Boris Lasarow, et al. (Feb. 2015), https://www.ftc.gov/public-statements/ 2015/02/dissenting-statement-commissionermaureen-k-ohlhausen-matter-health; Statement of Commissioner Joshua D. Wright, FTC v. Kevin Wright; HCG Platinum, LLC; and Right Way Nutrition, LLC (Dec. 2014), https://www.ftc.gov/ public-statements/2014/12/statementcommissioner-joshua-d-wright-federal-tradecommission-v-kevin; Statement of Commissioner Joshua D. Wright, In the Matter of GeneLink, Inc., and foru International Corporation (January 2014), https://www.ftc.gov/public-statements/2014/01/ statement-commissioner-joshua-d-wright-mattergenelink-inc-foru; Statement of Commissioner Maureen K. Ohlhausen Dissenting in Part and Concurring in Part, In the Matter of GeneLink, Inc. and foru International Corporation (January 2014), https://www.ftc.gov/public-statements/2014/01/ statement-commissioner-maureen-k-ohlhausendissenting-part-concurring-part; Dissenting Statement of Commissioner Maureen K. Ohlhausen, FTC v. Springtech 77376, et al. (July 2013), https:// www.ftc.gov/public-statements/2013/07/dissentingstatement-commissioner-maureen-k-ohlhausen; see also J. Howard Beales, III and Timothy J. Muris, In Defense of the Pfizer Factors, George Mason Law & Economics Research Paper No. 12–49 (May 2012), available at: https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=2087776. 6 See Statement of Commissioner Rohit Chopra Regarding the Cannabidiol (CBD) Enforcement Actions (Dec. 17, 2020). E:\FR\FM\31DEN1.SGM 31DEN1 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Notices The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices. The attached Analysis to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations. SUMMARY: Comments must be received on or before February 1, 2021. ADDRESSES: Interested parties may file comments online or on paper by following the instructions in the Request for Comment part of the SUPPLEMENTARY INFORMATION section below. Please write ‘‘Reef Industries, Inc.; File No. 202 3064’’ on your comment, and file your comment online at https://www.regulations.gov by following the instructions on the webbased form. If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. FOR FURTHER INFORMATION CONTACT: Nicholas Coates (415–848–5125), Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained at https:// www.ftc.gov/news-events/commissionactions. You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before February 1, 2021. Write ‘‘Reef Industries, Inc.; File No. 202 3064’’ on your comment. Your comment— including your name and your state— will be placed on the public record of this proceeding, including, to the extent khammond on DSKJM1Z7X2PROD with NOTICES DATES: VerDate Sep<11>2014 19:28 Dec 30, 2020 Jkt 253001 practicable, on the https:// www.regulations.gov website. Because of the public health emergency in response to the COVID–19 pandemic and the agency’s heightened security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comments online through the https://www.regulations.gov website. If you prefer to file your comment on paper, write ‘‘Reef Industries, Inc.; File No. 202 3064’’ on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580; or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service. Because your comment will be placed on the publicly accessible website at https://www.regulations.gov, you are solely responsible for making sure your comment does not include any sensitive or confidential information. In particular, your comment should not include sensitive personal information, such as your or anyone else’s Social Security number; date of birth; driver’s license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure your comment does not include sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any ‘‘trade secret or any commercial or financial information which . . . is privileged or confidential’’—as provided by Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)— including in particular competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names. Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled ‘‘Confidential,’’ and must comply with FTC Rule 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 86929 identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted on the https:// www.regulations.gov website—as legally required by FTC Rule 4.9(b)—we cannot redact or remove your comment from that website, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule 4.9(c), and the General Counsel grants that request. Visit the FTC website at http:// www.ftc.gov to read this Notice and the news release describing the proposed settlement. The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding, as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before February 1, 2021. For information on the Commission’s privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/ site-information/privacy-policy. Analysis of Proposed Consent Order To Aid Public Comment The Federal Trade Commission (‘‘FTC’’ or ‘‘Commission’’) has accepted, subject to final approval, an agreement containing a consent order with Reef Industries, Inc., a corporation; Cannatera, Inc., a corporation; AndHemp, Ltd., a limited company; and Andrew M. Bouchie, John R. Cavanaugh, and Shaun Paquette, individually and as officers and/or owners of Reef Industries, Inc., Cannatera, Inc., and/or AndHemp, Ltd. (collectively, ‘‘Respondents’’). The proposed consent order (‘‘Order’’) has been placed on the public record for 30 days so that interested persons may submit comments. Comments received during this period will become part of the public record. After 30 days, the Commission will again review the Order and the comments received, and will decide whether it should withdraw the Order or make it final. This matter involves the respondent’s advertising of cannabidiol (CBD), a cannabinoid compound found in hemp and cannabis. The complaint alleges that respondent violated Sections 5(a) and 12 of the FTC Act by disseminating false and unsubstantiated advertisements claiming that: (1) CBD products can effectively prevent, cure, treat, or mitigate multiple diseases and other health conditions; and (2) studies or scientific research prove that CBD E:\FR\FM\31DEN1.SGM 31DEN1 khammond on DSKJM1Z7X2PROD with NOTICES 86930 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Notices products effectively prevent, cure, treat, or mitigate multiple diseases and other health conditions. The Order includes injunctive relief that prohibits these alleged violations and fences in similar and related conduct. The product coverage would apply to any dietary supplement, drug, or food the respondent sells, markets, promotes, or advertises. Provision I requires randomized, double-blind, placebo-controlled clinical testing for the challenged claims or any disease treatment, mitigation, or cure claim for a Covered Product. The Order defines ‘‘Covered Product’’ as any dietary supplement, food, or drug including but not limited to CBD products or cannabigerol (CBG) products. Provision II prohibits other misleading or unsubstantiated representations about the health benefits, performance, efficacy, safety, or side effects of any Covered Product or essentially equivalent product. It also covers prevention claims not specifically included in Provision