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HBI Responds to Unfair Competition and Deceptive Trade Practices Verdict

(February 20, 2023) HBI and Josh Kesselman are no strangers to generating media attention. However, this time, the headlines aren’t exactly positive. Following a jury’s verdict that found the company guilty of engaging in unfair competition and violating the Illinois Uniform Deceptive Trade Practices Act, a federal court has issued an order for HBI International, the manufacturer of Raw Organic Hemp rolling papers, to discontinue selling and distributing certain products as they currently exist.

On January 31, 2023, a permanent injunction was filed in the U.S. District Court for the Northern District of Illinois as a result of a lawsuit filed by Republic Brands, a distributor of rolling papers and smoking accessories based in Glenview, Illinois, in 2016. Republic Brands alleged that HBI engaged in deceptive and unfair marketing of its Raw Organic Hemp rolling papers, with conduct falling primarily within nine topics or categories. These include marketing the papers as made in Alcoy, Spain, and claiming Alcoy as the “birthplace of rolling papers,” as well as affixing an Alcoy stamp to some of its products.

It is important to note that the injunction is titled “Agreed Order,” indicating that it was entered with HBI’s agreement. According to an exclusive interview with HQ Magazine, Brendan N. Mahoney, Esq., HBI’s general counsel, clarified that the document specifies that “HBI has since represented to the Court that [it has stopped or will stop making the statements indicated] WITHOUT consenting to a finding that any of the subject statements was or is false.”

HBI’s claim of producing rolling papers in Alcoy, Spain using artisanal techniques, a location regarded as the “cradle of rolling papers,” has sparked controversy due to the company attaching an “Alcoy Seal” and “Spanish Blessing of Alcoy Paper” label to some of its products. During the trial, evidence revealed that HBI does not manufacture any rolling papers in Alcoy, Spain. However, Mahoney stated that actual production of the papers does indeed happen in Spain; the bulk paper rolls are manufactured in France and transported to Spain, where they are processed, cut, watermarked, gummed, interleaved and packaged.

“Josh often spoke of Alcoy. Technically, the factory is just outside the perimeter of the small town of Muro de Alcoy in a hamlet called Benimarfull, about three miles away,” Mahoney explained, adding that it’s similar to people innocently referring to Parliament and Big Ben being located in London when, technically, they are in Westminster, a borough that takes in a large area of central London.

Despite the packaging’s reference to the origin of the rolling paper as Spain, RAW Cones (specifically) are manufactured in several locations, including Indonesia and Ireland. Mahoney clarified that the bulk paper comes from France and is then sent to Benimarfull, Spain for processing, watermarking, gumming, interleaving, and packaging before being transported to the cone factories for assembly.

HBI has been mandated by the court to discontinue the sale of all items that bear an Alcoy stamp. In compliance with the order, HBI consented to replacing Alcoy with Benifarfull in its packaging. Nevertheless, US regulations necessitate the “Made in Spain” label on the rolling paper booklets, which remains unaffected.

The court discovered some concerning allegations that go beyond just a packaging issue and could have significant implications for the legitimacy of the company. Specifically, it was found that HBI had made claims about donating a percentage of revenue to a 501c charity called the “RAW Foundation,” which the court determined does not exist.

Once again, Mahoney identified a technicality in the matter concerning HBI’s charitable donations. He states that long before the Agreed Order was entered, HBI began using the name ‘RAWGiving, to describe its philanthropic and charitable activities. The only issue addressed by the Court’s injunction is the actual name that HBI uses for that conduct.

According to Mahoney, there is nothing in the order that even implies the charitable giving was anything but true. Republic’s counsel stated in open court during closing arguments that “[HBI and Mr. Kesselman are] charitable people.”

Mahoney has reiterated that HBI and Mr. Kesselman have consistently provided substantial financial and in-kind contributions to support charitable causes globally, and they now carry out these efforts under the name “RAWGiving.”

In a press release, the company made it clear that while name previously used for thier giving efforts may have created the impression of being a charity, that is not the case. “Charities raise money by requesting donations. RAW does not. Instead, RAW gives portions of its profits to provide financial support to many charities and other causes central to the values of our brand.”

