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.