I. Provision III requires the preservation of certain records for any testing Respondents rely upon as competent and reliable scientific evidence. Provision IV addresses Respondents’ false establishment claims and generally prohibits misrepresentations regarding the scientifically or clinically proven benefits of any product. Provision V provides a safe harbor for FDAapproved claims. Provisions VI and VII contain monetary payment provisions. Provisions VIII, IX, and X require the Respondents to provide customer information to the Commission and to provide notice of the order to customers, affiliates and other resellers. Provision XI requires an acknowledgement of receipt of the order. It also requires the individual Respondents to deliver a copy of the order to certain individuals in any business for which they are the majority owner or which they control directly or indirectly. Provisions XII, XIII, and XIV provide the required reporting, recordkeeping, and compliance monitoring programs that Respondents must put in place. Provision XV explains when the Order is final and effective. The purpose of this analysis is to facilitate public comment on the order, and it is not intended to constitute an official interpretation of the complaint or order, or to modify the order’s terms in any way. VerDate Sep<11>2014 19:28 Dec 30, 2020 Jkt 253001 By direction of the Commission. April J. Tabor, Acting Secretary. Statement of Commissioner Rohit Chopra 1 Summary • When companies lie about the effectiveness of their treatments for serious conditions, this harms patients and diverts sales away from firms that tell the truth. • Congress gave the FTC a new authority to crack down on abuses in the opioid treatment industry, but the agency has not prioritized this issue. This should change. • The FTC can increase its effectiveness when it comes to health claims by shifting resources away from small businesses and by deploying the unused Penalty Offense Authority. Today, the Federal Trade Commission is taking action against several outfits regarding their outlandish—and unlawful—claims about cannabidiol (CBD). While CBD is currently the subject of considerable scientific research, there is no evidence yet that CBD can treat or cure cancer, Alzheimer’s, or other serious diseases. Baseless claims give patients false hope, improperly increase or divert their medical spending, and undermine ‘‘a competitor’s ability to compete’’ on honest attributes.2 I support these actions and congratulate those who made them a reality. Going forward, however, the FTC will need to refocus its efforts on health claims by targeting abuses in the substance use disorder treatment industry, shifting attention toward large businesses, and making more effective use of the FTC’s Penalty Offense Authority. First, COVID–19 and the resulting economic and social distress are fueling new concerns about substance use disorders. In particular, there are signs that the pandemic is leading to greater dependence on opioids.3 It is critical 1 In the Matter of EasyButter, LLC et al., Comm’n File No. 2023047; In the Matter of Reef Industries, Inc. et al., Comm’n File No. 2023064; In the Mater of Steves Distributing, LLC et al., Comm’n File No. 2023065; In the Matter of CBD Meds, Inc. et al., Comm’n File No. 2023080; In the Matter of Epichouse, LLC et al., Comm’n File No. 2023094; In the Matter of Bionatrol Health, LLC et al., Comm’n File No. 2023114. 2 In re Pfizer, Inc., 81 F.T.C. 23, 62 (1972). 3 See, e.g., Jon Kamp & Arian Campo-Flores, The Opioid Crisis, Already Serious, Has Intensified During Coronavirus Pandemic, WALL STREET J. (Sept. 8, 2020), https://www.wsj.com/articles/theopioid-crisis-already-serious-has-intensified-duringcoronavirus-pandemic-11599557401; Issue brief: Reports of increases in opioid- and other drugrelated overdose and other concerns during COVID pandemic, AMERICAN MEDICAL ASSOCIATION PO 00000 Frm 00030 Fmt 4703 Sfmt 4703 that the FTC take steps to prevent exploitation of patients seeking treatment for substance use disorders. I am particularly concerned about abusive practices in the for-profit opioid treatment industry, and believe this should be a high priority. This industry has grown exponentially by profiting off those suffering from addiction. Many of these outfits use lead generators to steer Americans into high-cost, subpar treatment centers, and some even hire intermediaries—so-called ‘‘body brokers’’—who collect kickbacks from this harmful practice.4 More than two years ago, Congress passed the SUPPORT for Patients and Communities Act. Among other provisions, the Act authorized the Commission to seek civil penalties, restitution, damages, and other relief against outfits that engage in misconduct related to substance use disorder treatment.5 The Commission is well positioned to help shut down these abuses, ensure they are not profitable, and hold predatory actors and their enablers to account.6 Unfortunately, the Commission has brought zero cases under this new authority. While I have supported actions like this one that challenge baseless CBD claims, as well as previous actions charging that pain relief devices and similar products were sold deceptively,7 I am concerned that we (last updated on Oct. 31, 2020), https://www.amaassn.org/delivering-care/opioids/covid-19-may-beworsening-opioid-crisis-states-can-take-action. 4 For example, recent reporting describes the ‘‘Florida Shuffle,’’ where treatment facilities pay brokers to recruit patients through 12-step meetings, conferences, hotlines, and online groups, leading to serious harm. See German Lopez, She wanted addiction treatment. She ended up in the relapse capital of America, VOX (Mar. 2, 2020), https:// www.vox.com/policy-and-politics/2020/3/2/ 21156327/florida-shuffle-drug-rehab-addictiontreatment-bri-jayne. See also Letter from Commissioner Chopra to Congress on Deceptive Marketing Practices in the Opioid Addiction Treatment Industry (July 28, 2018), https:// www.ftc.gov/public-statements/2018/07/lettercommissioner-chopra-congress-deceptivemarketing-practices-opioid (calling on the FTC to do more to tackle this problem). 5 Public Law 115–271 §§ 8021–8023 (codified in 15 U.S.C. 45d). The Act also allows the Commission to prosecute deceptive marketing of opioid treatment products. Notably, a number of respondents in this sweep are alleged to have made claims that CBD could replace OxyContin. 