Kesselman was quoted in an interview with Cannatechtoday on January 27, 2022 (tinyurl.com/cannatech12722), saying, “The plan was basically to give back in a way that I believe is uncorrupted. [When customers visit RAWgiving.com and purchase items like skateboards, snowboards, or other merchandise] 100% of what you spend goes directly to the charity.”

In a February 1, 2021 Forbes interview (tinyurl.com/Forbes2121), Kesselman stated, “We have given away millions of dollars to charity,” and mentioned that a significant part of his work on product development and sales was not financially driven. However, Kesselman acknowledged that it was crucial for the company to remain profitable to continue innovating and contributing to charitable causes. Although Kesselman declined to provide specifics in the interview, Forbes identified the [RAW Foundation] as a not-for-profit organization focused on entrepreneurial philanthropy and funded by HBI. The article also listed several outside initiatives that HBI has supported, including “Water Is Life International,” “Trees for the Future,” “Wine To Water,” “CarbonFund.org,” and “Home ‘Fur’ Good.”

As an independently owned company, RAW’s philanthropic efforts of over a decade have contributed more than $2.5 million in direct cash contributions, plus in-kind contributions of $186,174 to a wide variety of charities. RAW’s in-kind gifts helped the charities raise an additional $590,661 for themselves.

Following the court’s ruling, HBI is now prohibited from making any declarations, implications, or references to the non-existent charitable entity or foundation called the “RAW Foundation.” The court order permanently prohibits HBI and its employees from implying or suggesting that HBI and/or RAW contribute funds or sales proceeds to any foundation referred to as the “RAW Foundation,” or featuring references to the “RAW Foundation” in text or images.

HBI, headquartered in Phoenix, told the court that it will stop making the statements that were deemed false, but did not admit to any wrongdoing. Currently, HBI International’s website displays a notice that a new website will be launched on March 1, 2023, with options for existing customers to log in or contact the company directly. HBI also sells products under other brands, such as Elements, Juicy Jays, Pay-Pay, and Skunk.

Mahoney restated that the Agreed Order pertains solely to HBI and requires only a modification of the language used on their packaging. The change does not impact any retail stores, and this was made clear by the court in previous orders related to alterations in packaging.

HBI agreed to the terms of the January 31, 2023 order that requires HBI and its personnel to refrain from making any statement or communication, or engaging in any promotion or advertising activity that states, implies or suggests:

  • That HBI and/or RAW operate(s) or contributes its funds or sales proceeds to a charitable entity or foundation of any kind referred to as the “RAW Foundation” or making reference to the “RAW Foundation” in text or images;
  • That RAW Organic Hemp rolling papers are “unrefined;”
  • That RAW Organic Hemp rolling papers are made with natural hemp gum, or that the adhesive used in RAW Organic Hemp rolling papers is made from or contains hemp;
  • That RAW Organic Hemp rolling papers are, or ever were, the world’s first or world’s only organic (or organic hemp) rolling papers;
  • That RAW Organic Hemp rolling paper booklets are made in Alcoy, Spain;
  • That RAW Organic Hemp pre-rolled rolling-paper cones are made in Alcoy, Spain;
  • That the bulk paper (“bobbins”) used to make RAW Organic Hemp rolling paper products is made in Spain;
  • That RAW Organic Hemp rolling papers are made in Alcoy Spain, the birthplace of rolling papers; and
  • HBI shall not use on its packaging a “stamp” including the use of the word Alcoy or referring to Alcoy.
  • That RAW Organic Hemp rolling papers are made using wind power or are powered by wind;
  • That HBI uses or used the center of the hemp stalk for its RAW Organic Hemp rolling papers;
  • That HBI or Joshua Kesselman invented rolling paper pre-rolled cones;
  • That the OCB Organic Hemp papers are knock-offs, “RAWnabees”, copies, or fake versions of RAW.

It’s important to note that litigation is ongoing.  Recently a case that has been ongoing for seven years resulted in some updates for RAW and their brand. In 2022, a jury awarded RAW $979,620.00 for a competitor’s willful infringement of RAW trade dress and $40,000 statutory damages for willful infringement of RAW copyright.

“We are sorry for any confusion the litigation outcome has created and are relieved that the recent lawsuit does not negatively affect the sale of any of our products already in the market,” Raw representatives said, “Our valued customers and stores who stock RAW’s products will continue to sell them and run their businesses just as before.”

We will keep you updated as we have additional developments and information to share.

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