Consumer Advertising Law Blog

Critics Claim There Is Something Fishy About Certified Sustainable Seafood

Environmentally-minded consumers rely more and more on certification labels and logos from organizations they trust to help them navigate the sea of environmental claims they encounter while grocery shopping. However, critics say that consumers may not be getting what they expect when they purchase seafood labeled with the Marine Stewardship Council’s Certified Sustainable Seafood label. 

According to the MSC’s Certification Requirements, certification and the accompanying label communicates that a particular fishery adheres to the MSC’s standards for sustainability, including the use of fishing practices that will not deplete fish populations. If a fishery wishes to become certified by the MSC, it must bring in an auditor to assess its fishery according to MSC standards. Fisheries with a score of 80 or better out of 100 are granted unconditional certification.  A fishery that scores between 60 and 80 may be granted conditional certification, contingent on the fishery making improvements to its fishing practices in order to reach a score of 80 within five years. The MSC’s Certified Sustainable Seafood label does not differentiate between conditionally and unconditionally certified fisheries.  Therefore, critics contend that consumers may be getting seafood that is less sustainable than they believe and spending more at the seafood counter without actually achieving any environmental benefit. 

This controversy is a reminder that marketers using or who want to use environmental seals or certification should pay close attention to the FTC’s revised Green Guides. The FTC declined to specifically address “sustainability” claims in the Green Guide because it found through consumer research that the term does not have a single meaning understood by a significant number of consumers. However, marketers are still responsible for substantiating any claims that would be reasonably understood by consumers, even those conveyed by the use of third-party certifications. Moreover, the Green Guides warn marketers to avoid making “unqualified general environmental benefit claims” and notes that such claims are “difficult to interpret and likely convey a wide range of meaning.”

Although the Green Guides don’t provide guidance for sustainability claims, they do provide guidance on the use of environmental seals and certifications like the Certified Sustainable Seafood label. According to the Green Guides, the use of a seal or certification likely conveys a general environmental benefit, unless it conveys the basis for the award. MSC requires marketers to print text along with the label that explains that the label means that the fishery meets MSC’s standards and provides MSC’s web address, an approach used in the Green Guides’ examples. The question in that and similar situations would be whether it adequately conveys the basis for the award and the limits of the potential environmental benefits. 

- Matthew Shultz and Amie Medley

The FTC Continues to Cut Down Allegedly Deceptive Bamboo Labeling

Four retailers have agreed to pay a combined $1.26 million to settle Federal Trade Commission charges that they violated the Textile Products Identification Act and the FTC’s Textile Rules by marketing and advertising rayon products as made of bamboo. According to the FTC, the companies’ textile product labels and advertisements − such as “bamboo,” “100% bamboo fiber,” or “55% Bamboo/45% Cotton” − constituted unfair or deceptive advertising because the products were made of rayon and not actual bamboo fibers woven into fabric. (Long-term readers of this blog will recall that similar FTC enforcement actions were a topic of interest in August 2009 and February 2010.)  The settlement does not constitute an admission of wrongdoing by any of the retailers. 

The recent trend of marketing products as made of bamboo is an attempt to appeal to the growing market of consumers that consider “green” the new black.  However, the process for manufacturing rayon is hardly eco-chic -- rayon is a man-made fiber that is created from the regenerated cellulose of many plants and trees, including bamboo.    

In August 2009, after settling similar claims with other companies, the FTC distributed a business alert, How to Avoid Bamboozling Your Customers, cautioning textile manufacturers and sellers that if a product is not made directly with bamboo fiber, it may not be advertised as “bamboo,” even if bamboo was used somewhere in the production process.  Rather, textile products composed in whole or in part of regenerated cellulose fiber should be labeled using the generic fiber name: rayon.  The FTC also said that if bamboo is used as the raw material, the product can be labeled “rayon made from bamboo,” which accurately indicates that bamboo was used to make the rayon without implying that the product has the environmentally-friendly qualities of pure bamboo fiber.   

Furthermore, in January 2010 the FTC sent a warning letter to more than 78 companies, including the four retailers in this case, informing them about potential civil liability for claiming that rayon products were made of bamboo, and urging them to correct any misleading claims.  The FTC alleges that despite the warning, these companies continued to improperly label and advertise rayon textiles as “bamboo” products.  The settlement amounts in these cases were determined in part by how long the companies allegedly continued to sell mislabeled products after receiving the January 2010 warning letter from the Commission. 

The settlement orders prohibit future advertising misrepresentations about “bamboo” textiles. 

And, consistent with current law, the settlement orders allow the companies to avoid future liability by obtaining a “good faith” guaranty from suppliers certifying that products are not mislabeled, falsely invoiced, or falsely advertised.  This “good faith” provision does not apply, however, if the company knew or should have known that products were mislabeled.  The orders make clear that if the Commission sends a warning letter about improper labeling (as it did in this case), that company is on notice and is thus precluded from relying on a supplier’s guaranty to avoid liability.  The orders also state − consistent with the FTC’s new Enforcement Policy Statement − that if the company cannot obtain a good faith guarantee from the supplier, as long as the company does not (i) embellish claims provided by the supplier, or (ii) sell the product as a private label product, the company will not be liable for a Textile Act violation unless it knew or should have known that the product was improperly labeled. 