6 Given public reports regarding private equity rollups of smaller opioid treatment facilities, the Commission can also examine whether anticompetitive M&A strategies are leading to further patient harm. See Statement of Commissioner Rohit Chopra Regarding Private Equity Roll-ups and the Hart-Scott-Rodino Annual Report to Congress, Comm’n File No. P110014 (July 8, 2020), https://www.ftc.gov/public-statements/ 2020/07/statement-commissioner-rohit-chopraregarding-private-equity-roll-ups-hart. 7 Press Release, Fed. Trade Comm’n, Marketers of Pain Relief Device Settle FTC False Advertising E:\FR\FM\31DEN1.SGM 31DEN1 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES have largely ignored Congressional concerns about unlawful opioid treatment practices. I urge my fellow Commissioners to change course on our enforcement priorities, especially given our limited resources. Second, the FTC should focus more of its enforcement efforts on larger firms rather than small businesses. Today’s actions focus on very small players, some of which are defunct. While I appreciate that small businesses can also harm honest competitors and families, they are often judgment-proof, making it unlikely victims will see any relief.8 I am confident that FTC staff can successfully challenge powerful, wellfinanced defendants that break the law. Finally, the Commission should reduce the prevalence of unlawful health claims by triggering civil penalties under the FTC’s Penalty Offense Authority.9 Under the Penalty Offense Authority, firms that engage in conduct they know has been previously condemned by the Commission can face civil penalties, in addition to the relief that we typically seek.10 For example, the Commission routinely issues warning letters to businesses regarding unsubstantiated health claims. Future warning letters can be more effective if they include penalty offense notifications. The Commission has repeatedly found that objective claims require a reasonable basis,11 and apprising firms of these findings—along with a warning that noncompliance can result in penalties—makes it significantly more Complaint (Mar. 4, 2020), https://www.ftc.gov/ news-events/press-releases/2020/03/marketerspain-relief-device-settle-ftc-false-advertising. 8 In one of these matters, the respondents are paying nothing. 9 15 U.S.C. 45(m)(1)(b). 10 See Rohit Chopra & Samuel A.A. Levine, The Case for Resurrecting the FTC Act’s Penalty Offense Authority (Oct. 29, 2020), https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=3721256. Particularly given challenges to the FTC’s 13(b) authority, incorporating a penalty offense strategy can safeguard the Commission’s ability to seek strong remedies against lawbreakers. 11 This requirement was first established in the Commission’s 1972 Pfizer decision, and it has been affirmed repeatedly. Pfizer, Inc., supra note 2 (finding that ‘‘[f]airness to the consumer, as well as fairness to competitors’’ compels the conclusion that affirmative claims require a reasonable basis); In re Thompson Medical Co., 104 F.T.C. 648, 813 (1984) (collecting cases), aff’d, 791 F.2d 189 (DC Cir. 1986). Appended to Thompson Medical was the Commission’s Policy Statement Regarding Advertising Substantiation, which states that ‘‘a firm’s failure to possess and rely upon a reasonable basis for objective claims constitutes an unfair and deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act.’’ Id. at 839. This standard continues to govern the Commission’s approach to substantiation, as recently reaffirmed in the Commission’s final order against POM Wonderful. In re POM Wonderful LLC et al., 155 F.T.C. 1, 6 (2013). VerDate Sep<11>2014 19:28 Dec 30, 2020 Jkt 253001 likely they will come into compliance voluntarily. In fact, when the Commission employed this strategy four decades ago, it reportedly resulted in a ‘‘high level of voluntary compliance achieved quickly and at a low cost.’’ 12 Going forward, we should pursue this strategy. I thank everyone who made today’s actions possible, and look forward to future efforts that address emerging harms using the full range of our tools and authorities.13 Concurring Statement of Commissioner Christine S. Wilson Today the Commission announces six settlements with marketers of cannabidiol (CBD) products resolving allegations that they made false, misleading, and/or unsubstantiated express disease claims for their products. I support these cases because accurate and complete information about products contributes to the efficient functioning of the market and facilitates informed consumer decisionmaking. In contrast, deceptive or false claims inhibit informed decisionmaking and may cause economic injury to consumers. The Commission’s complaints in these matters allege that the marketers claimed their products could treat, prevent, or cure diseases or serious medical conditions, including cancer, heart disease, Alzheimer’s, diabetes, and Parkinson’s disease, and that scientific research or clinical studies supported these claims. In fact, according to the Commission’s complaints, the proposed respondents did not conduct scientific research on the efficacy of their products to treat these diseases or conditions. In addition, the complaints allege that some of the proposed respondents claimed that their products could be taken in lieu of prescription medication. The Commission has been working with the FDA, and on its own, to combat false and unsubstantiated claims for CBD products, including 12 Commissioner Bailey made this observation in the context of opposing industry efforts to repeal this authority, an authority she described as an ‘‘extremely effective and efficient way to enforce the law.’’ Testimony of Commissioner Patricia P. Bailey Before the Subcomm. on Com., Tourism and Transp. of the Comm. on Energy and Com. of the H.R. Concerning the 1982 Reauthorization of the Fed. Trade Comm’n, at 11 (Apr. 1, 1982), https:// www.ftc.gov/system/files/documents/public_ statements/693551/19820401_bailey_testimony_ before_the_subcorrmittee_on_commerce_ subcommittee_on_commerce_touri.pdf. 13 My colleague, Commissioner Christine S. Wilson, has issued a statement in this matter. I agree that the Commission should not prioritize close-call substantiation cases, especially those involving small businesses. PO 00000 Frm 00031 Fmt 4703 Sfmt 4703 86931 through warning letters 1 and a law enforcement action.2 Here, where consumers may have foregone proven measures to address serious diseases and the marketers have made virtually no effort to possess and rely on scientific evidence to support their strong, express disease claims, as we allege in our complaint, I agree that law enforcement is appropriate. The Commission’s proposed consent orders in these matters require respondents to possess and rely on competent and reliable evidence, defined as randomized, double-blind, placebo-controlled human clinical trials to support disease and other serious health claims for these types of products in the future.3 Although I support this requirement in these cases, for these types of claims, I caution that the Commission should impose this stringent substantiation requirement sparingly. Credible science supports the use of CBD products to treat certain conditions—specifically, the FDA has approved a drug containing CBD as an active ingredient to treat rare, severe forms of epilepsy.4 And I understand that many research studies are currently seeking to determine whether there are other scientifically valid and safe uses of this ingredient. I agree with my predecessors who have stated that the Commission should be careful to avoid imposing an unduly high standard of substantiation that risks denying consumers truthful, useful 1 Press Release, FTC and FDA Warn Florida Company Marketing CBD Products about Claims Related to Treating Autism, ADHD, Parkinson’s, Alzheimer’s, and Other Medical Conditions, Oct. 22, 2019, available at https://www.ftc.gov/newsevents/press-releases/2019/10/ftc-fda-warn-floridacompany-marketing-cbd-productsabout-claims; Press Release, FTC Sends Warning Letters to Companies Advertising Their CBD-Infused Products as Treatmentsfor Serious Diseases, Including Cancer, Alzheimer’s, and Multiple Sclerosis, Sept. 10, 2019, available at https://www.ftc.gov/newsevents/press-releases/2019/09/ftc-sends-warningletters-companies-advertising-their-cbdinfused; Press Release, FTC Joins FDA in Sending Warning Letters to Companies Advertising and Selling Products Containing Cannabidiol (CBD) Claiming to Treat Alzheimer’s, Cancer, and Other Diseases, Apr. 2, 2019, available at https://www.ftc.gov/newsevents/press-releases/2019/04/ftc-joins-fda-sendingwarning-letters-companiesadvertising. 