Israeli cannabis firm could pay millions for shady marketing scheme

Panaxia, an Israeli company focused mainly on cannabis products, may face serious legal issues following thousands of complaints about its misleading advertisements, spam messages and personal information breaches. The CEO of the cannabis firm, Dadi Seagal, has denied any lawbreaking, but customers are starting to file claims that could eventually lead to the company’s downfall.

Panaxia primarily focuses on cannabis operations like manufacturing, and also operates as a pharmacy that provides transportation services. The company makes a point from trying to differentiate itself from the “regular” cannabis industry. It presents itself as a pharmaceutical company that produces “cannabis medication.”

Panaxia’s unorthodox methods are also reflected in other areas, such as customer recruitment. The company uses methods that are considered rogue and are commonly used by crooks – this is what customers complaints are based on.

Many people have long reported they have received frequent spam SMS messages from the company and claimed to have been harassed, allegedly in violation of advertising dissemination laws, data storage laws, and more.

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Spam messages could lead to the fall of Panaxia

Due to these alleged practices, Panaxia may be forced to pay millions of shekels (the basic monetary unit of Israel) as compensation, to thousands of customers. Some of them are already preparing to file small claims and are also considering filing a class action.

According to Israeli law, a single spam message that a citizen received without agreeing to it could lead up to a compensation of $280 (NIS 1,000), without proof of damage. Given that such text messages have been sent up to 10 times or more, to thousands of cannabis patients, the amount Panaxia might have to pay could reach many millions.

Some of the messages that Panaxia sent are marketing-only and include self-promotional phrases such as: “We are the leading pharmacy in Israel for deliveries.”

For example, patients have recently received a text message from the cannabis firm containing their ID number with a message that is clearly advertisement under the guise of a technical message: “Due to a failure, you were unable to make a purchase, you are welcome to sign in again” – even though the customers never tried to place an order.

Sending such messages without the recipient’s permission is a violation of the “Spam Law.” Until recently, the messages did not even include a link to be removed from the mailing lists, as required by law. Both the company website link and the new mailing list removal link are not secured as required, and any entered personal information may leak.

Personal information security is one of the biggest problems that Panaxia faces

The lack of information security and reliable databases is nothing new. In fact, it was even worse in the past.

In a previous SMS campaign, Panaxia directed patients to submit their personal medical details on a private PR website that collected their information, including ID numbers, a copy of medical licenses, and more. Allegedly, that was in violation of the Database Law and regulation concerning the use of medical information.

The same PR company is known in the industry for trying to collect patient information for a long time, including through websites that masqueraded as online petitions. That has not prevented Panaxia from using its services without conducting a thorough background check.

Panaxia claimed that the distribution of the link to the company’s PR website was “accidental” and that the link to it leaked unintentionally. However, it was found that the link was actually distributed in forums and medical cannabis patient groups in a way that seemed organized. It contained additional advertising parameters and tracking code.

At the same time, the PR company also coordinates the publication of similar personal medical information collection forms with various organizations and groups, whose levels of website security isn’t sufficient.

Where do the phone numbers come from? Some are from these unidentified sites and links, but most are probably from information gathered by Panaxia during its collaboration with cannabis companies like “Better”, “IMC” and “Discourse”. The customer information has apparently been collected over the years and is now used by Panaxia to distribute its own advertisements. That’s despite the fact that the medical cannabis patients are not its customers and have certainly never signed an agreement to receive advertisements.

“They’ve been sending me eight messages in the past few weeks,” a veteran cannabis patient said. “I’ve never signed up for messages, I’ve never even been their customer. I called them once to find out about inventory and they told me that the condition for receiving information was to give my ID, phone number, and license number just to let me know what was in stock. In the end I didn’t buy anything. I don’t understand why they send me messages like that.”

Panaxia is facing paying millions in compensation

As mentioned, claimants are entitled to $280 (NIS 1,000) compensation without proof of damage. Since such a claim can be filed within 5 minutes from home, the company may have to deal with hundreds and even thousands of such small claims, meaning that it will have to pay millions of shekels for this unprofessional method of marketing.

Panaxia’s practices are joined by examples from other areas and look like the opposite of the image the company is trying to present, which is that of an advanced and high-quality pharma company.

This conduct is not expected from a company that presents itself as a serious cannabis company, and certainly not from a publicly traded company worth over $90 million (NIS 320 million).

Company spokeswoman Gali Dahan, from Ben Horin Alexandrovitz’s PR office, declined to comment.

“Especially during this period, we inform our patients about the possibility of placing an order on the site instead of telephone customer service, in order to shorten waiting times and provide more efficient service for them,” the company only said. However, Panaxia refused to respond to the claim that the messages have been sent for a long time and not only “during this period”, in contrast to the spam law.

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(Featured image by Darwin Laganzon from Pixabay)

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