It is clear that the FTC is intent on cutting down all misleading bamboo claims.  It is important that retailers of textile products assess their labeling and advertising claims to ensure that the fiber content and environmental benefits of such products are not being misrepresented, especially after receiving a warning letter from the Commission.

- Brittany McClure and Matthew Shultz 

2012 FTC Year in Review

As we begin 2013, we wanted to take a look back at our top FTC developments from 2012. Like last year, there are too many good ones to limit them to just the top 10. 

1. Green Guides

While green claims have been an enforcement priority for the FTC over the last few years, the FTC finally released its revised Green Guides, which we summarized here, here, and here.

2. Protecting Kids

The FTC adopted final amendments to the COPPA rule meant to keep the rule current with evolving technology and the way children use the Internet, including mobile devices and social networking websites.  The FTC also released an updated report on mobile apps for kids, finding that there has been little progress since the FTC first looked at this issue in 2011 and strongly encouraging providers to improve their practices… or else.

3. Mobile Apps and Disclosures

Sticking with the theme of mobile apps, the FTC also published guidance for mobile app developers addressing marketing and privacy issues. Earlier in the year, the Commission held a workshop on updating its 2000 Dot Com Disclosures guidance in light of changes in technology and the way consumers use and access the Internet.

4. Privacy Report

The FTC released its final report setting forth a privacy framework and best practices for companies that collect and use consumer data. 

5. Personnel Changes

Last year saw two new Commissioners -- Maureen Ohlhausen and Joshua Wright -- and the departure of David Vladeck, the Director of the Bureau of Consumer Protection. It remains to be seen whether Vladeck’s departure will have any significant, long-term effect on the FTC’s consumer protection enforcement actions and priorities.

6. Record Breaking

The FTC won its largest ever litigated monetary judgment when the US District Court for the Central District of California ordered a marketer of wealth creation products to pay $478 million. 

7. Reaching an Understanding

As required by the Dodd-Frank Act, the FTC and CFPB entered into a Memorandum of Understanding on coordinating enforcement actions and harmonizing rulemakings. 

8. The Public Interest

Courts took a closer look at whether FTC settlements in which the defendant denied liability or did not admit liability were in the public interest.  In two cases that looked at this issue, the courts ultimately approved the settlement as is. Commissioner Rosch led the charge in questioning such settlements, and with his departure it will be interesting to see if this issue persists.

9. It’s Never-ending

There will always be people who struggle with weight, and the FTC will always be keeping an eye on companies that market weight loss products. In 2012, the FTC reached settlements with Skechers, Medifast, and Ab Circle Pro over weight loss and other health claims. 

10.  What Else Was the FTC “Up To” in 2012?

Settling with replacement window companies over claims that their windows could save consumers “up to” an advertised amount on energy costs. These settlements, and subsequent FTC activity, appeared to represent a departure from the FTC’s prior guidance on maximum performance claims.  Time will tell whether the new standard is limited to the facts and circumstances of these cases, or will apply more generally.

11.  Bad Spy

In the creepiest development of 2012, the FTC settled with several rent-to-own companies over claims that they used software on computers they rented to spy on consumers, including capturing personal information and pictures of consumers’ homes.

12.  Sleep Tight

And in the ickiest development, the FTC brought charges against two makers of bed bug and lice treatments alleging that the companies lacked substantiation for their claims and falsely claimed government recommendation and affiliation.

The FTC was indeed very busy in 2012, identifying and addressing issues across industries and forms of advertising. We’re excited to see what’s in store for 2013. Stay tuned to the Consumer Advertising Law Blog for all the riveting details!

- Danielle Garten and Matthew Shultz

 

Update on the New Green Guides: General Environmental Benefits Claims, Certifications, and Seals of Approval (Part 3)

In this final post of our Green Guides series, we address the revised Green Guides’ sections on general environmental benefits claims and certifications and seals of approval.  As noted in our earlier posts about product afterlife  and content  claims, careful qualification and attention to all reasonable consumer interpretations of green claims are again key.

General Environmental Benefits Claims

Given the revised Green Guides’ emphasis on careful qualification of environmental claims to avoid misinterpretations by reasonable consumers, it is not surprising that the revised Green Guides warn advertisers not to make unqualified general environmental benefits claims (e.g., claims that a product is “environmentally friendly”).  According to the FTC, such claims “are difficult to interpret and likely convey a wide range of meanings,” making it “highly unlikely that marketers can substantiate all reasonable interpretations,” a concern that was also reflected in the old guidance.

To avoid deception, general environmental benefits claims should be qualified with clear, prominent language limiting the claim to a specific benefit or benefits.  For instance, if your product complies with the revised Green Guides’ sections on recycled content claims, say the product is “eco-friendly: made with recycled materials,” instead of just advertising your product as “eco-friendly.” 

This section of the revised Green Guides also notes that it may be deceptive to imply that any specific environmental benefit is significant when it is actually negligible, and further provides that improper general environmental benefits claims may be implied through the use of images combined with text.  In the revised Green Guides, the FTC has provided a new example of how this may occur, stating that it would be deceptive  to market a printer with the phrase “Buy our printer. Make a change,” if that text was accompanied by the image of the printer “in a bird’s nest balancing on a tree branch, surrounded by a dense forest.” According to the FTC, that image could imply that the product has no negative environmental impact, and thus would be deceptive unless that were the case.

