Long Awaited "Green Guides" Revisions Published

On October 6th, the Federal Trade Commission (FTC) published the final revisions to the 1988 "Green Guides" which provide guidance to companies when making environmental claims regarding their products.  The FTC is seeking public comments on the proposed changes until December 10, 2010, after which it will decide which changes to make final.

The FTC can take legal action against unfair or deceptive marketing practices under Section 5 of the FTC Act.  The 1988 "Green Guides" provide standards for asserting environmental benefits or advantages of products.  However, the 1988 guides were outdated.  Since their release in 1988, the number of companies asserting environmental benefits relative to their products has grown exponentially as well as the type of claims being asserted.

The proposed revisions to the "green guides" (copy here) provide much more detail than the 1988 version.  For the first time issues such as- renewable energy claims, carbon offsets, and use of renewable materials are addressed in the proposed revisions.

Past court decisions highlight the importance of the guides.  Judges have been willing to abide by the guidance set forth in the guides in determining whether a claim constitutes an unfair or deceptive marketing practice. 

Here are some of the key proposed revisions:

  • Stay away from general environmental benefit claims.  These general claims such as "green" or "eco-friendly" are almost impossible to substantiate.  The requirement to justify any green claims is a central requirement of the guides.
  • Third Party Certifications- Seals or endorsement of environmental benefits will receive heightened scrutiny.  Any material connection to the certifier must be disclosed.  Also, a 3rd party certification doesn't eliminate the requirement to substantiate all claims.
  • Renewable Energy-  If a company wants to say they utilize renewable energy in the manufacturing of their product, they better be prepared to provide more detail.  For example, if the company does not have its own wind or solar generation sources and is only purchasing RECs, it must disclose this as part of its claim.  If you generate your own renewable energy, but sell the RECs you cannot claim you use renewable energy.
  • Climate Change-  The concept of "additionality" has entered into marketing claims regarding carbon offsets.  A company cannot claim it is offsetting its carbon emissions if those reductions were required by law.
  • Recycling- Proposed revisions will create various tiers for claiming your product is recyclable.  If the product is only partially recyclable due to lack of access to recycling, then any recycling claim must carry with it certain qualifications.

This is just a brief highlight of the many topics covered in the revised guidelines.  Once the revisions are finalized, the guides will likely cause wholesale revisions to marketing campaigns for products.  While companies will still have a strong incentive to market the green attributes of their products, those campaigns will have lawyers reviewing the labeling, support for claims and mandatory qualifications required under the guides.

 

"Greenwashing Rampant" and FTC Is Taking Notice

Green marketing claims are running rampant, according to the April 2008 survey by Terrachoice a consulting firm that runs the Canadian government’s eco-labeling program.  Labels on products frequently claim “recycled content”, “biodegradable”, and “safe for the environment.”

The recent survey found that the number of big box store products making green claims grew 79 percent since its last report, in 2007.  In addition, the amount of advertising containing green claims has risen shapely.   Terrachoice reviewed 18,000 ads in recent issues of Time, Fortune, National Geographic, Sports Illustrated and Vanity Fair, TerraChoice found that more than 10 percent of all ads in 2008 made “green” claim, up from 3 percent in 2006. 

Businesses making these claims better pay even more attention to FTC requirements, known as the "Green Guides".  The FTC has recently began to take enforcement actions against businesses who can't substantiate their green claims. I was recently contacted by a business owner who faced signing a consent order with the FTC to resolve allegations of "greenwashing." 

The FTC had taken a long hiatus from enforcement of the Green Guides.  As discussed on the Consumer Advertising Law Blog, one of the FTC Commissioners only as recently as June 2008 indicated the FTC had not brought any cases under the Green Guides since 2000. 

Commissioner Rosch gave two reasons for the fact that the FTC has not brought any cases under the Green Guides since 2000. First, industry has been abiding by the Guides. Second, private enforcement under the Lanham Act and self-regulation have developed into effective alternative enforcement mechanisms over the past 30 years. However, the eight-year enforcement hiatus may be coming to a close. In his speech, Commissioner Rosch noted that FTC “staff is currently investigating a variety of environmental product claims.”

Well, based upon the recent activity it appears the hiatus is over and FTC is actively enforcing the Green Guides.  This enforcement is taking place even though the FTC has yet to update the Green Guides after an extensive public involvement process.  The FTC enforces Section 5 of the FTC Act, which generally prohibits "unfair or deceptive acts or practices," including advertising that is false or misleading. 

