CHAMERSTRASSE, SWITZERLAND / ACCESSWIRE / May 16, 2024 / In the ever-evolving world of cannabis and CBD, where products are securing a growing foothold in the global wellness market, navigating regulatory frameworks is as intricate and delicate as a Swiss watch. A recent legal dispute between Formula Swiss , a Swiss-based CBD company established in 2013, and the Office for Consumer Protection in the Kanton of Zug highlights these challenges. This landmark lawsuit raises crucial questions that reverberate throughout the global CBD industry regarding product classification, consumer protection, and the evolving landscape of cannabis regulation.
Formula Swiss, known for its unwavering commitment to product quality and compliance, has invested heavily to meet stringent regulatory demands. The company, which has been producing certified organic and vegan hemp products since 2013, has spent over CHF 2 million since 2019 to classify its hemp products as cosmetics, meticulously following every directive from the Office for Consumer Protection in the Kanton of Zug. The legal dispute centers around the classification of Formula Swiss's hemp products, as the company argues that its products are cosmetics, while the Office for Consumer Protection in the Kanton of Zug insists that they are food and food supplements.
To clearly communicate that their products are cosmetics, Formula Swiss has made extensive changes since 2019. This includes modifying thousands of pages on their website, which is available in 15 languages, along with updating product labels, packaging, inserts, and instructions. The company also brought in compliance specialists from Belgium to ensure their labeling met international standards. They have developed comprehensive Product Information Files (PIFs) with safety experts and conducted skin testing on 50 people in laboratories in Germany. These efforts demonstrate the company's determination to comply with cosmetic regulations and clearly differentiate their products from food and food supplements.
Despite this diligent compliance and significant investment, Formula Swiss found itself embroiled in a legal dispute with the Office for Consumer Protection in the Kanton of Zug, alleging that the Office had hindered the legal distribution of its products. "We are shocked by the treatment of the Office for Consumer Protection in the Kanton of Zug," remarked Robin Roy Krigslund-Hansen, CEO of Formula Swiss. "We have spent years of manpower and millions of Swiss Francs doing exactly what the competent authorities told us to do to ensure our hemp products are correctly registered in Switzerland, EU Member States, and in the United Kingdom. Yet, the Office for Consumer Protection has done everything possible to prevent our legal and compliant products from being on the market."
Since 2020, Formula Swiss has engaged a strong legal team to fight its case and is confident that they will ultimately prevail. Mr. Robin Roy Krigslund-Hansen stated that the company would not be starting such an expensive legal case, which may take years to reach a decision in the Supreme Court, if they were not at least 90% confident that they would win the case against the Canton of Zug. This optimism stems from the company's diligent adherence to regulatory guidelines, significant investment in compliance, and the unwavering belief that the Swiss regulatory system will ultimately side with fairness and transparency.
The discrepancies in classification are stark. The exact same products from Formula Swiss that Swiss authorities classify as food supplements are consistently categorized as cosmetic products in countries such as Denmark, Sweden, and Norway. Adding to the inconsistency, many other Swiss companies sell the same products as cosmetics without issue, creating unfair competition due to differing interpretations of the same laws. This incongruity raises questions about the Swiss authorities' decision-making process. Despite meticulously following guidelines, Formula Swiss's efforts have been undermined by regulatory inconsistencies.
Switzerland itself doesn't have a classification system for CBD products, instead relying on EU databases like the Novel Food Catalogue and the CosIng database, where CBD was classified in January 2019 and October 2019, respectively. This classification permits the sale of CBD as a cosmetic. Yet, interpreting these guidelines has led to inconsistency across Swiss Cantons and other EU countries. For Formula Swiss, which sells its products in over 60 countries worldwide, the differing regulatory interpretations are highly frustrating. While all other countries classify the hemp products from Formula Swiss as cosmetics, the Office for Consumer Protection in the Kanton of Zug interprets the same rules differently, classifying the products as food supplements.
