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Going Green: The FTC Takes Action on Environmental Marketing

Beveridge & Diamond, P.C., July 1, 2009

Environmental (or “green”) advertising and marketing claims seem to be everywhere today.  Companies across industries are promoting green products and product features in response to increased consumer demand for more environmentally-responsible goods and services.  According to the Federal Trade Commission (“FTC”), which has primary jurisdiction over the regulation of these claims, “there has been a virtual tsunami of environmental marketing.”[1]  To address potential consumer deception from such claims, the FTC has been considering updating its decade-old guidance.  Last month, the agency took affirmative steps toward remedying the issue.

On June 9, 2009, the FTC reminded marketers that it “plays an important role in helping to ensure that these environmental advertisements are truthful, substantiated, and not confusing to consumers.”[2]  After a long hiatus, it brought three environmental marketing enforcement actions and testified before Congress on the proliferation of “green” claims.  The bottom line from these actions is that businesses seeking to promote “environmentally-friendly” products and services should exercise due diligence.

FTC Enforcement Actions

The FTC regulates green marketing in part by challenging allegedly deceptive claims through agency enforcement actions.  Until last month, the Commission had not publicly announced any green marketing cases since the year 2000.[3]  In June, however, the FTC charged Kmart Corp., Tender Corp., and Dyna-E International with making false and unsubstantiated environmental claims in violation of the FTC Act.[4]   All three complaints concern “biodegradable” claims made by the retailers.  Kmart Corp. had advertised biodegradable American Fare paper plates, Tender Corp. had advertised biodegradable Fresh Bath wet wipes, and Dyna-E had represented its Lighthouse towels as biodegradable.   While Kmart and Tender Corp. agreed to settle their cases, Dyna-E will engage in administrative litigation scheduled for January 2010. 

The cases allege violations of Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.”[5]   In applying Section 5 to environmental advertising and marketing practices, the FTC relies on its Guides for the Use of Environmental Marketing (commonly known as the “Green Guides”).[6]  While the Green Guides are solely administrative interpretations of the law and therefore not independently enforceable, the FTC considers that actions inconsistent with the Green Guides demonstrate potential Section 5 violations.  With regard to the biodegradable claims at issue in the recent cases, the Green Guides specifically provide that “[a]n unqualified claim that a product or package is degradable, biodegradable or photodegradable should be substantiated by competent and reliable scientific evidence that the entire product or package will completely break down and return to nature, i.e. decompose into elements found in nature within a reasonably short period of time after customary disposal.”[7]  In all three cases, the retailers represented unqualified claims – which proved difficult to substantiate.  For example, the FTC alleged that Kmart “did not possess and rely upon a reasonable basis that substantiated the representation.”  Kmart has indicated that it relied on the vendor’s documents to substantiate the claim.[8] 

The FTC’s recent cases concern environmental claims clearly outlined in the current Green Guides.  Companies marketing claims most popular in today’s marketplace, such as “green”, “eco-friendly”, and “sustainable”, should note that such claims may also constitute general environmental benefit claims covered by the Green Guides.  In addition, self-regulatory bodies, such as the National Advertising Division of the Better Business Bureau (“NAD”), actively considers such claims and refers cases to the FTC when necessary.  Also in June, the NAD considered Apple’s claim of offering the “world’s greenest family of notebooks.”[9]  NAD found the claim to be appropriately substantiated, but recommended that Apple modify the claim to clarify its comparative nature.[10]  Businesses employing such claims should utilize best practices that include incorporating qualifying language in their claims and relying on competent and scientific evidence for substantiation.

