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Is This Article Green? Getting Familiar with FTC Guides

New York Law Journal

October 28, 2010

Because consumers increasingly are concerned about the environmental effects of their purchasing decisions, companies today often advertise their products and services as “eco-friendly,” “green,” “carbon neutral,” “sustainable,” and “toxic free.” However, these terms are inherently vague and provide little information to consumers; in some cases, their use may even be deceptive.

“Greenwashing” is when companies promote a misleading perception that their policies or products do not harm—or even improve—the environment.[1] In response, watchdog groups now post examples of deceptive advertising to protect consumers. Consumer advocates and companies alike have sought clarification by the federal government on green marketing, especially on the use of new buzz words, such as “carbon neutral,” “renewable resources,” and “renewable energy.”

Section 5 of the Fair Trade Commission Act (FTC Act), 15 U.S.C. §45, authorizes the Federal Trade Commission (FTC) to prevent deceptive acts or practices affecting commerce. The FTC’s Guides for the Use of Environmental Marketing Claims (“Green Guides” or “Guides”), which were first issued in 1992 and last revised in 1998, are designed to help marketers avoid making unfair or deceptive environmental claims. The Guides apply to all forms of marketing in any medium, including labeling, advertising, and other promotional materials. On Oct. 6, the FTC proposed revisions to the Green Guides, and is accepting public comments on its proposal through Dec. 10.[2]

Although the Guides are set forth in FTC regulations at 16 CFR Part 260, they are administrative interpretations, do not have the force of law, and are not independently enforceable. Nevertheless, the Guides indicate FTC policy, which the FTC implements in enforcement actions. The FTC can commence an action under the FTC Act if a marketer makes environmental claims inconsistent with the Guides.

The Guides delineate common principles that pertain to all “green” marketing claims and supply detailed guidance regarding many ecological benefit claims. For such claims, the Guides “explain how reasonable consumers are likely to interpret the claim, describe the basic elements necessary to substantiate the claim, and present options for qualifying the claim to avoid deception.”[3] Environmental claims must be supported by a “reasonable basis,” which often requires “competent and reliable scientific evidence.”[4]

Recent Enforcement Actions

The FTC recently has brought enforcement actions against companies making false or unsubstantiated environmental claims about their products. In 2009, the FTC brought three actions alleging that marketers had falsely claimed that their goods were biodegradable. The FTC has challenged degradability claims more than any other kind of claim.[5] For example, in Dyna-E International, the FTC brought an action against a corporation that manufactured towels, which were labeled and advertised as “biodegradable.” According to the FTC’s complaint, the respondent did not define, describe, or qualify such biodegradability. The FTC argued that the respondent’s towels were not, in fact, biodegradable because they were ordinarily disposed of in landfills, incinerators, or recycling facilities where it would not be possible for the towels to biodegrade in a reasonably short time period.[6]

The FTC also recently brought actions against four textile and clothing sellers for misleadingly labeling and advertising their products as being made of bamboo fiber that was manufactured in an environmentally safe manner and as being biodegradable.[7] In Pure Bamboo, the respondent’s Web site touted the eco-friendly fiber content, biodegradability, and anti-microbial content of its clothing. According to the FTC, however, even though made from bamboo, the products were actually rayon, which is manufactured with toxic chemicals and releases pollutants to the environment.[8] In addition, the FTC brought actions related to misleading claims concerning the insulation value of home insulation.[9]

Revision Rationale

Citing the proliferation of environmental claims, the FTC began this revision in 2007, a year earlier than originally scheduled. The review process involved requests for public comment and three public workshops. FTC staff also reviewed 1,000 industry Web pages to gather information regarding claims about reducing carbon dioxide output, renewability, sustainability and general environmental claims. Because the Guides are based on how consumers actually perceive green claims, the FTC also commissioned a consumer perception study, which showed that the public reads many unstated things into general, unqualified green claims.

For example, when presented with an unqualified green claim, 61 percent believed that the product is made from recycled materials, 59 percent believed the product is recyclable, 54 percent believed the product is made with renewable materials, 53 percent believed the product is biodegradable, 48 percent believed the product is made with renewable energy, 45 percent believed the product is non-toxic, and 40 percent believed the product is compostable.

