Cannabidiol (‘CBD’) has had an increasing consumer interest over recent years due to the range of CBD-based products that are now available and the purported benefits these products give to the consumer’s health and wellbeing. The scope for more CBD-based products is continually expanding and, according to the Centre for Medicinal Cannabis, the UK CBD market is currently worth £300 million (double that of the current Vitamin-C market) and is expected to reach £1 billion by 2025, suggesting that this wave of popularity is more than just a passing fad.
Authored By: Nikesh Mistry
Despite the boom in the CBD sector, there exists a lot of confusion and ambiguity surrounding CBD itself and the regulatory framework relating supply of CBD-based products. Comparisons are often made with another element of the cannabis plant, delta-9-tetrahydrocannabinol (otherwise known as ‘THC’), which has many differences to CBD, in both its chemical effects on the user and the legal parameters of selling the product on the market. In addition, it is argued by some that “the CBD industry is engaged with a product that can (and often does) touch on what is permissible under the criminal law, as a result of other elements within the same product“. Furthermore, recent developments in the regulatory framework for CBD products classed as foods has placed further scrutiny on current and new businesses hoping to bring their products to the market.
It is therefore crucial that businesses selling CBD-based products are clear on what it is they are selling to consumers and how this differs from other cannabis products, as well as being up-to-speed on the new and existing regulations so that suppliers ensure they are compliant.
‘Cannabis’ is the term that collectively refers to the herbaceous plants from the Cannabaceae genus and the term ‘cannabinoids’ collectively refers to the naturally occurring chemical compounds that are found within these cannabis plants. It is thought that the cannabis plant produces over 100 variants of cannabinoids and two of the most well-known cannabinoids are CBD and THC. A specific type of cannabis plant that is equally well-known is hemp, which contains high amounts of CBD and low amounts of THC (less than 0.3%). Hemp has been cultivated by humans around the world for thousands of years and is commonly used in modern industrial settings.
As CBD-based products continue to increase in popularity, comparisons of CBD are made often with THC despite there being some distinct differences between the two cannabinoids. The key difference is that THC contains a psychoactive element and gives the user a feeling of intoxication (a ‘high’). On the other hand, CBD contains no THC and no known psychoactive elements and will therefore give the user no ‘high’ or any intoxicating effects.
- Are CBD products that contain less than 0.2% THC legal?
In the UK, cannabis (and cannabis products containing the THC cannabinoid) is a Class B controlled drug under the Misuse of Drugs Act 1971 (the ‘MoDA’) and therefore it is unlawful to possess, supply, produce, import or export this drug except under a Home Office licence. It is also an offence to cultivate any plant of the cannabis family (including hemp) except under a Home Office licence. CBD, however, as an isolated substance (i.e. in its pure form) is not considered a control substance and is perfectly legal for a business to sell pure CBD-products.
There is a common misconception that it is legal to supply CBD products if the CBD product contains no more than 0.2% THC. For products that contain a small amount of a controlled substance, Home Office guidance states that “licences may be issued for the cultivation of cannabis plants with a low tetrahydrocannabinol (THC) content” (0.2%), however this only applies in the context of hemp plants being cultivated for industrial purposes and does not refer to CBD products being sold to consumers for human consumption.
In the case of CBD products sold for human consumption that contain traces of THC, the applicable provision is Regulation 2 of the Misuse of Drugs Regulations 2001 (the MDR). This states that a CBD product will be exempt from being caught under the MoDA where it satisfies all three elements of the ‘exempt product’ criteria:
- it is not designed for the administration of THC
- any THC elements of the product are packaged in such a way that it cannot be recovered by readily applicable means, or at a level which would constitute a risk to health; and
- it contains no more than one milligram per component part of the product.