Certifications and Seals of Approval

The revised Green Guides also include a new section on the use of certifications and seals of approval, previously addressed only by way of example. The revised Green Guides, largely in keeping with the 2010 proposed revisions, caution that use of an environmental seal or certification that does not communicate its basis to consumers likely conveys a general environmental benefit claim, which should be qualified with clear and prominent language explaining the specific environmentally-friendly quality on which the seal or certification is based.  For example, under the revised Green Guides, use of a seal merely stating “EarthSmart” would likely convey that a product has far reaching environmental benefits.  If such claims cannot be substantiated, the seal should be qualified by stating, for example, “EarthSmart certifies that this product meets EarthSmart standards for reduced chemical emissions during product usage.” 

The revised Green Guides also note that unqualified certifications and seals may deceptively imply that the certifier has applied independently developed standards in evaluating a product.  If this is not the case, the seal or certification should be qualified.  For instance, if a manufacturer self-certifies its product, the environmental certification should be accompanied by clear language to that effect.

Finally, the revised Green Guides warn that the use of a third-party certifier’s name, logo, or seal of approval may be an endorsement covered by the FTC’s Endorsement Guides, which advises that, among other things, advertisers must disclose any connections with the third-party endorser that could affect an endorsement’s weight or credibility.  Accordingly, advertisers should consider both sets of guidance when using a certification or seal of approval.

*    *    *

This is our final post in the Green Guides series, and we hope that you have found them helpful and informative.  As we have noted throughout this series, the FTC advises that advertisers should carefully craft green claims to avoid consumer misconceptions, and should also be mindful of how the overall context of product packaging or advertisements may influence consumers’ understanding of a green claim.

- Matthew Shultz and Joanna Persio

Update on the New Green Guides: Marketing Your Product’s Greenness (Part 2)

Earlier last week, we wrote about the FTC’s recently released revised Green Guides as they relate to claims about a product’s afterlife.  In this post, we discuss the FTC’s guidance on claims about a product’s green content or environmentally friendly production, including “free of” claims, non-toxic claims, and renewable claims.

Free Of Claims

“Free of” claims (i.e., claims that a product does not contain a particular harmful substance), were not included as a specific section of the old guidelines, which only addressed these claims in examples.  In the 2010 proposed revisions, the FTC recommended creating a section dedicated to free of claims.  Acting on this recommendation, the revised Green Guides note that truthful free of claims may actually be misleading in two instances.  First, a free of claim can be misleading if made regarding a substance that has not been associated with the product category -- for example, it would be misleading to state that a product was “formaldehyde free” if formaldehyde was never used for the product category.  Second, a truthful free of claim may also be misleading if the product contains other substances posing the same or similar environmental risks.  Advertisers should carefully craft claims to avoid these concerns.  

The revised Green Guides also now reflect a three-part analysis, not included in the 2010 proposed revisions, for determining when a free of claim may be acceptable even though the product contains some amount of a substance.  A free of claim may be made even if a product actually contains some amount of a substance if: (1) the product contains only a trace amount or background level of the substance; (2) the amount of the substance present does not actually cause harm that consumers typically associate with the substance; and (3) the substance was not intentionally added to the product.

Non-Toxic Claims

Like free of claims, the old guidelines only briefly touched upon non-toxic claims by way of example.  The revised Green Guides, reflecting the 2010 proposed revisions, contain a section dedicated to non-toxic claims.  Unqualified non-toxic claims should be made only if backed by competent and scientific evidence that a product, package, or service is non-toxic both to humans and the environment. 

Unlike free of claims, the revised Green Guides do not contain a specific exception for trace toxicity in a product.  But, in its Statement of Basis and Purpose accompanying the revised Green Guides, the Commission states that advertisers may still claim that a product is non-toxic if it contains a toxic substance at a level that is not harmful to humans or the environment.  

Renewable Energy Claims

Guidance on renewable energy claims is new to the revised Green Guides -- the old guidelines did not address the topic, which was first tackled in the 2010 proposed revisions.  In accordance with the proposed revisions, the revised Green Guides provide that advertisers should not make unqualified claims that a product is “made with renewable energy” unless all, or virtually all, of the significant manufacturing processes involved in making the product are powered by renewable energy.  If energy used to make the product derives from fossil fuels, unqualified renewable energy claims are generally not appropriate; however, in an addition to the proposed revisions, the revised Green Guides allow unqualified renewable energy claims if the manufacturer has purchased renewable energy certificates (“RECs”) to match its fossil fuel use.  (Way back in 2008, we wrote a client advisory on the FTC’s workshop on RECs and carbon offsets, which discusses issues to watch out for when purchasing and using RECs.)

The revised Green Guides also provide that advertisers should qualify a renewable energy claim if reasonable consumers would otherwise interpret the claim to imply that a product is made with recyclable or renewable materials when that is not the case.  Although the 2010 proposed revisions would have required advertisers to disclose the source of renewable energy in order to prevent this type of misconception, that disclosure is not mandated under the revised Green Guides.  Instead, disclosing the energy source is only one method advertisers might consider to clarify that their renewable energy claim is not also a recyclable or renewable materials claim.  But, the Commission recommends that should advertisers choose another method, they should first “test consumer perception of their claims in the context of their advertisements” to avoid scrutiny.