The FTC Testifies Before Congress

On June 9, 2009, the House Energy and Commerce Committee’s Subcommittee on Commerce, Trade, and Consumer Protection held a hearing entitled, "It's Too Easy Being Green:  Defining Fair Green Marketing Practices".  The hearing aimed to address: (1) the FTC’s role in monitoring and/or regulating environmental marketing claims, (2) the private sector’s role in differentiating deceptive and non-deceptive claims, and (3) overall consumer perception of green marketing claims.[11]  Witnesses before the subcommittee included:

  • James Kohm, Director, Enforcement Division, Federal Trade Commission
  • M. Scot Case, Vice President, TerraChoice, Executive Director, EcoLogo Program
  • Urvashi Rangan, Ph.D., Director, Technical Policy, Consumers Union
  • Dara O'Rourke, Ph.D., Associate Professor, University of California Berkeley, Co-Founder, GoodGuide 
  • Scott P. Cooper, Vice President, Government Relations, American National Standards Institute

All witnesses agreed that environmental marketing claims are inundating the marketplace, that most claims lack a commonly accepted definition, and that, as a result, consumers may be deceived.  The witnesses did not always agree, however, on the steps required to remedy the problem.  For instance, when Chairman Bobby Rush (D-IL) questioned the panelists about a paper-saving claim on the label of his water bottle, most panelists disapproved of the claim.  Mr. Kohm maintained, however, that so long as the claim is truthful and accurate, it is not problematic from the Commission’s perspective.  Ranking Member Radanovich (R-CA) pressed the witnesses for a specific definition of “green”.  Some panelists suggested that definite features of a “green” product should include social responsibility, energy efficiency, and/or water conservation.  Others indicated that “green” encompasses an extensive list of possible environmental considerations. 

All panelists encouraged and/or supported government action on this issue.  The FTC announced its latest enforcement efforts and continued consumer perception research.[12]  Mr. Case, of Terrachoice, pushed for independent third-party certifications, an environmental leadership eco-label, and research funding for a national lifecycle inventory database.[13]  Dr. Rangan recommended that a general baseline be set for all green marketing claims, and Mr. O’Rourke called for fuller public disclosure requirements.[14] 

Green Guides Regulatory Review Update

Since late 2007, the FTC has been reviewing its Green Guides.[15]  The FTC first issued the Green Guides in 1992 (with subsequent revisions in 1996 and 1998).  The latest review recognizes that claims contemplated and addressed in the 1990’s are no longer the claims most prevalent in today’s marketplace.  As a result, the FTC commenced a review of the Green Guides seeking public comment and conducting a series of public workshops. 

The FTC has publicly announced minimal information concerning its revision of the Green Guides since its last public workshop on July 15, 2008, but the Commission recently revealed that it is currently conducting consumer perception research critical to the revision process.  A May 12, 2009 Federal Register notice indicates that during the original public comment period “[f]ew comments submitted consumer survey evidence or consumer perception data.”[16]  As a result, the Commission is conducting research to examine how consumers perceive general environmental benefit claims, in particular, how consumers perceive unqualified general claims (e.g. “Green”) versus qualified general claims (e.g. “Green-Made with Renewable Materials”).  The FTC expects to complete the study and analysis by the end of the year.  Thus, release of the revised Green Guides is likely due in 2010.

International Standards for Green Claims

The FTC is not the only government agency providing guidance on when green claims may be regarded as deceptive.  Outside the United States, several extensive guidelines on green marketing claims are now available.  Marketers in the U.S. may want to consider these international sources while waiting for the FTC to update the Green Guides, or as a supplement to the revised Green Guides once available.

For example, last year the Canadian Standards Association, in partnership with Canada’s Competition Bureau (analogous to the FTC), revised the Canadian guidelines regarding the use of environmental claims.[17]  Based on ISO 14021, the Canadian guidelines include best practices suggested in comments submitted to the FTC, such as specific substantiation requirements or expectations, and consideration of life-cycle analysis.  Use of the term “green” is specifically discouraged as a vague environmental claim.  Also in 2008 the Australian Competition & Consumer Commission released guidelines that advise against the use of “green”:

This statement is very vague, and conveys little information to the consumer—other than the message that your product is in some way less damaging to the environment than others. This term invites consumers to give a wide range of meanings to the claim, which risks misleading them.[18]

As the FTC continues its research and review, similar principles are likely to be considered and/or included in its revised Green Guides. 

Conclusion

As consumers continue to demand that companies offer more environmentally-responsible products and services, and operate in a manner that reduces adverse environmental impact, environmental marketing claims will continue to proliferate. To avoid widespread overstatements, diminished consumer confidence, and/or any potential disparate impact on consumers with lesser income, marketers will have to pay close attention to the wording of their green claims and the substantiation underlying them.  They should recognize that the FTC, which had been quiet, is once again stirring into action.