2 Press Release, FTC Order Stops the Marketer of ‘‘Thrive’’ Supplement from Making Baseless Claims It Can Treat, Prevent, or Reduce the Risks from COVID–19, July 10, 2020, available at https:// www.ftc.gov/newsevents/press-releases/2020/07/ftcorder-stops-marketer-thrive-supplement-makingbaseless-claims. 3 See, e.g., Part I of Proposed Order, In the Matter of Bionatrol Health, LLC, et al. (Dec. 2020). 4 See FDA Press Release, FDA approves first drug comprised of an active ingredient derived from marijuana to treat rare, severe forms of epilepsy (June 25, 2018), available at: https://www.fda.gov/ news-events/press-announcements/fda-approvesfirst-drug-comprised-active-ingredient-derivedmarijuana-treat-rare-severe-forms. E:\FR\FM\31DEN1.SGM 31DEN1 86932 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Notices information, may diminish incentives to conduct research, and could chill manufacturer incentives to introduce new products to the market.5 And I agree with the observation of my colleague Commissioner Chopra in his statement that ‘‘[b]aseless claims give patients false hope, improperly increase or divert their medical spending, and undermine ‘a competitor’s ability to compete’ on honest attributes.’’ 6 Although I support these cases, I hope that the Commission’s actions here, which challenge wholly unsubstantiated disease claims, do not discourage research into the potential legitimate benefits of CBD and a wide array of other products. In addition, going forward, I urge the Commission to focus our scarce resources on marketers that make strong, express claims about diseases and serious health issues with little to no scientific support and engage in deceptive practices that cause substantial consumer injury. [FR Doc. 2020–29003 Filed 12–30–20; 8:45 am] khammond on DSKJM1Z7X2PROD with NOTICES BILLING CODE 6750–01–P 5 See, e.g., Statement of Commissioner Maureen K. Ohlhausen, In the Matter of Health Discovery Corporation and FTC v. Avrom Boris Lasarow, et al. (Feb. 2015), https://www.ftc.gov/public-statements/ 2015/02/dissenting-statement-commissionermaureen-k-ohlhausen-matter-health; Statement of Commissioner Joshua D. Wright, FTC v. Kevin Wright; HCG Platinum, LLC; and Right Way Nutrition, LLC (Dec. 2014), https://www.ftc.gov/ public-statements/2014/12/statementcommissioner-joshua-d-wright-federal-tradecommission-v-kevin; Statement of Commissioner Joshua D. Wright, In the Matter of GeneLink, Inc., and foru International Corporation (January 2014), https://www.ftc.gov/public-statements/2014/01/ statement-commissioner-joshua-d-wright-mattergenelink-inc-foru; Statement of Commissioner Maureen K. Ohlhausen Dissenting in Part and Concurring in Part, In the Matter of GeneLink, Inc. and foru International Corporation (January 2014), https://www.ftc.gov/public-statements/2014/01/ statement-commissioner-maureen-k-ohlhausendissenting-part-concurring-part; Dissenting Statement of Commissioner Maureen K. Ohlhausen, FTC v. Springtech 77376, et al. (July 2013), https:// www.ftc.gov/public-statements/2013/07/dissentingstatement-commissioner-maureen-k-ohlhausen; see also J. Howard Beales, III and Timothy J. Muris, In Defense of the Pfizer Factors, George Mason Law & Economics Research Paper No. 12–49 (May 2012), available at: https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=2087776. 6 See Statement of Commissioner Rohit Chopra Regarding the Cannabidiol (CBD) Enforcement Actions (Dec. 17, 2020). VerDate Sep<11>2014 19:28 Dec 30, 2020 Jkt 253001 DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Disease Control and Prevention [30 Day–21–1277] Agency Forms Undergoing Paperwork Reduction Act Review In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled The Childcare Survey of Activity and Wellness (C– SAW) Pilot Study to the Office of Management and Budget (OMB) for review and approval. CDC previously published a ‘‘Proposed Data Collection Submitted for Public Comment and Recommendations’’ notice on October 30, 2020 to obtain comments from the public and affected agencies. CDC received one public comment related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments. CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that: (a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) Enhance the quality, utility, and clarity of the information to be collected; (d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses; and (e) Assess information collection costs. To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639–7570. Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to www.reginfo.gov/public/ do/PRAMain. Find this particular information collection by selecting PO 00000 Frm 00032 Fmt 4703 Sfmt 4703 ‘‘Currently under 30-day Review—Open for Public Comments’’ or by using the search function. Direct written comments and/or suggestions regarding the items contained in this notice to the Attention: CDC Desk Officer, Office of Management and Budget, 725 17th Street NW, Washington, DC 20503 or by fax to (202) 395–5806. Provide written comments within 30 days of notice publication. Proposed Project The Childcare Survey of Activity and Wellness (C–SAW) Pilot Study (OMB Control No. 0920–1277, Exp. 12/31/ 2020)—Revision—National Center for Chronic Disease Prevention and Health Promotion (NCCDPHP), Centers for Disease Control and Prevention (CDC). Background and Brief Description The Centers for Disease Control and Prevention (CDC) work to promote optimal nutrition, physical activity, and wellness in early care and education (ECE) facilities for children 0–5 years of age. Data collected from this pilot survey will be used to understand the current practices of ECE centers in a representative sample in four states. The survey will also be used to inform the development of a potential national surveillance system. A sample of approximately 1,266 ECE centers across four states will be selected to participate in this one-time data collection effort. However, it is estimated that approximately 10% of the original sample will be out of business or otherwise ineligible yielding an actual sample of 1,140 ECEs to be recruited. Each center will receive a recruitment letter introducing the survey, and instructions for completing the survey. It is anticipated that most responses will be submitted through the web. However, paper surveys will be available upon request. It is also anticipated that the response rate will be approximately 55% based on a review of recent surveys of childcare centers conducted by the Federal government. Thus, we anticipate the number of completed surveys to be 627. CDC requests approval for a two year period with an estimated 513 total Burden Hours. Participation in this study is completely voluntary and there are no costs to the respondent other than their time. E:\FR\FM\31DEN1.SGM 31DEN1