Renewable Materials Claims

Renewable materials claims are also new to the guidelines, and were first discussed in the 2010 proposed revisions.  Similar to renewable energy claims, the revised Green Guides explain that reasonable consumers may interpret unqualified renewable materials claims as meaning that a product is made with recycled content, or is recyclable or degradable.  Advertisers thus may need to qualify renewable materials claims to prevent such an interpretation if incorrect.  Under the revised Green Guides, this is best accomplished by identifying the renewable material used and explaining why it is renewable.  

Notably absent from both the proposed revisions and the revised Green Guides is a definition of renewable materials.  The FTC explained in its Statement of Basis and Purpose that because the results of its consumer perception study showed a “disconnect” between scientific and technical definitions of renewable materials and consumer understanding of the term, it could not define renewable materials with a technical or scientific definition in the Guides.  Instead, advertisers should keep in mind that they must be responsible for all reasonable consumer interpretations of their claims.  

As the FTC noted in its press release accompanying the revised Green Guides, the introduction of environmentally friendly products “is a win for consumers who want to purchase greener products and producers who want to sell them.”  But, according to the FTC this “win-win” only occurs if advertisers’ green claims are truthful and not misleading.  When crafting green claims in relatively new areas like renewable energy and materials, advertisers should be particularly sensitive to ensure that they account for the common consumer misconceptions discovered in the FTC’s consumer perception study.

- Matthew Shultz and Joanna Persio

 

 

 

Update on the New Green Guides: Marketing Your Product’s Green Afterlife (Part 1)

Last week, the FTC released the final version of the revised Guides for the Use of Environmental Marketing Claims (the revised “Green Guides”).  The FTC proposed revisions to the Green Guides, which we wrote about here, two years ago.  This is the first in a series of posts explaining the FTC’s updated guidance.  Up first, we tackle what the revised Green Guides have to say about green claims relating to a product’s afterlife -- specifically, claims that a product is recyclable, compostable, or degradable.

Recyclable

Consistent with the old guidelines, an item is recyclable under the revised Green Guides if it can be collected, separated, or otherwise recovered from the waste stream through an established recycling program for reuse or use in manufacturing or assembling another item; an item is not  recyclable merely because recycling facilities will accept it for processing, if such facilities ultimately discard the item. 

The revised Green Guides instruct marketers to carefully qualify recyclable claims if the entire product or package (excluding “minor incidental components”) is not recyclable, and provide additional guidance, not included in the 2010 proposed revisions, as to how recyclable claims should be qualified for multi-layer packaging.  More specific qualifiers are better.  For example, if packaging contains four layers, only one of which is recyclable, the revised Green Guides caution that it may be deceptive to claim that the packaging “includes some recyclable material.”  Instead, marketers would be safer specifying the portion of the package that is recyclable by stating: “25 percent of this package is recyclable.”

Additionally, marketers must qualify recyclable claims if the facilities needed to recycle the item are not available to a substantial majority of consumers or communities in which the item is sold.  Adopting the 2010 proposed revisions, the revised Green Guides define “substantial majority” as 60%, but move it from a footnote to the text to “clearly place[] marketers on notice of the threshold.”  The lower the level of access to appropriate facilities, the more a marketer should emphasize the limited availability in its recyclable claim.  Thus, if the appropriate facilities are only available to a small minority of consumers, it is likely insufficient to state, “This product may not be recyclable in your area.”  Instead, marketers should use a stronger qualifier -- “This product is recyclable only in the few communities with appropriate recycling facilities” would be better. 

Compostable

Claims that a product is compostable should be substantiated by competent and reliable scientific evidence that the entire product will break down into -- or become part of -- usable compost in a safe and timely manner. The revised Green Guides, adopting the 2010 proposed revisions, clarify that a “timely manner” means the item should break down within approximately the same time as the material with which its composted (i.e., natural plant material).

A holdover from the old guidelines, the revised Green Guides also caution that to avoid deception, manufacturers whose products are not suitable for home composting should be careful to disclose this information if they choose to make compostable claims.  Because of continuing variation nationwide in the availability of composting facilities, if the product is not suitable for home composting, marketers should qualify compostable claims if a municipal or institutional composting facility in which the product can be composted is not available to a substantial majority of consumers where the item is sold (e.g., “Appropriate facilities may not exist in your area”).  Although the FTC has not specifically defined “substantial majority” for compostable claims, the 60% threshold now defined with respect to recyclable claims is probably a good starting point.  

Degradable

Adopting the 2010 proposed revisions, the revised Green Guides provide that claims that a product is degradable, biodegradable, oxo-degradable, oxo-biodegradable, or photodegradable should be supported by competent and reliable scientific evidence that the entire item will completely break down into elements found in nature within a reasonably short time after customary disposal.  Oxo-degradable and oxo-biodegradable claims were not covered by the old guidelines.

To clarify the old guidance, the revised Green Guides, which follow the proposed revisions, now define this reasonably short time period as one year for solid waste products.  Because items customarily disposed of in landfills, incinerators, or recycling facilities will not decompose in a year, the revised Green Guides state that unqualified degradable claims for such items are deceptive.  

