Consumer Advertising Law Blog

FTC Commissioner Talks About Green Enforcement

On June 18, Commissioner Rosch gave a speech on “Responsible Green Marketing” to American Conference Institute’s Regulatory Summit for Advertisers and Marketers.  His remarks covered a range of green marketing topics, but we focus on two here:  the FTC’s current enforcement activities and its revisions to the Guides for the Use of Environmental Marketing Claims or “Green Guides.”

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.”

The Commissioners remarks also highlighted some major themes that have emerged from the FTC’s on-going Green Guides review:

• Life Cycle Analysis (the examination of a product’s environmental impact from manufacturer through distribution and use to its ultimate disposal).  Commissioner Rosch noted that the primary challenge for manufacturers is how to truthfully and accurately describe their practices.  He singled out “hidden tradeoffs” as an issue.  That is, manufacturers must be careful that an environmental improvement in one area does not result in worse environmental performance in another area.
• Biodegradability.  The current Green Guides require break-down to occur in a reasonably short period of time under customary disposal conditions.  Commissioner Rosch noted two issues with the use of these terms.  First, how long do consumers think a reasonably short period is?  Second, customary disposal for consumers, i.e., landfills, are generally not conducive to biodegrading.
• Recyclability.  Commissioner Rosch cautioned manufacturers that recyclability claims must be qualified to account for any limitations on the availability of recycling.
• Sustainable and Renewable.  Commissioner Rosch commented that the FTC will need to work out treatment of these claims in the Green Guides revisions.  Many commenters have taken the position that such claims are too vague and general and should be prohibited unless related to a specific attribute.  Others have commented that such terms have accepted definitions in certain industries and members of those industries should be able to use them.

EU Getting Greener

The European Commission published a preliminary action plan on sustainability last month which is just one step the EU is taking to reach it's goal of reducing green house gas emissions 20% by 2020. The plan focuses on "improving the overall environmental performance of products throughout their life-cycle, promoting and stimulating the demand of better products and production technologies, and enabling consumers to make better choices."

One component of the new plan will extend the previously enacted Energy Efficiency Labeling Directive to cover a wider range of products. The current labeling scheme applies only to energy-using products such as refrigerators. Examples of products that may be included in the new labeling scheme include clothing, cleaning products, furniture, and others. The new labels would rank the products on their environmental performance.

Additionally, the new labeling program would obligate public entities to purchase products above a selected level in the range of labeling categories. This is significant because, according to the report, European public entities spend the equivalent of 16% of the EU GDP on goods and services.

This report is just an early draft and is at a fairly high-level. The exact details of the new labeling directive are unknown at this point and implementation of the program could be a ways down the road. Nevertheless, if and when this becomes effective, it will surely be costly for manufacturers and retailers doing business in the EU and could potentially become a model for regulation or voluntary programs here at home.

Bret Finkelstein

Watching What You Click

Next Wednesday, June 18th, the U.S. Senate Commerce Committee will have a hearing on "Privacy Implications of Online Advertising." The Committee will be discussing online behavioral advertising and the related privacy implications. According to the FTC, "[b]ehavioral advertising is the tracking of a consumer's activities online - including the searches the consumer has conducted, the Web pages visited, and the content viewed - in order to deliver advertising targeted to the individual consumer's interests." Internet users are often unaware that their online activities are being monitored in such a fashion.

Companies that engage in behavioral advertising tout it as a benefit. Consumers benefit because the ads they receive are potentially much more useful to them. Advertisers benefit because their ads will reach a more receptive audience at a lower cost.

While the Senate is just now joining the debate over online advertising, other regulatory and legislative bodies have already entered the fray. The FTC staff in December of last year issued a set of proposed principles for self-regulation. The proposed principles include:

• companies collecting data must have a prominent statement on their website to put users on notice;
• companies collecting data should take reasonable precautions to secure the data and should dispose of it when no longer useful;
• if a company decides to use the data in a different manner than originally announced they must receive affirmative express consent from the user; and
• companies should only collect sensitive data (such as medical records) if they receive affirmative express consent from the user.

Two states have also taken steps to regulate online behavioral advertising. New York has legislation pending that would prohibit companies from collecting personally identifying information and would require the disclosure of practices and uses of collecting any data. The bill would also allow consumers to opt-out of any data collecting activity, whether personally identifying or not.