Agencies

[Federal Register Volume 85, Number 251 (Thursday, December 31, 2020)]
[Notices]
[Pages 86928-86932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29003]


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FEDERAL TRADE COMMISSION

[File No. 202 3064]


Reef Industries, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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[[Page 86929]]

SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices. The attached Analysis to Aid Public Comment describes both 
the allegations in the complaint and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before February 1, 2021.

ADDRESSES: Interested parties may file comments online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write ``Reef 
Industries, Inc.; File No. 202 3064'' on your comment, and file your 
comment online at https://www.regulations.gov by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Nicholas Coates (415-848-5125), Bureau 
of Consumer Protection, Federal Trade Commission, 600 Pennsylvania 
Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
at https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before February 1, 
2021. Write ``Reef Industries, Inc.; File No. 202 3064'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the https://www.regulations.gov website.
    Because of the public health emergency in response to the COVID-19 
pandemic and the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``Reef 
Industries, Inc.; File No. 202 3064'' on your comment and on the 
envelope, and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex D), Washington, DC 20580; or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else's Social Security 
number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the https://www.regulations.gov website--as legally 
required by FTC Rule 4.9(b)--we cannot redact or remove your comment 
from that website, unless you submit a confidentiality request that 
meets the requirements for such treatment under FTC Rule 4.9(c), and 
the General Counsel grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing the proposed settlement. The FTC Act and 
other laws that the Commission administers permit the collection of 
public comments to consider and use in this proceeding, as appropriate. 
The Commission will consider all timely and responsive public comments 
that it receives on or before February 1, 2021. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``FTC'' or ``Commission'') has 
accepted, subject to final approval, an agreement containing a consent 
order with Reef Industries, Inc., a corporation; Cannatera, Inc., a 
corporation; AndHemp, Ltd., a limited company; and Andrew M. Bouchie, 
John R. Cavanaugh, and Shaun Paquette, individually and as officers 
and/or owners of Reef Industries, Inc., Cannatera, Inc., and/or 
AndHemp, Ltd. (collectively, ``Respondents'').
    The proposed consent order (``Order'') has been placed on the 
public record for 30 days so that interested persons may submit 
comments. Comments received during this period will become part of the 
public record. After 30 days, the Commission will again review the 
Order and the comments received, and will decide whether it should 
withdraw the Order or make it final.
    This matter involves the respondent's advertising of cannabidiol 
(CBD), a cannabinoid compound found in hemp and cannabis. The complaint 
alleges that respondent violated Sections 5(a) and 12 of the FTC Act by 
disseminating false and unsubstantiated advertisements claiming that: 
(1) CBD products can effectively prevent, cure, treat, or mitigate 
multiple diseases and other health conditions; and (2) studies or 
scientific research prove that CBD

[[Page 86930]]

products effectively prevent, cure, treat, or mitigate multiple 
diseases and other health conditions.
    The Order includes injunctive relief that prohibits these alleged 
violations and fences in similar and related conduct. The product 
coverage would apply to any dietary supplement, drug, or food the 
respondent sells, markets, promotes, or advertises.
    Provision I requires randomized, double-blind, placebo-controlled 
clinical testing for the challenged claims or any disease treatment, 
mitigation, or cure claim for a Covered Product. The Order defines 
``Covered Product'' as any dietary supplement, food, or drug including 
but not limited to CBD products or cannabigerol (CBG) products.
    Provision II prohibits other misleading or unsubstantiated 
representations about the health benefits, performance, efficacy, 
safety, or side effects of any Covered Product or essentially 
equivalent product. It also covers prevention claims not specifically 
included in Provision I.
    Provision III requires the preservation of certain records for any 
testing Respondents rely upon as competent and reliable scientific 
evidence.
    Provision IV addresses Respondents' false establishment claims and 
generally prohibits misrepresentations regarding the scientifically or 
clinically proven benefits of any product. Provision V provides a safe 
harbor for FDA-approved claims.
    Provisions VI and VII contain monetary payment provisions.
    Provisions VIII, IX, and X require the Respondents to provide 
customer information to the Commission and to provide notice of the 
order to customers, affiliates and other resellers. Provision XI 
requires an acknowledgement of receipt of the order. It also requires 
the individual Respondents to deliver a copy of the order to certain 
individuals in any business for which they are the majority owner or 
which they control directly or indirectly.
    Provisions XII, XIII, and XIV provide the required reporting, 
recordkeeping, and compliance monitoring programs that Respondents must 
put in place.
    Provision XV explains when the Order is final and effective.
    The purpose of this analysis is to facilitate public comment on the 
order, and it is not intended to constitute an official interpretation 
of the complaint or order, or to modify the order's terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.