Although the revised Green Guides are non-binding, they do represent the FTC’s current views on green claims and are designed to help advertisers avoid violating Section 5 of the FTC Act.  Thus, advertisers should be wary that failure to follow the Guides may result in FTC enforcement action.  Adherence to the principle of careful and specific claims and qualifications, a theme consistent throughout the revised Green Guides, should make it easier for consumers to understand green claims, decreasing the likelihood of scrutiny. 

- Matthew Shultz and Joanna Persio

 

Green Millionaire to Pay Millions: FTC Settles With Marketer Over Negative Option Program

“FREE!” shouted advertisements for the Green Millionaire Book.  “This free offer won’t last,” so you’d better “GET YOUR FREE BOOK TODAY!” 

Reasonable people might conclude that the book in question was free.  Not so free, according to the FTC, which charged Green Millionaire, LLC and its co-defendants with failing to disclose adequately the true cost of the offer before enrolling consumers who accepted the offer in a negative option program.  In a negative option, sellers interpret consumers' silence or inaction as permission to continue charging them for goods or services. In this case, the FTC alleged that consumers who ordered the “free” book were enrolled in a paid subscription to Green Wealth e-Magazine unless they cancelled during the trial period. According to the FTC, this fact was not disclosed adequately, but was buried in fine print on the Green Millionaire website. In addition, the FTC alleged that the defendants induced consumers to order the book by falsely claiming that the book would show them “how to get free gas for life,” “how to put solar panels on your roof for free,” and “how to make your electricity meter go backwards paying you.”  As a result, the FTC filed a Complaint earlier this month against Green Millionaire and affiliated entities and individuals for violations of the Federal Trade Commission Act.   

Under the proposed consent order, prior to using a consumer’s billing information for a negative option purchase, sellers must acquire the express informed consent of the consumer. They must disclose all fees and costs, the amount and frequency of any subsequent charges, the material terms of any refund or cancellation policy, and how to cancel or obtain a refund. To complete a purchase, consumers must sign, check a box, or otherwise affirmatively accept the negative option feature, and all costs associated with the negative option must be disclosed immediately adjacent to the signature line or check box.  Following any transaction, prior to any renewal of six months or more, and with any shipment, the defendants must send written confirmation, including procedures for canceling the order or obtaining a refund. These procedures must be cost-free and “as simple to use and effective” as the mechanism for purchase. The order also imposes a judgment totaling nearly $6 million for consumer redress, all but $2 million of which is suspended unless a defendant is found to have misrepresented its financial condition.

In 2010, Congress passed and the President signed the Restore Online Shopper’s Confidence Act (ROSCA). Section 4 (15 U.S.C. § 8403) requires that a seller marketing a negative option over the Internet:

1. Clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information;
2. Obtain a consumer’s express informed consent before charging the consumer’s credit card, debit card, bank account, or other financial account; and
3. Provide simple mechanisms to stop recurring charges.

The FTC has enforcement authority under ROSCA, but we are not aware of any enforcement activity so far. The Green Millionaire case wasn’t brought under ROSCA either (presumably because the conduct at issue occurred before enactment), but it may provide guidance as to how the FTC will interpret and apply the Act in the future.

- Katherine Ross and Matt Shultz

Closing the Window on Deceptive Claims

Last week, the Federal Trade Commission (FTC) touted settlements with five replacement window sellers over energy efficiency and heating and cooling cost savings claims as “part of a broad FTC effort to ensure that environmental marketing is truthful and based on solid scientific evidence.”  This is further evidence that even though the revised Green Guides have yet to be finalized, green claims are still an FTC enforcement priority because of their popularity with advertisers.

The consent orders prohibit the sellers from making any claims that consumers will achieve a specific (or up to a specific) energy or costs savings unless the seller “possesses and relies upon competent and reliable scientific evidence to substantiate that all or almost all consumers are likely to receive the maximum represented savings or reduction.”  The analyses accompanying the proposed orders explain that the “all or substantially all” standard represents “fencing-in” relief--relief that reaches beyond the conduct complained of to related conduct, which may not violate the FTC Act, to help ensure compliance with the order.  The FTC typically tries to include fencing-in relief in its consent orders.

The “all or substantially all” standard in the consent orders applies to claims that consumers will achieve savings “up to” a specified amount.  Some of the analyses accompanying the proposed orders explain that in the context of the sellers’ advertisements, “up to” did not effectively qualify the claims about what energy or cost savings consumers should expect, and that the proposed orders should not be read as a statement as to how the FTC will interpret “up to” claims for other products or services.  In other words, the FTC apparently concluded that the sellers’ advertisements represented that consumers should expect to receive the maximum specified savings.  For example, one seller ran a newspaper ad claiming “Up to 40% FUEL SAVINGS” and another ad claiming “40% Fuel Savings.”  Other marketing materials also claimed a 40% savings without the “up to” qualification.

The proposed consent orders also highlight that specificity counts when making environmental claims. The Green Guides advise that specific environmental claims are easier to substantiate and are less likely to be deceptive.  The Green Guides also caution that the basis of a comparative environmental claim needs to be clear in order to avoid confusion about what comparison is being made.  As discussed in the analyses accompanying the proposed orders, a house’s energy efficiency depends on several factors, including its geographic location, its insulation, as well as the existing windows.  Because each consumer’s circumstances are different, it could be difficult to substantiate general claims about energy or cost savings.  Thus, the consent orders allow claims of specific energy or cost savings under specified circumstances if those circumstances are clearly and prominently disclosed in close proximity to the claim.