Formula Swiss has previously taken successful legal action against authorities in Sweden, but they prefer a cooperative approach based on constructive communication and dialogue. Unfortunately, Formula Swiss experienced a sudden change in communication from the Office for Consumer Protection in the Kanton of Zug, which, for years, has refused to meet representatives from Formula Swiss and their legal team in person and stopped replying to letters sent to them. Instead, the Office involved the police and unsuccessfully attempted to turn the case into a criminal investigation against Formula Swiss.
The company suspects that external pressures might have influenced the sudden reevaluation of hemp products in Switzerland, forcing Formula Swiss into a corner with no option but to pursue legal action against the Office. Despite recognizing the challenges ahead, Formula Swiss remains steadfast. While the initial legal battle in the Court of Zug might present biases favoring local authorities, the company is confident in their case's merits. They believe they will ultimately prevail when the case reaches the Federal Supreme Court in 2025, potentially setting a precedent for the CBD industry in Switzerland and beyond.
Formula Swiss feels compelled to seek legal clarification not just for themselves but for the entire Swiss hemp industry, so everyone can be treated fairly and equally. The Swiss hemp industry deserves this clarity. Establishing a successful business in the cannabis industry takes many years and requires substantial capital investment. An unstable legal situation is the last thing cannabis entrepreneurs and investors want.
In addition to seeking justice over product classification, Formula Swiss plans to follow up with a substantial financial claim against the Kanton of Zug. The company is seeking CHF 5 to 10 million in compensation for documented financial losses and the significant impact on its business. However, Formula Swiss is not taking this legal action purely for financial reasons. Their primary goal is to establish a fair and stable business environment and to hold the authorities accountable for the financial damages caused by inconsistent regulation. This underscores the company's unwavering determination to fight for a predictable regulatory framework that will allow businesses in the CBD industry to thrive without the fear of arbitrary legal hurdles.
The company believes that by pursuing this legal action, they will set an important precedent, ensuring that all CBD businesses in Switzerland are provided with a clear regulatory framework. This case serves as a reminder that regulatory bodies must apply the laws consistently and fairly, providing the kind of stability that is crucial for businesses that require significant investment and time to grow.
Formula Swiss alleges that the Office for Consumer Protection in the Kanton of Zug has not only undermined its business in Switzerland but has also actively tried to impair their sales outside the country. Despite these challenges, the company has found support from many other nations, allowing it to shift operations abroad. Authorities in Denmark, Sweden, and Norway have been notably supportive, expressing their confusion over the Office's classification of the products as food or food supplements. These countries support Formula Swiss in its stance that the products are indeed cosmetics, enabling the company to operate local warehouses in these countries without any legal or compliance issues.
This unwavering support has been crucial for Formula Swiss as it continues its operations amidst a challenging regulatory landscape. The backing from these supportive jurisdictions has allowed the company to maintain its commitment to quality and compliance while providing its CBD products to customers in over 60 countries worldwide.
Though they have operated as a Swiss company since 2013, these regulatory challenges have forced them to temporarily relocate operations. This frustrating move is seen as a logical consequence of the ongoing legal dispute, expected to resolve in 2025. Until then, Formula Swiss companies will be paying their taxes in the United Kingdom, Denmark, Portugal, and Romania as they continue their operations in these supportive jurisdictions.
Formula Swiss is a Swiss company producing and selling Swiss products, so they naturally want to return to Switzerland once the legal battle against the Kanton of Zug has been won. However, the company is very unlikely to base its operations in the Kanton of Zug again, as it fears future discrimination and harassment could continue even after the legal case is resolved.
The journalist of this article has attempted to reach Dr. Mattias Fricker and Ms. Kristine Hotz from the Office for Consumer Protection in the Kanton of Zug to obtain their opinions on the pending legal case against them. However, they have not responded to the request to be heard.
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SOURCE: Formula Swiss