Statement of Commissioner Rohit Chopra \1\
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    \1\ In the Matter of EasyButter, LLC et al., Comm'n File No. 
2023047; In the Matter of Reef Industries, Inc. et al., Comm'n File 
No. 2023064; In the Mater of Steves Distributing, LLC et al., Comm'n 
File No. 2023065; In the Matter of CBD Meds, Inc. et al., Comm'n 
File No. 2023080; In the Matter of Epichouse, LLC et al., Comm'n 
File No. 2023094; In the Matter of Bionatrol Health, LLC et al., 
Comm'n File No. 2023114.
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Summary

     When companies lie about the effectiveness of their 
treatments for serious conditions, this harms patients and diverts 
sales away from firms that tell the truth.
     Congress gave the FTC a new authority to crack down on 
abuses in the opioid treatment industry, but the agency has not 
prioritized this issue. This should change.
     The FTC can increase its effectiveness when it comes to 
health claims by shifting resources away from small businesses and by 
deploying the unused Penalty Offense Authority.
    Today, the Federal Trade Commission is taking action against 
several outfits regarding their outlandish--and unlawful--claims about 
cannabidiol (CBD). While CBD is currently the subject of considerable 
scientific research, there is no evidence yet that CBD can treat or 
cure cancer, Alzheimer's, or other serious diseases. Baseless claims 
give patients false hope, improperly increase or divert their medical 
spending, and undermine ``a competitor's ability to compete'' on honest 
attributes.\2\
---------------------------------------------------------------------------

    \2\ In re Pfizer, Inc., 81 F.T.C. 23, 62 (1972).
---------------------------------------------------------------------------

    I support these actions and congratulate those who made them a 
reality. Going forward, however, the FTC will need to refocus its 
efforts on health claims by targeting abuses in the substance use 
disorder treatment industry, shifting attention toward large 
businesses, and making more effective use of the FTC's Penalty Offense 
Authority.
    First, COVID-19 and the resulting economic and social distress are 
fueling new concerns about substance use disorders. In particular, 
there are signs that the pandemic is leading to greater dependence on 
opioids.\3\ It is critical that the FTC take steps to prevent 
exploitation of patients seeking treatment for substance use disorders.
---------------------------------------------------------------------------

    \3\ See, e.g., Jon Kamp & Arian Campo-Flores, The Opioid Crisis, 
Already Serious, Has Intensified During Coronavirus Pandemic, WALL 
STREET J. (Sept. 8, 2020), https://www.wsj.com/articles/the-opioid-crisis-already-serious-has-intensified-during-coronavirus-pandemic-11599557401; Issue brief: Reports of increases in opioid- and other 
drug-related overdose and other concerns during COVID pandemic, 
AMERICAN MEDICAL ASSOCIATION (last updated on Oct. 31, 2020), 
https://www.ama-assn.org/delivering-care/opioids/covid-19-may-be-worsening-opioid-crisis-states-can-take-action.
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    I am particularly concerned about abusive practices in the for-
profit opioid treatment industry, and believe this should be a high 
priority. This industry has grown exponentially by profiting off those 
suffering from addiction. Many of these outfits use lead generators to 
steer Americans into high-cost, subpar treatment centers, and some even 
hire intermediaries--so-called ``body brokers''--who collect kickbacks 
from this harmful practice.\4\
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    \4\ For example, recent reporting describes the ``Florida 
Shuffle,'' where treatment facilities pay brokers to recruit 
patients through 12-step meetings, conferences, hotlines, and online 
groups, leading to serious harm. See German Lopez, She wanted 
addiction treatment. She ended up in the relapse capital of America, 
VOX (Mar. 2, 2020), https://www.vox.com/policy-and-politics/2020/3/2/21156327/florida-shuffle-drug-rehab-addiction-treatment-bri-jayne. 
See also Letter from Commissioner Chopra to Congress on Deceptive 
Marketing Practices in the Opioid Addiction Treatment Industry (July 
28, 2018), https://www.ftc.gov/public-statements/2018/07/letter-commissioner-chopra-congress-deceptive-marketing-practices-opioid 
(calling on the FTC to do more to tackle this problem).
---------------------------------------------------------------------------

    More than two years ago, Congress passed the SUPPORT for Patients 
and Communities Act. Among other provisions, the Act authorized the 
Commission to seek civil penalties, restitution, damages, and other 
relief against outfits that engage in misconduct related to substance 
use disorder treatment.\5\ The Commission is well positioned to help 
shut down these abuses, ensure they are not profitable, and hold 
predatory actors and their enablers to account.\6\
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    \5\ Public Law 115-271 Sec. Sec.  8021-8023 (codified in 15 
U.S.C. 45d). The Act also allows the Commission to prosecute 
deceptive marketing of opioid treatment products. Notably, a number 
of respondents in this sweep are alleged to have made claims that 
CBD could replace OxyContin.
    \6\ Given public reports regarding private equity rollups of 
smaller opioid treatment facilities, the Commission can also examine 
whether anticompetitive M&A strategies are leading to further 
patient harm. See Statement of Commissioner Rohit Chopra Regarding 
Private Equity Roll-ups and the Hart-Scott-Rodino Annual Report to 
Congress, Comm'n File No. P110014 (July 8, 2020), https://www.ftc.gov/public-statements/2020/07/statement-commissioner-rohit-chopra-regarding-private-equity-roll-ups-hart.
---------------------------------------------------------------------------

