Troutman Pepper: Colorado Hemp Company Settles With AG Over Alleged Violations of Consumer Protection Law

The Colorado Attorney General’s (AG) Office recently entered into a settlement agreement with Bee’s Knees Enterprises, LLC, dba Bee’s Knees CBDs, addressing allegations of violations of the Colorado Consumer Protection Act (CCPA). The CCPA generally prohibits deceptive trade practices, including false representations or advertising, and allows for public or private enforcement and civil penalties. The settlement agreement resolves claims against Bee’s Knees without admitting liability. According to the settlement agreement, Bee’s Knees’ primary revenue stream comes from selling hemp extracts to business customers that manufacture the extracts into hemp-infused products, but it also sells consumable, intoxicating hemp products, among other products, on its website directly to consumers. Colorado alleged that from 2019 to October 2024, Bee’s Knees engaged in deceptive business practices, including misrepresentations about the source, quality, and chain of custody of its products; false affiliations with nonprofit organizations; and inadequate age-verification systems for products that should not be accessible to minors. Key Allegations
  1. Misrepresentation of Product Source and Quality
    • Bee’s Knees misrepresented the source of its hemp extracts, claiming they were from licensed hemp farms and Colorado Department of Public Health and Environment-approved sources without possessing supporting documentation.
    • Bee’s Knees’ certificates of analysis and chain of custody documentation were found to be unverifiable.
  2. False Advertising on Website
    • Bee’s Knees’ website contained inaccurate statements about the origin and organic status of its products.
    • Bee’s Knees falsely implied affiliations with nonprofit organizations by displaying their logos without permission or actual donations.
  3. Lack of Age Verification
    • Bee’s Knees’ website lacked an age-verification system to ensure minors cannot purchase intoxicating hemp products, despite warnings about keeping such products away from children.
Settlement Terms
  1. Monetary Penalties:
    • Bee’s Knees agreed to pay $495,000 in civil penalties, with an initial payment of $75,000 by December 31, 2024, followed by incremental payments until December 31, 2027.
    • An additional $270,000 in penalties will be suspended contingent on Bee’s Knees making all prior payments on time consistent with the terms of the settlement agreement.
  2. Compliance and Corrective Actions:
    • Bee’s Knees must comply with the CCPA and other applicable laws in the future.
    • Bee’s Knees must remove misleading statements and unauthorized logos from its website.
    • Bee’s Knees is required to obtain and maintain all necessary licenses and permits for its operations.
    • Bee’s Knees is required to develop and implement an age-verification policy to prevent minors from purchasing restricted products.
  3. Ongoing Obligations:
    • The settlement agreement imposes continuing obligations on Bee’s Knees and its affiliated entities to ensure compliance with the agreed terms.
    • The Colorado AG retains the right to enforce the settlement agreement and pursue further legal action if violations occur, but it will not initiate any civil action or proceeding under the CCPA against Bee’s Knees for conduct prior to the effective date of the settlement agreement that relates to the subject matter of the agreement.
Why It Matters The settlement agreement is only one example of the power that the CCPA provides the Colorado AG to enforce generally applicable laws against companies that sell intoxicating hemp products. As another example, the Colorado AG filed a complaint[1] against Foxhole Farms LLC on November 21, 2024, in which he alleges that Foxhole Farms violated the CCPA by misrepresenting the true potency, concentration, and ingredients of chemically converted cannabinoids; failing to use any adequate or reasonable age verification system, allowing minors to order and receive delivery of high concentration psychoactive cannabis products; selling edible “copycat” cannabis products that resemble and/or are identical to popular children’s candy and snacks without labeling them as containing cannabis; falsely and deceptively advertising certain products as “industrial hemp” when these products were in fact “marijuana”; and failing to obtain required permits or licensure for the cultivation of industrial hemp or the sale of finished cannabis products, misrepresenting expired cannabis cultivation licenses as current and valid, and improperly altering or amending expired cannabis cultivation licenses; and selling cannabis products into Colorado that are prohibited due to containing excessive amounts of tetrahydrocannabinol. Finally, most states have consumer protection laws similar to the CCPA, so the Colorado AG’s actions serve as an example of how other AGs could rely on these generally applicable laws to prohibit or restrict companies from selling intoxicating hemp products in addition to, or in lieu of, clear laws regulating those products.
Our Cannabis Practice provides advice on issues related to applicable federal and state law. Marijuana remains an illegal controlled substance under federal law. Source:  https://www.regulatoryoversight.com/2024/12/colorado-hemp-company-settles-with-ag-over-alleged-violations-of-consumer-protection-law/