- Matthew Shultz

After Bump in the Road, FTC Puts the Brakes on Gas Mileage Device

Although the FTC has yet to finalize the revised Green Guides over a year since the comment period ended without final action, green claims, particularly ones that stretch credulity, are still an enforcement priority.  The FTC recently settled with the marketers of the “Hydro-Assist Fuel Cell.”  The settlement brings to a close an almost three-year long litigation in the District of New Jersey over the veracity of the marketers’ claims, including that the device would “Turn Any Vehicle into a Hybrid.”  In its January 2009 complaint and TRO brief, the FTC alleged that the marketers--Dennis Lee, Dutchman Enterprises LLC, and United Community Services of America Inc. (d/b/a UCSA Dealers Group LLC)--misrepresented that the device could improve fuel economy.  The marketers claimed that the device could improve fuel mileage by 50% to 261% through a combination of mixing hydrogen produced by electrolysis with the car’s gasoline and pre-treating the gasoline so that it burned more completely.  The FTC argued that the marketers’ claims violate the laws of thermodynamics--the device has to consume more energy than it can produce. 

The court granted the TRO and set a date for a preliminary injunction hearing.  After the first preliminary injunction hearing in February 2009, the magistrate judge issued a report recommending that the preliminary injunction be denied.  The magistrate judge concluded that the FTC failed to establish that there was probable cause that the FTC Act had been violated for the following reasons:  (1) the FTC didn’t rebut the marketers’ proffered scientific evidence with specificity; (2) while the FTC’s expert was an expert in physics, he was not an expert in automotive engines; (3) the FTC’s expert had not examined or tested the device; and (4) the FTC’s expert acknowledged that adding hydrogen to gasoline could increase fuel efficiency and that a similar device being developed at MIT had potential.

In a lucky twist of fate for the FTC, the recording of the first preliminary hearing was inaudible, preventing a true transcript of the proceeding, and the court ordered a new hearing. Taking advantage of the do-over, the FTC submitted supplemental expert reports and briefing to address the magistrate judge’s concerns while maintaining that the magistrate judge had improperly interpreted the FTC’s burden.  The parties eventually entered into a stipulated preliminary injunction and ultimately a settlement agreement.

The settlement includes a $2,738,950 monetary judgment, all but $230,356 of which will be suspended upon the transfer of the assets of certain bank accounts to the FTC for consumer redress. The settlement order prohibits the defendants from marketing any product purporting to generate energy, reduce energy consumption, or improve energy efficiency. Defendants are permitted to sell their remaining stock of “Hydro-Assist Fuel Cells” as long as they don’t represent that the device generates energy, reduces energy consumption, or improves fuel efficiency and they prohibit by contract their dealers from making such claims.  Defendants are obligated to monitor their dealer’s advertising and report violations to the FTC.  With respect to other products, defendants are prohibited from making any false or misleading representations and from making representations without competent and reliable evidence.  Defendants are further prohibited from using customer information obtained in connection with the marketing and sale of the “Hydro-Assist Fuel Cell” device. 

We suspect it unlikely that the FTC will pursue vigorously cases related to claims that are new subjects of the proposed revised Green Guides until this new guidance is final.  After that time, we expect to see a flurry of enforcement activity.  In the meantime, take a hard look at any green claims and make sure they are substantiated and properly explained so consumers understand the breadth and limits to the environmental benefits your product offers.  If it looks too good to be true, know the FTC may well come knocking. 

- Matt Shultz

Seller Beware: California says “Plastic is NOT Biodegradable!”

If you were thinking of tossing that supposedly “biodegradable” plastic bottle out your car window along with that banana peel -- first of all, shame on you! But second, California says labeling a plastic product as “biodegradable” is inherently misleading and is not allowed in that state.

On October 26, 2011, California Attorney General Kamala Harris sued two makers of plastic bottles and their plastic resin supplier for advertising the bottles as “biodegradable” in violation of California law.  She accused them of “greenwashing” their products, thereby misleading consumers into becoming litter bugs.

Kamala Harris doesn’t care if you say your plastic bottle is full of special microbes that will chew it up and spit it out. You still can’t call it “biodegradable.”  Furthermore, if these microbes contaminate the recycling stream, you also can’t call your bottle “recyclable.”

The three defendants -- two are based in other states -- now find themselves caught in a web of California and federal laws and regulations that require makers and sellers of plastic products to be very careful about the “green” claims they make.

California Law - For Now

In 2008, California enacted a law that prohibited labeling plastic bags and plastic food and beverage containers as “biodegradable,” “degradable,” or “decomposable” or otherwise implying that the item would break down in a landfill or other environment. 

The 2008 law also prohibited labeling plastic bags and plastic food and beverage containers as “compostable” or “marine degradable” unless the item met specific testing standards established by the American Society for Testing and Materials (ASTM).

Beginning in July of 2011, the 2008 law also required manufacturers of “compostable plastic bags” to comply with the Federal Trade Commission Guides for Use of Environmental Marketing Claims (affectionately known as the “Green Guides”). In particular, makers of plastic compost bin liners must make sure the bags have all sorts of visual cues for consumers, like dying the bag green, or labeling both sides as “COMPOSTABLE” in big letters next to a big green stripe.