Therefore, a CBD product must contain no more than one milligram per component part of the product (not less than 0.2% as is often suggested) for it to be legal. In relation this requirement, studies have shown that many CBD products on the market have contained a measurable amount of THC that exceeded the legal limit and would therefore be classed as a controlled substance. This therefore demonstrates that there are significant challenges for businesses selling CBD products to comply with this regulation as it is extremely difficult for any business to estimate whether products are within the remit of the permitted 1mlg threshold without proper scientific tests. Home Office guidance states that, when investigating whether a product has met the criteria, they would take a “full-spectrum” analysis undertaken by an independent company, with the provision of comprehensive and independently verifiable information and research of an appropriately rigorous nature.
- Penalties for non-compliance
The very fine line between what would render a product legal and illegal has huge consequences for businesses selling CBD products, as the sanctions for falling short of these regulations could have very serious implications.
For example, supplying a Class B controlled substance under the MoDA carries a prison sentence of up to 14 years and/or an unlimited fine. Furthermore, under the Proceeds of Crime Act, the Crown Prosecution Service (CPS) has the power to make restraint orders to freeze supplier’s assets in order to preserve evidence and can also make confiscation orders which would require the convicted defendant to pay any sums and/or assets the Crown Court has determined as being proceeds of the sale of the illegal products.
- Food products containing CBD
There has been an increasing market for food products that contain CBD (e.g. oils, sweets and even bread) which are becoming more and more popular in shops, cafes and online. On top of the MoDA and the MDR, CBD products sold as foods or health supplements are subject to further regulatory provisions that have undergone a recent update which will impact all businesses selling CBD products caught under this category.
The status of CBD as a novel food product was confirmed in January 2019 by the UK Foods Standards Agency (the FSA). The FSA is the Central Competent Authority (CCA) for food safety; however, local authorities are responsible for the day to day enforcement of food law. The FSA issues guidance to support consistency in approach, but ultimately it is for local authorities to make specific enforcement decisions based on the facts of individual cases and circumstances.
The previous FSA rules sought to implement EU law which stated that CBD purporting to have health benefits (which were not to be sold as medicinal products) are regulated by the EU as food supplements. These regulations include controls such as that any claims made regarding the health benefits of CBD supplements or foods are prohibited (and should therefore not be marketed or labelled as such) because the health benefits of CBD-based products does not appear on the EU’s authorised health claims list. However, it has been argued that enforcement of these regulations by the FSA and at a local level has until recently not been as stringent as it could have been, given the wide range of CBD-based food products and supplements on the market.
To combat the laissez-faire approach and uncertainty to regulatory enforcement, the FSA has recently announced that CBD companies that sell products classed as novel foods will have until 31 March 2021 to make a validated novel food application for each product. After this date, only products which have a validated novel food application will be allowed to remain on the market. The FSA has stated that the Novel Foods Authorisation process will ensure that all novel food CBD products will meet legal standards on safety and content, otherwise these products will be removed. In order to comply, businesses must submit a validated dossier for each product in order to remain on the market.
- Key message
It is therefore fair to say that tighter regulations have accompanied the extraordinary growth in the CBD market and there is nothing to suggest that stricter controls are to follow. It is clear from the above that both existing businesses that are currently operating, or new entrants hoping to step into the CBD market, will need to put time (and indeed money) into ensuring that their products are in line with the current regulations.
Nikesh Mistry Associate
Working on commercial issues including product supply, services and framework agreements, e-commerce terms, software licensing, hosting and support contracts and outsourcings, my recent experience spans hospitality, education and beyond.
I have advised a multinational hospitality company on a master services agreement for automated check-in kiosks; a well-known luxury brand on its ecommerce and technology initiatives, including the deployment of online education programmes and digital media projects; and an online sports content distributor and aggregator on contractual arrangements with its new platform provider.
In recent years, a secondment working on commercial and IP matters with an international retailer has helped me gain a deeper understanding of its business, including contractual work on its migration to a new EPOS system, and advisory work on IT outsourcing.
I am also involved in a virtual secondment for a global financial institution. This involves liaising directly with the business, providing cost quotes, running scoping calls, reviewing various agreements and producing mark-ups, risk memos and approval emails.