Businesses should be careful to read the Green Guides and seek advice before making any green claims on their products.  Otherwise, they may face signing a FTC consent order that carries with it severe restrictions on the ability to market green attributes of its products. A few things to keep in mind:

  • FTC has enforcement authority to issue a cease and desist order for up to 20 years. 
  • The prohibition against unsupported or deceptive claims can extend to officers, subsidiaries and other divisions of the company.
  • Cease and Desist authority includes what is called "fencing in relief."  The relief is designed to prevent similar conduct.  As a result the prohibit against additional "deceptive" claims may cover all the company's products.  The relief may also include more draconian terms that require notification if senior management responsible for marketing departs for a new company.  In other words, the terms of the consent order can follow significant decisions makers to other jobs.

While penalties will typically not become an issues until a cease and desist order is violated, the order itself will still carry very onerous terms and conditions.  For these reasons, company's should really proactively review any green claims and ensure they meeting FTC requirements.

"Greenwashing"-Business Eco-Friendly Claims Get Increased Legal Scrutiny

Businesses are increasingly trying to market their products as “green.” Common eco-friendly labels or claims can be found on many products, including labels like “recycled content”, “biodegradable”, and “safe for the environment.” Before making any such claims, businesses should be able to substantiate their claims or risk legal action.

How frequent are false or misleading eco-friendly claims being made on products? A 2007 survey performed by Terrachoice, an environmental marketing agency, gained national attention.  The survey found that of 1,018 common consumer products ranging from toothpaste to printers, 99% were guilty of stretching the eco-truth regarding their products. This practice is commonly referred to as “greenwashing.”

Here are just two examples of what could be considered misleading:

Example 1: A box of aluminum foil is labeled with the claim “recyclable,” without further elaboration. Unless the business establishes whether the claim refers to the foil or the box, the claim is deceptive if any part of the box or the foil cannot be recycled.

Example 2: A product is advertised as “environmentally preferable” which is likely to convey to consumers that this product is environmentally superior to other products. If the manufacturer cannot substantiate this broad claim, the claim would be deceptive.

The Federal Trade Commission can take legal action against unfair or deceptive marketing practices under Section 5 of the FTC Act. To assist businesses in determining how to stay in compliance with the law, the FTC issued the Guide for the Use of Environmental Marketing Claims, commonly referred to as the “Green Guides.” The “Green Guides” provide the following general guidance on substantiating environmental claims:

Any party making an express or implied claim that presents an objective assertion about the environmental attribute of a product, package or service must… rely upon a reasonable basis substantiating the claim…such substantiation will often require competent and reliable scientific evidence, defined as tests, analyses, research, studies or other evidence…

Because of the proliferation of green claims in the marketplace, last year the FTC has decided to perform a formal review of the "Green Guides" which were last updated in 1998.  A final version of the update guide is expected in 2009.  

As an alternative to filing a complaint with the FTC, businesses can take action against their competitors for unsubstantiated or misleading claims by filing a complaint with the National Advertising Division of the Council of Better Business Bureaus, Inc. (NAD).  Between 1988 and 2008, NAD issued nearly 30 decisions pertaining to "green" marketing claims.  While compliance with NAD decision are voluntary, they often lead to the claims being modified or discontinued to prevent a referral to the FTC for more formal action. 

As a recent example, this month GP Plastics Corp. accepted a NAD determination that the company modify or discontinue certain advertising claims related to its plastic bags. Advertising by GP Plastics was challenged by a competing provider of plastic bags for the newspaper industry.
NAD did not agree that the claims ‘100 percent oxo-biodegradable’ and ‘completely recyclable’ were substantiated.

One way manufacturers and suppliers can reduce their risk of being the target of a “greenwashing” claim is by obtaining third party verification that their claims are valid. Non-profit organizations and government programs such as EcoLogo, Green-e and U.S. EPA’s Energy Star program offer independent ecolabelling programs that provide some protection.

EcoLogo describes their process as follows:

Provides a Type I eco-label, as defined by the International Organization for Standardization (ISO). This means that the Program compares products/services with others in the same category, develops rigorous and scientifically relevant criteria that reflect the entire lifecycle of the product, and awards the EcoLogo to those that are verified by an independent third party as complying with the criteria.

Green-e describes is more of niche toward carbon offsets and renewable energy:

Green-e is the nation's leading independent consumer protection program for the sale of renewable energy and greenhouse gas reductions in the retail market. Green-e offers certification and verification of renewable energy and greenhouse gas mitigation products.

(Photo: davidgljay/everystockphoto.com)