The percentages are similar for respondents viewing an “ecofriendly” claim. Moreover, 27 percent of respondents interpreted the unqualified green and ecofriendly claims as suggesting the product has no negative environmental impact.[10]  (Interestingly, in response to a question about the meaning of “sustainable,” 13 percent said it meant nothing, 8 percent said they did not know what it meant, 19 percent said it means a product is durable or long-lasting, and relatively few indicated that it was related to any environmental benefit.[11])

In contrast to the unqualified “green” claims, the perception study found that when a green claim was qualified, such as with the addition of the statement “made with recycled materials,” 26 percent of respondents took away implied claims, a decrease of 26 percent from the survey for the unqualified claims, and only 16 percent of those viewing a qualified green claim made an inference that the product had no environmental impacts.

Accordingly, the proposed revisions to the Green Guides are intended to provide greater clarity, along with examples of fact-specific situations, so that advertisements will not include blanket unqualified statements that a product is green or ecofriendly but, rather, will include additional specific information so that consumers will not make inferences about the alleged green attributes of a product that are not true.

In addition to modifying existing guidance concerning general environmental benefit claims (“green” or “eco-friendly”), degradable claims, compostable claims, ozone-safe claims, recyclable claims, “free-of” or “non-toxic” claims, and certifications and seals of approvals, the FTC also proposed new guidance for claims not addressed by the current Guides, such as claims of products made with renewable materials or renewable energy, and carbon offsets.

Key Proposed Changes

Overall, the proposed changes require marketers to provide more specificity and substantiation of environmental claims. For instance, based on the consumer perception study, the FTC proposes to make the Green Guides clearer that marketers must use clear and prominent qualifying language to convey to consumers that a general environmental claim refers only to specific and limited environmental benefits. According to the FTC, unqualified general environmental marketing claims are “very difficult, if not impossible, to substantiate,” and “few products, if any, have all of the attributes consumers appear to perceive” from those claims. The proposed Guide more explicitly cautions against the use of unqualified general environmental claims.[12]

The FTC provides the following example:

A marketer states that its packaging is now “Greener than our previous packaging.” The packaging weighs 15 percent less than previous packaging, but it is not recyclable nor has it been improved in any other material respect. The claim is deceptive because reasonable consumers likely would interpret “Greener” in this context to mean that other significant environmental aspects of the packaging also are improved over previous packaging. A claim stating “Greener than our previous packaging” accompanied by clear and prominent language such as, “We’ve reduced the weight of our packaging by 15 percent,” would not be deceptive, provided that the advertisement’s context does not imply other deceptive claims.[13]

The proposal also includes a new section regarding claims that a product, package or service has been endorsed or certified by an independent, third-party organization, including a caution not to use unqualified certifications or seals of approval that do not specify the basis for the certification. FTC provides specific examples of situations that marketers should clearly identify: advertisements that include a seal developed by the marketer and not by a third party; advertisements that include a seal from a third-party trade association to which the marketer pays membership dues; a certification that is by an industry trade association; and an association’s seal that refers to a company’s membership rather than that the association has evaluated and certified a particular product. Moreover, the FTC instructs manufacturers to limit any environmental superiority representation to the particular product attribute or attributes the seal can substantiate.

The FTC also is clarifying a number of environmental claims, such as for a product that is recyclable, compostable, degradable, or “free from” a particular substance. For example, a product described as “degradable” should decompose in no more than one year in the environment where it is customarily disposed. As such, a marketer should not make unqualified assertions of biodegradability for products that are destined for landfills, incinerators or recycling facilities.

With regard to claims about the use of “renewable materials” and “renewable energy,” marketers should specify the type of renewable energy (i.e., solar or wind); should state a product is made with renewable energy only if virtually all processes to make the product are powered by renewable energy or, alternatively, powered by fossil fuel-produced energy that is offset by Renewable Energy Certificates (RECs); and, to prevent double-counting of renewable energy, should not claim that they use renewable energy if they generate renewable energy but sell the RECs.