Beveridge & Diamonds actively counsels clients on environmental marketing and continues to monitor this issue. 

*  *  *

For more information on this topic, please contact Mark Duvall (mduvall@bdlaw.com) or Rea Harrison (rharrison@bdlaw.com


[1] Prepared Statement of the Federal Trade Commission on “It’s Too Easy Being Green: Defining Fair Green Marketing Principles” before the Committee on Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection (June 9, 2009) [hereinafter FTC Hearing Statement], http://energycommerce.house.gov/Press_111/20090609/
testimony_kohm.pdf
.

[2] Id. 

[3] Federal Trade Commission, The FTC’s Environmental Cases, http://www.ftc.gov/energy/ (last visited June 25, 2009).

[4] See K-mart Corp., File No. 082-3186 (June 9, 2009), http://www2.ftc
.gov/os/caselist/0823186/index.shtm
; Tender Corp., File No. 082-3188 (June 9, 2009), http://www2.ftc.gov/os/caselist/0823188/index.shtm; Dyna-E Int’l, et al., Docket No. 9336 (June 9, 2009), http://www2.ftc.gov/os/adjpro/d9336/index.shtm
Comments on the Proposed Consent Orders for Kmart Corp. and Tender Corp. must be received by July 9, 2009.  See 70 Fed. Reg. 28,494 (Jun. 16, 2009), http://www.ftc.gov/os/fedreg/2009/june/090616kmartco.pdf.

[5] See 15 U.S.C. § 45 (2009).

[6] 16 C.F.R Part 260 (2009)

[7] Id. at § 260.7(b). 

[8] See Kate Galbraith, F.T.C. Sends Stern Warning On “Biodegradable Marketing Claims, New York Times -- Green, Inc., June 11, 2009, http://greeninc.blogs.nytimes.com/2009/06/11/ftc-sends-stern-warning-
on-biodegradable-marketing-claims/
.

[9] National Advertising Division, NAD Finds Apple Can Support
Certain ‘Green’ Claims For
Macbook, Recommends Company Modify World’s Greenest ‘Family’ Claim, June 18, 2009,  http://www.nadreview.org/DocView.aspx?DocumentID=7421.

[10] Id.

[11] See Opening Statement by Honorable Bobby L. Rush, Chairman, Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Perception (June 9, 2009), http://energycommerce.house.gov/Press_111/20090609/rush_open.pdf.

[12] FTC Hearing Statement, supra note 1.

[13] Prepared Statement of M. Scot Case, Vice President, Terrachoice, June 9, 2009, http://energycommerce.house.gov/Press_111/20090609/
testimony_case.pdf
.

[14] Prepared Statement of Urvashi Rangan, Ph.D., Director, Technical Policy, Consumers Union, June 9, 2009, http://energycommerce.house.gov/
Press_111/20090609/testimony_rangan.pdf
;  Prepared Statement of Dara O'Rourke, Ph.D., Associate Professor, University of California Berkeley, Co-Founder, GoodGuide , June 9, 2009, http://energycommerce.house.gov/
Press_111/20090609/testimony_orourke.pdf

[15] 72 Fed. Reg. 66,091 (Nov. 27, 2009), http://www.ftc.gov/os/2007/11/P954501ggfrn.pdf.

[16] 74 Fed. Reg. 22,396 (May 12, 2009), http://www.ftc.gov/os/fedreg/2009/may/090512greenmarketing.pdf.

[17] Canadian Standards Association, Environmental Claims: A Guide for Industry and Advertisers, June 2008, http://www.cb-bc.gc.ca/eic/site/
cb-bc.nsf/vwapj/guide-for-industry-and-advertisers-en.pdf/$FILE/
guide-for-industry-and-advertisers-en.pdf
.

[18] Australian Competition and Consumer Commission, Green Marketing and the Trade Practices Act, http://www.accc.gov.au/content/item.phtml?
itemId=815763&nodeId=69646a6d15e7958a41b40ab5848c6968&fn=
Green%20marketing%20and%20the%20Trade%20Prac
.

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