    Unfortunately, the Commission has brought zero cases under this new 
authority. While I have supported actions like this one that challenge 
baseless CBD claims, as well as previous actions charging that pain 
relief devices and similar products were sold deceptively,\7\ I am 
concerned that we

[[Page 86931]]

have largely ignored Congressional concerns about unlawful opioid 
treatment practices. I urge my fellow Commissioners to change course on 
our enforcement priorities, especially given our limited resources.
---------------------------------------------------------------------------

    \7\ Press Release, Fed. Trade Comm'n, Marketers of Pain Relief 
Device Settle FTC False Advertising Complaint (Mar. 4, 2020), 
https://www.ftc.gov/news-events/press-releases/2020/03/marketers-pain-relief-device-settle-ftc-false-advertising.
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    Second, the FTC should focus more of its enforcement efforts on 
larger firms rather than small businesses. Today's actions focus on 
very small players, some of which are defunct. While I appreciate that 
small businesses can also harm honest competitors and families, they 
are often judgment-proof, making it unlikely victims will see any 
relief.\8\ I am confident that FTC staff can successfully challenge 
powerful, well-financed defendants that break the law.
---------------------------------------------------------------------------

    \8\ In one of these matters, the respondents are paying nothing.
---------------------------------------------------------------------------

    Finally, the Commission should reduce the prevalence of unlawful 
health claims by triggering civil penalties under the FTC's Penalty 
Offense Authority.\9\ Under the Penalty Offense Authority, firms that 
engage in conduct they know has been previously condemned by the 
Commission can face civil penalties, in addition to the relief that we 
typically seek.\10\ For example, the Commission routinely issues 
warning letters to businesses regarding unsubstantiated health claims. 
Future warning letters can be more effective if they include penalty 
offense notifications.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 45(m)(1)(b).
    \10\ See Rohit Chopra & Samuel A.A. Levine, The Case for 
Resurrecting the FTC Act's Penalty Offense Authority (Oct. 29, 
2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3721256. 
Particularly given challenges to the FTC's 13(b) authority, 
incorporating a penalty offense strategy can safeguard the 
Commission's ability to seek strong remedies against lawbreakers.
---------------------------------------------------------------------------

    The Commission has repeatedly found that objective claims require a 
reasonable basis,\11\ and apprising firms of these findings--along with 
a warning that noncompliance can result in penalties--makes it 
significantly more likely they will come into compliance voluntarily. 
In fact, when the Commission employed this strategy four decades ago, 
it reportedly resulted in a ``high level of voluntary compliance 
achieved quickly and at a low cost.'' \12\ Going forward, we should 
pursue this strategy.
---------------------------------------------------------------------------

    \11\ This requirement was first established in the Commission's 
1972 Pfizer decision, and it has been affirmed repeatedly. Pfizer, 
Inc., supra note 2 (finding that ``[f]airness to the consumer, as 
well as fairness to competitors'' compels the conclusion that 
affirmative claims require a reasonable basis); In re Thompson 
Medical Co., 104 F.T.C. 648, 813 (1984) (collecting cases), aff'd, 
791 F.2d 189 (DC Cir. 1986). Appended to Thompson Medical was the 
Commission's Policy Statement Regarding Advertising Substantiation, 
which states that ``a firm's failure to possess and rely upon a 
reasonable basis for objective claims constitutes an unfair and 
deceptive act or practice in violation of Section 5 of the Federal 
Trade Commission Act.'' Id. at 839. This standard continues to 
govern the Commission's approach to substantiation, as recently 
reaffirmed in the Commission's final order against POM Wonderful. In 
re POM Wonderful LLC et al., 155 F.T.C. 1, 6 (2013).
    \12\ Commissioner Bailey made this observation in the context of 
opposing industry efforts to repeal this authority, an authority she 
described as an ``extremely effective and efficient way to enforce 
the law.'' Testimony of Commissioner Patricia P. Bailey Before the 
Subcomm. on Com., Tourism and Transp. of the Comm. on Energy and 
Com. of the H.R. Concerning the 1982 Reauthorization of the Fed. 
Trade Comm'n, at 11 (Apr. 1, 1982), https://www.ftc.gov/system/files/documents/public_statements/693551/19820401_bailey_testimony_before_the_subcorrmittee_on_commerce_subcommittee_on_commerce_touri.pdf.
---------------------------------------------------------------------------

    I thank everyone who made today's actions possible, and look 
forward to future efforts that address emerging harms using the full 
range of our tools and authorities.\13\
---------------------------------------------------------------------------

    \13\ My colleague, Commissioner Christine S. Wilson, has issued 
a statement in this matter. I agree that the Commission should not 
prioritize close-call substantiation cases, especially those 
involving small businesses.
---------------------------------------------------------------------------

Concurring Statement of Commissioner Christine S. Wilson

    Today the Commission announces six settlements with marketers of 
cannabidiol (CBD) products resolving allegations that they made false, 
misleading, and/or unsubstantiated express disease claims for their 
products. I support these cases because accurate and complete 
information about products contributes to the efficient functioning of 
the market and facilitates informed consumer decision-making. In 
contrast, deceptive or false claims inhibit informed decision-making 
and may cause economic injury to consumers.
    The Commission's complaints in these matters allege that the 
marketers claimed their products could treat, prevent, or cure diseases 
or serious medical conditions, including cancer, heart disease, 
Alzheimer's, diabetes, and Parkinson's disease, and that scientific 
research or clinical studies supported these claims. In fact, according 
to the Commission's complaints, the proposed respondents did not 
conduct scientific research on the efficacy of their products to treat 
these diseases or conditions. In addition, the complaints allege that 
some of the proposed respondents claimed that their products could be 
taken in lieu of prescription medication. The Commission has been 
working with the FDA, and on its own, to combat false and 
unsubstantiated claims for CBD products, including through warning 
letters \1\ and a law enforcement action.\2\ Here, where consumers may 
have foregone proven measures to address serious diseases and the 
marketers have made virtually no effort to possess and rely on 
scientific evidence to support their strong, express disease claims, as 
we allege in our complaint, I agree that law enforcement is 
appropriate.
---------------------------------------------------------------------------