The Green Guides also provide new advice regarding carbon or other greenhouse gas offset claims, reflecting the general concern (not limited to the FTC Green Guides) about the verifiability and “additionality” of offsets. For example, marketers should have competent and reliable scientific and accounting information to support offset claims, should disclose if greenhouse gas reductions will not take place within two years, and should take credit only for activities that are not already required by applicable law, although the FTC declined to select a single test for additionality. FTC provides the following example:

A company places solar panels on its store roof to generate power and advertises that its store is “100 percent solar-powered.” The company, however, sells renewable energy certificates based on the renewable attributes of all the power it generates. Even if the company uses the electricity generated by the solar panels, it has, by selling renewable energy certificates, transferred the right to characterize that electricity as renewable. The company’s claim is therefore deceptive. It also would be deceptive for this company to advertise that it “hosts a renewable power facility” because reasonable consumers likely would interpret this claim to mean that the company uses renewable energy.[14]

Finally, the FTC proposes revisions that emphasize that the Green Guides apply to business-to-business transactions as well as to consumer marketing, and also proposes a reorganization of the Green Guides, with information the FTC regarded as unnecessary and redundant deleted.

The FTC declined to provide guidelines on life cycle assessments and “organic” claims for non-agricultural products. It also declined to add guidance on “natural,” citing a lack of consumer perception data and the shifting meaning of the term based on its context.[15] The FTC also does not provide guidance on the use of “sustainable,” citing First Amendment concerns, since it may be used to describe a company’s environmental philosophy, rather than making a marketing claim about a product.

The new guidelines, even as a proposal, should assist companies in how to properly advertise and market their “green” products, ensuring national consistency that will benefit consumers while also protecting those companies that want to ensure their competitors are marketing products using true and substantiated claims rather than competitively advantaged false claims.

is a partner and Ethan I. Strell an associate in the environmental practice group at Carter Ledyard & Milburn. Judith Wallace and Bryce Bernards, associates of the firm, assisted in the research for this column.


This article is reprinted with permission from the October 28, 2010 issue of the New York Law Journal  © 2010 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.  

Endnotes


[1] Source Watch, “Greenwashing,” http://www.sourcewatch.org/index.php?title=Greenwashing. Accessed Oct. 19, 2010; Greenwashing Index, “What Is Greenwashing? It’s Whitewashing, but With a Green Brush,” http://www.greenwashingindex.com/what.php. Accessed Oct. 19, 2010. Organizations that post examples of deceptive advertising on their Web sites include Earth Day Resources for Living Green, Greenpeace, and Enviromedia Social Marketing (in collaboration with the University of Oregon).

[2] FTC, “Guides for the Use of Environmental Marketing Claims,” 75 Fed. Reg. 63522 (Proposed Oct. 15, 2010).

[3] Id. at 63553.

[4] Id. at 63600.

[5] See 75 Fed. Reg. at 63556 (citing Dyna-E Int’l Inc., et al., Docket No. 9336 (F.T.C., Dec. 15, 2009); Kmart Corp., Docket No. C-4263 (F.T.C., July 15, 2009); Tender Corp., Docket No. C-4261 (F.T.C., July 13, 2009)). See also 75 Fed. Reg. at 63586.

[6] Dyna-E Int’l Inc., at 1-2.

[7] See 75 Fed. Reg. at 63556 (citing CSE Inc. et al., Docket No. C-4276 (F.T.C., Dec. 15, 2009); Pure Bamboo, LLC, et al., Docket No. C-4274 (F.T.C., Dec. 15, 2009); Sami Designs, LLC, et al., Docket No. C-4275 (F.T.C., Dec. 15, 2009); The M Group Inc., et al., Docket No. 9340 (F.T.C. April 2, 2010)).

[8] Pure Bamboo, LLC, at 2-7.

[9] See, e.g., 75 Fed. Reg. at 63556 (citing United States v. Enviromate, LLC, et al., No. 09-CV-00386 (N.D. Ala. March 2, 2009); United States v. Meyer Enterprises, LLC, et al., No. 09-CV-1074 (C.D. Ill. March 2, 2009)).

[10] 75 Fed. Reg. at 63563.

[11] Id. at 63583.

[12] Id.

[13] Id. at 63601.

[14] Id. at 63607.

[15] Id. at 63586.


Christine A. Fazio

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