After July 1, 2011, compostable plastic bag makers also were not allowed to market their bags as “recyclable” for fear that they will “contaminate” the recycling stream.

Violators could be on the hook for civil fines up to $2,000 per violation for repeat offenders, plus court costs if the state sues and wins. But the price tag for not playing by the rules could be even higher, since the law doesn’t rule out class action lawsuits under California’s Unfair Competition Law.  And potential plaintiffs’ lawyers get free discovery: California law contains provisions requiring companies to provide substantiation for certain “green” claims to any member of the public upon request (see here and here).

California Law - Coming Soon

Beginning on January 1, 2013, the California law will be expanded to include all “plastic products” (think packaging, straws, utensils, toys, desk accessories, and virtually any other plastic consumer product you can imagine).

The rules for labeling plastic products as “compostable” will change just a little. In addition to being allowed to use the terms “compostable” and “marine degradable” (so long as you meet the relevant ASTM standard), you can also start using the term “home compostable” if you meet the certification requirements of a Belgian group called Vinçotte.  (Oh-la-la.)

But if you’re hoping to start calling your plastic product “biodegradable” any time soon, don’t hold your breath. California is sticking to its view that calling a plastic product “biodegradable” is inherently misleading.

California vs. USA: Drumroll . . . California Wins!

California’s rules -- especially the ban on labeling plastic products “biodegradable” -- are tougher than the FTC’s Green Guides.  But you already guessed that, right?

-Trent Norris and Zack Allen

Make a Splash, Avoid the Trash: Novel Swimwear Line Highlights Standards for Making “Compostable” Claims

As the summer draws to a close, it may soon be time to retire that swimsuit of yours. Maybe return it to a suitcase in the closet or under the bed. Maybe it’s seen better days and it’s time for it to be thrown away altogether. But what if there were another option? What if you could just toss it in the compost bin? That is what fashion designer Linda Loudermilk has proposed for what is claimed to be the first ever compostable swimsuit. Debuting at a Miami fashion show this summer, the “sustainable swimwear” promises to decompose within 180 days once buried under ground. As such, we thought that this novel idea presented a good opportunity to remind readers about how the proposed revisions to the FTC’s Green Guides treat claims that a product is compostable.

As we have previously reported, the FTC is in the process of revising its Green Guides, and is currently reviewing the hundreds of comments submitted in response to the proposed revisions announced last year. Under the proposed revisions, it is important to keep in mind both how long it will take a product to break down and where that breakdown will occur. First, as to the timing, the FTC’s proposal would clarify that the use of a “compostable” claim is appropriate where the product or package will break down in approximately the same time as the materials with which it is composted. That means that your compostable product -- be it swimsuit or otherwise -- must break down at the same rate as the twigs, grass, or other clippings tossed into the compost pile. As to the location, the FTC notes that although some products can break down in a compost pile in the backyard, other products will only decompose in a municipal composting facility. For the latter category, the proposed revisions state that an unqualified claim that a product is compostable is permitted only where a substantial majority (informally interpreted to mean 60%) of consumers or communities have access to composting facilities. Because municipal composting facilities remain uncommon and most consumers likely do not have access to them, unqualified claims of this nature will probably be rare. We haven’t seen specifics about the swimsuit but it sounds like it’s designed to compost in backyard compost facilities. And if your laundry pile looks anything like ours, make sure you don’t accidentally leave the swimsuit there all winter and wonder in the Spring where all the dirt came from.

- Randy Shaheen and Allyson Himelfarb

Fiji’s Green Is Clean, Says California Court

In the last decade, green claims in advertising have exploded as marketers continually seek to appeal to eco-conscious consumers interested in protecting the environment. In making these claims, companies must be careful to avoid “greenwashing,” which is the deceptive use of marketing to promote a misleading environmentally friendly image for the company’s products.

Recently, a plaintiff in California brought a putative class action against Fiji Water Co. LLC (Fiji), alleging that the company engaged in greenwashing through the labeling and advertising of its bottled water. The front label of the product in question contains a green water drop symbol and the bottled water is advertised with the slogan, “Every Drop is Green.” The named plaintiff, Ayana Hill, alleged that Fiji misrepresented its bottled water as environmentally superior to that of its competitors, and, in doing so, violated California’s consumer protection statutes. In particular, Ms. Hill took issue with the green water drop symbol, which she alleged gave consumers the false impression that the product received an environmental seal of approval from an independent, third-party organization.

A California Court of Appeals did not agree and last week dismissed Ms. Hill’s claims with prejudice. The court held that the claims failed because they did not satisfy the reasonable consumer standard as expressed in the FTC’s Green Guides or as used in California’s consumer protection laws. In other words, “no reasonable consumer would be misled to think that the green drop on Fiji water represents a third party organization's endorsement or that Fiji water is environmentally superior to that of the competition.” In reaching this decision, the court noted that the green water drop symbol bears no name or recognized logo of any group, and no indication that it is anything but a symbol of Fiji water. Moreover, the symbol appears on the back of every bottle next to the website name, “fijigreen.com,” which would lead a reasonable consumer to believe that the symbol is by Fiji water, rather than a third-party organization.

