Consumer Advertising Law Blog

California Greenin'

The California Senate earlier this week overwhelmingly passed legislation that would make it unlawful for anyone to advertise or promote the sale of greenhouse gas credits or emission reductions to the public unless the credits or reductions meet one or more of the following criteria:

(1) it has been approved by the State Air Resources Board;

(2) it complies with protocols adopted by the California Climate Action Registry;

(3) that it is:

     (a) quantifiable and measurable;

     (b) it is surplus and in addition to any greenhouse gas emission that would otherwise occur;

     (c) it is verifiable by a state or local California agency; 

     (d) it does not result in an increase in the emission of criteria pollutants or toxic air contaminants, and it does not result in adverse environmental impacts, including impacts on species, habitat, ecosystems, land use, biodiversity, air quality, water  supply and quality, access to food and production of food.

Under the law any individual would be entitled to bring a civil cause of action for a violation of the statute.

The proposed bill raises at least two interesting questions.  First, is this the beginning of the balkanization of offset and emissions reduction advertising claims regulation?  If other states follow suit but adopt slightly different regulations national advertisers may find themselves trying to comply with multiple, inconsistent standards.  The proposed bill's focus on California specific criteria and protocols is not a good sign in that respect.  Similar circumstances led the FTC to adopt its initial green guides back in the early 1990s.  Second, what does it mean that a greenhouse gas credit has no "adverse environmental impacts?"  Is it net adverse impact or any adverse impact whatsoever.  If the former, how do you balance out, for example, a reduction in carbon emissions against the impact on an endangered species.  If the latter, how can you ever demonstrate that any activity has no adverse environmental impact.  For example, if you plant trees on what was formerly farmland as part of a carbon offset haven't you arguably impacted food production?  The FTC's caution in its green guides that claims of general environmental impact are likely to be misleading seems appropriate here. 

Contactless Payment

On July 24 the FTC will host a town hall meeting to focus on new high tech ways to buy stuff, like using a smart card or key fob to pay for gas at the pump or paying for groceries with your mobile phone.  Keeping abreast of the FTC's thinking in this area will be of interest to anyone who sells goods or services directly to consumers and may be considering alternate payment methods as a consumer convenience.  The FTC hosted a forum in 2006 and issued a report in April of 2008 on "Protecting Consumers in the Next Tech-ade," which examined many technological developments that will affect consumer's buying experiences.  Contactless payment was one the FTC staff decided was worthy of its own in-depth discussion.  The town hall plans to focus on an overview of contactless payment devices, the need to educate consumers on the risks of using such payment methods, security and privacy threats from such devices and proposed solutions, and what new technology is emerging for such payments (personally we're still waiting for the one that doesn't actually debit money from your checking account.)  If you want to submit comments, participate as a panelist or recommend other topics for discussion, instructions can be found here.  If a trip to Washington in July (and you're not a big fan of heat and high humidity) is not in your plans, we will be attending the town hall and letting you know what everyone was talking about.  From the discussions to date and the current FTC enforcement priorities, we expect the meeting to focus on the risks to consumers' personal data being compromised and what best practices should be encouraged to prevent identity theft. 

FTC's Seven Deadly Consumer Protection Sins for 2009

The FTC testified before the Senate Appropriations Committee on Wednesday seeking to add 10 more staff members to work full time in support of its consumer protection mission.  The agency is also seeking additional tax dollars to support more green market research, consumer education and enforcement (so perhaps the agency has decided that the time is soon coming to move from talking about green claims to enforcing them.)  The FTC also wants to invest in high-tech tools to stop fraud, further examine food marketing and advertising to kids and to continue privacy and identity theft initiatives, including those related to mobile marketing.  The FTC stated that its top seven agenda items for Fiscal Year 2009 would be -- (1) financial practices -- primarily unfair practices in the mortgage lending industry and debt foreclosure resuce scams, (2) technology (spyware, spam and behavioral advertising), (3) Do Not Call issues and Telemarketing Sales Rule Enforcement, (4) privacy and data security (including regional workshops for businesses on how to manage data security), (5) green advertising (including more workshops addressing whether and how to revise the Green Guides), (6) food marketing to kids (including submitting a report to Congress this summer based on the information it received from civil investigative demands sent to 44 food and beverage companies, and (7) marketing to kids by the entertainment industry (continuing to monitor self-regulatory efforts by retailers not to sell Mature or R-rated games and movies to underage buyers.)  All of these items no doubt reasonated well with members of Congress,and by extension, voters, and largely reflect a continuation of the FTC's current focus. 

Psst . . . UK Cracks Down on Word of Mouth Marketing

As of May 26, marketers could face criminal charges in the UK if they use so-called word of mouth marketing without disclosing the origin of the message.  The Consumer Protection from Unfair Trading Regulations will make it unlawful for a trader to represent oneself as a consumer and to pay for the use of editorial content in media to promote a product without disclosing such payment.  Similar legislation went into effect in other parts of the EU at the beginning of 2008.

In the U.S., so far, despite several noteworthy incidents, including some anonymous postings critical of a competitor by the founder of Whole Foods, the FTC has not provided specific guidance in this area.  However, Section 5's prohibition on material omissions and the FTC's testimonial guidelines which require disclosure of material connections between consumer "endorsers" and the advertiser to be disclosed could well apply to many word of mouth marketing situations.  Similarly, when infomercials first surfaced years ago, the FTC brought several cases alleging a failure to disclose that the infomercials were not in fact third party news shows but rather paid advertisements. 

As in many areas the FTC may be giving self-regulation a chance.  The Word of Mouth Marketing Association "Ethics Code" include guidelines similar to the new UK legislation.  For example, there should be full disclosure of identity before communicating with bloggers or commenting on blogs; any compensation to bloggers should be disclosed; and if a company sends a blogger a free product to review, they should be asked to proactively to disclose the product's source.  (This blog abides by that last principle should anyone want to send us free products to write about . . . .)  As is usually the case, more disclosure is generally better than less.