Connecticut also has legislation pending which focuses generally on disclosure. The bill requires "online third-party advertising networks" to "post notices about their data collection" and how they use it. The Connecticut bill has a few other provisions but by and large does not go as far as its New York counterpart.

As in many other areas, federal action here may prevent a situation where companies find themselves forced to comply with sometimes conflicting state regulation.

Bret Finkelstein

How To Get Your Company Into "Guaranteed" Legal Trouble

LifeLock, Inc., a Tempe, Arizona based company that provides identity theft protection, needs a little protection of its own these days - legal protection that is.  LifeLock is the defendant in several lawsuits alleging that its service did not work as promised.  LifeLock has various advertisements with its CEO Todd Davis telling the world his social security number.  The ads further state" "So why publish my social security number?  Because I'm absolutely confident LifeLock is protecting my good name and personal information, just like it will yours.  And we guarantee our service up to $1 million dollars."

One of the lawsuits, Falke v. LifeLock, Inc., which is pending in the U.S. District Court for the District of Maryland, (it was removed from state court) alleges that LifeLock and Davis knew their service did not work as promised because Davis' own personal information had been compromised on more than 20 occasions, one of which Davis publicly acknowledged.

The plaintiffs also claim that LifeLock's $1 million guarantee is misleading because the actual level of protection is significantly limited.  Allegedly, the guarantee is only enforceable if there is a defect in LifeLock's service.  For example, if a customer's identity is stolen but the LifeLock service operated as intended, the customer is out of luck.  The complaint further alleges the guarantee will not cover actual financial losses in the event that a customer's identity is stolen.  Instead, the guarantee only reimburses customers for direct expenses and to pay third party professionals to resolve their credit profiles and ratings.

We thought this would serve as a good opportunity to remind you of the FTC's Guides for the Advertising of Warranties and Guarantees.  Among other things, the Guides require:

• Any advertisement of a guarantee or warranty should disclose clearly and prominently where a prospective purchaser can obtain the complete details of coverage;

• Representations such as "Satisfaction guaranteed," "money back guarantee," or other similar representations should disclose clearly and prominently any material limitations or conditions that apply and should only be made if full refunds are available at the purchaser's request;

• An advertisement that uses "lifetime guarantee" or a similar representation must disclose clearly and prominently the life to which the representation refers;

• Finally, a warranty or guarantee should only be advertised if the seller or manufacturer will fully perform such obligations.

Bret Finkelstein

FTC Announces Workshop Examining Green Building and Textile Claims

On Tuesday, the FTC announced that it will hold a one-day workshop on July 15 to examine green building and textile claims.  As in other areas of the economy, claims about the environmental attributes and benefits of buildings, building materials, and textiles have increased significantly.  Building materials suppliers are making green claims on a wide range of materials; for example:  non-toxic, green, or renewable flooring; lumber from certified and managed forests or that has been recycled or reclaimed; and natural or organic paints.  Homes and other buildings are also being marketed as green or eco-friendly.  Green textile claims include organic or environmentally friendly cotton and wool and synthetic fibers such as nylon and polyester made from recycled materials.  Certification programs verifying the environmental attributes and benefits of such products have also proliferated.

The workshop will explore consumer perceptions of such building and textile claims, how such claims are, or can be, substantiated, and whether the FTC should update its Guides for the Use of Environmental Marketing Claims, or “Green Guides,” to address green building and textile claims.  The workshop will be held at the FTC’s Conference Center at 601 New Jersey Ave., N.W. in Washington starting at 9:00 a.m.  The workshop’s webpage provides instructions for pre-registration.  You can also access a live webcast of the workshop from this webpage on the day of the event.  The FTC will accept comments on the workshop through July 1, and any comments submitted should be available through the workshop’s webpage.

The workshop is the third in a series conducted as part of the FTC’s review of its Green Guides.  In November 2007, the FTC announced its review of the Green Guides and its intention to hold public workshops in connection with this review.  The first workshop, on carbon offsets and renewable energy certificates, was held in January 2008.  You can find a write-up of this workshop here.  The second workshop, on green packaging claims, was held on April 30.  You can find a write-up of this workshop here.