    \1\ Press Release, FTC and FDA Warn Florida Company Marketing 
CBD Products about Claims Related to Treating Autism, ADHD, 
Parkinson's, Alzheimer's, and Other Medical Conditions, Oct. 22, 
2019, available at https://www.ftc.gov/news-events/press-releases/2019/10/ftc-fda-warn-florida-company-marketing-cbd-productsabout-claims; Press Release, FTC Sends Warning Letters to Companies 
Advertising Their CBD-Infused Products as Treatmentsfor Serious 
Diseases, Including Cancer, Alzheimer's, and Multiple Sclerosis, 
Sept. 10, 2019, available at https://www.ftc.gov/news-events/press-releases/2019/09/ftc-sends-warning-letters-companies-advertising-their-cbdinfused; Press Release, FTC Joins FDA in Sending Warning 
Letters to Companies Advertising and Selling Products Containing 
Cannabidiol (CBD) Claiming to Treat Alzheimer's, Cancer, and Other 
Diseases, Apr. 2, 2019, available at https://www.ftc.gov/news-events/press-releases/2019/04/ftc-joins-fda-sending-warning-letters-companiesadvertising.
    \2\ Press Release, FTC Order Stops the Marketer of ``Thrive'' 
Supplement from Making Baseless Claims It Can Treat, Prevent, or 
Reduce the Risks from COVID-19, July 10, 2020, available at https://www.ftc.gov/newsevents/press-releases/2020/07/ftc-order-stops-marketer-thrive-supplement-making-baseless-claims.
---------------------------------------------------------------------------

    The Commission's proposed consent orders in these matters require 
respondents to possess and rely on competent and reliable evidence, 
defined as randomized, double-blind, placebo-controlled human clinical 
trials to support disease and other serious health claims for these 
types of products in the future.\3\ Although I support this requirement 
in these cases, for these types of claims, I caution that the 
Commission should impose this stringent substantiation requirement 
sparingly. Credible science supports the use of CBD products to treat 
certain conditions--specifically, the FDA has approved a drug 
containing CBD as an active ingredient to treat rare, severe forms of 
epilepsy.\4\ And I understand that many research studies are currently 
seeking to determine whether there are other scientifically valid and 
safe uses of this ingredient.
---------------------------------------------------------------------------

    \3\ See, e.g., Part I of Proposed Order, In the Matter of 
Bionatrol Health, LLC, et al. (Dec. 2020).
    \4\ See FDA Press Release, FDA approves first drug comprised of 
an active ingredient derived from marijuana to treat rare, severe 
forms of epilepsy (June 25, 2018), available at: https://www.fda.gov/news-events/press-announcements/fda-approves-first-drug-comprised-active-ingredient-derived-marijuana-treat-rare-severe-forms.
---------------------------------------------------------------------------

    I agree with my predecessors who have stated that the Commission 
should be careful to avoid imposing an unduly high standard of 
substantiation that risks denying consumers truthful, useful

[[Page 86932]]

information, may diminish incentives to conduct research, and could 
chill manufacturer incentives to introduce new products to the 
market.\5\ And I agree with the observation of my colleague 
Commissioner Chopra in his statement that ``[b]aseless claims give 
patients false hope, improperly increase or divert their medical 
spending, and undermine `a competitor's ability to compete' on honest 
attributes.'' \6\ Although I support these cases, I hope that the 
Commission's actions here, which challenge wholly unsubstantiated 
disease claims, do not discourage research into the potential 
legitimate benefits of CBD and a wide array of other products. In 
addition, going forward, I urge the Commission to focus our scarce 
resources on marketers that make strong, express claims about diseases 
and serious health issues with little to no scientific support and 
engage in deceptive practices that cause substantial consumer injury.
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    \5\ See, e.g., Statement of Commissioner Maureen K. Ohlhausen, 
In the Matter of Health Discovery Corporation and FTC v. Avrom Boris 
Lasarow, et al. (Feb. 2015), https://www.ftc.gov/public-statements/2015/02/dissenting-statement-commissioner-maureen-k-ohlhausen-matter-health; Statement of Commissioner Joshua D. Wright, FTC v. 
Kevin Wright; HCG Platinum, LLC; and Right Way Nutrition, LLC (Dec. 
2014), https://www.ftc.gov/public-statements/2014/12/statement-commissioner-joshua-d-wright-federal-trade-commission-v-kevin; 
Statement of Commissioner Joshua D. Wright, In the Matter of 
GeneLink, Inc., and foru International Corporation (January 2014), 
https://www.ftc.gov/public-statements/2014/01/statement-commissioner-joshua-d-wright-matter-genelink-inc-foru; Statement of 
Commissioner Maureen K. Ohlhausen Dissenting in Part and Concurring 
in Part, In the Matter of GeneLink, Inc. and foru International 
Corporation (January 2014), https://www.ftc.gov/public-statements/2014/01/statement-commissioner-maureen-k-ohlhausen-dissenting-part-concurring-part; Dissenting Statement of Commissioner Maureen K. 
Ohlhausen, FTC v. Springtech 77376, et al. (July 2013), https://www.ftc.gov/public-statements/2013/07/dissenting-statement-commissioner-maureen-k-ohlhausen; see also J. Howard Beales, III and 
Timothy J. Muris, In Defense of the Pfizer Factors, George Mason Law 
& Economics Research Paper No. 12-49 (May 2012), available at: 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2087776.
    \6\ See Statement of Commissioner Rohit Chopra Regarding the 
Cannabidiol (CBD) Enforcement Actions (Dec. 17, 2020).

[FR Doc. 2020-29003 Filed 12-30-20; 8:45 am]
BILLING CODE 6750-01-P