The FTC’s Green Guides and the recent Proposed Revisions are an excellent resource for companies looking to reduce legal risk and steer clear of greenwashing. The Guides are designed to inform marketers how to avoid making environmental claims that are unfair or deceptive under Section 5 of the FTC Act and they contain numerous examples addressing different types of deception. As a matter of federal law, the guides themselves are only administrative interpretations and not enforceable regulations. However, a number of states, like California, have incorporated FTC’s green guides into state laws governing unlawful environmental marketing claims.

- James Speyer & Sean Hennessy

Green Marketers, Add Something Else to Your Ad Copy Checklist: Appropriate Disposal and Recycling

The Consumer Advertising Law Blog has posted several times about the perils of making an “environmentally friendly” claim and the broad scope that the FTC and other regulators may give to such unqualified claims. However, such claims can be interpreted even more broadly than we had imagined. EarthTronics Inc., a manufacturer of compact fluorescent bulbs, just settled a case with the Massachusetts Attorney General. The AG alleged that EarthTronics’ claim that it was a good steward of the environment was misleading because it had failed to comply with the state’s program for managing the disposal of waste mercury in light bulbs. What is particularly interesting about this case is that it is not certain that EarthTronics violation actually caused any harm to the environment. Rather, the company failed to certify its compliance with the law and to provide consumers with information regarding proper disposal and recycling methods for its bulbs.

Although the requirements here were part of a Massachusetts law, is it possible that environmentally friendly claims could soon be interpreted to mean not only that a company has not harmed the environment through its activities, but also has taken proactive steps to protect the environment.

- Randy Shaheen

Green Means Go on the Enforcement Highway -- FTC Not Waiting to Finalize Green Guides Revisions

Last week, the FTC announced that it has reached an agreement with a company called Tested Green that will require the company to stop selling allegedly worthless environmental certifications that do not test or otherwise investigate whether the recipient companies have environmentally friendly products. The consent focuses solely on the certifying company, going to the root of the matter, rather than on the companies who used the Tested Green seal in their marketing. 

The FTC’s action on this front likely will not come as a surprise to our readers. Last October, the FTC’s proposed revisions to its Green Guides created a new section for its guidance on certifications and seals of approval. (Proposed revisions summarized here.) FTC Staff has emphasized its growing concern with use of green seals to convey overreaching product environmental benefits. The proposed revisions emphasize:

• Third-party certifications and seals constitute endorsements covered by the Endorsement Guides. As such, marketers are required to disclose a “material connection,” or a “connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement.” (16 CFR 255.5)
• It is deceptive to misrepresent, directly or by implication, that a product, package, or service has been endorsed or certified by an independent, third-party organization.
• The use of a certification or seal by itself may imply a general environmental benefit claim. Marketers should accompany seals or certifications with clear and prominent language limiting the general environmental benefit claim to the particular attribute or attributes for which they have substantiation.
• It is the marketer’s responsibility to ensure that the certification adequately substantiates its claims. Simply possessing a third-party certification does not eliminate their obligation to ensure that they have substantiation for their claims, including all claims communicated by the certification. A marketer may rely on a third-party certification as all or part of its substantiation if the marketer ensures that the certification constitutes competent and reliable scientific evidence to support its claims.

The proposed revisions came at the end of a year that, according to the current TerraChoice report, saw the percentage of “green” home products giving the impression they are certified or endorsed by a third party where no such certification or endorsement actually exists rise to 32%, up from 26.8% in 2009. The increased use of “green” certifications has also had an impact in the trademark context.

So why Tested Green? The FTC complaint alleges that Tested Green advertised and sold “Tested Green” certifications to businesses via its website and e-mail solicitations from February 2009 through April 2010. More than 100 customers purchased Tested Green’s “Rapid” or “Pro” certification, at the price of $189.95 or $549.95, respectively. The FTC alleges that Tested Green falsely represented that it was “the nation’s leading certification program for businesses that produce green products or use green processes in the manufacture of goods and services,” stating that it “served over 65,000 certifications in the United States.” In fact, the FTC alleges, applicants for the Tested Green certification were not required to provide any information about their operations; once an applicant provided a name and address and paid the indicated amounts via credit card, he received the Tested Green certification and customizable advertising materials. Tested Green claimed that it was “endorsed by the National Green Business Association and the National Association of Government Contractors,” which were allegedly shell organizations created by an officer of Tested Green.

The FTC complaint charges three counts of violations of the FTC Act. First, “[b]y furnishing businesses with Tested Green Certifications, along with access to the HTML code for the Tested Green logo, and a ‘certification verification page’ that such businesses could edit and use to promote their Tested Green certified status, Respondents provided businesses with the means and instrumentalities for the commission of deceptive acts and practices.” Specifically, the Tested Green certification falsely represented that the products or services bearing such certification were independently and objectively evaluated based on their environmental attributes or benefits. Second, Tested Green made the false and misleading representation that it was endorsed by independent organizations. And third, Tested Green’s failure to disclose that it owns and operates those organizations was deceptive. Under the terms of the settlement agreement, Tested Green and its officer and parent company are permanently restrained and from making misrepresentations about its seal program.

“It’s really tough for most people to know whether green or environmental claims are credible,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “Legitimate seals and certifications are a useful tool that can help consumers choose where to place their trust and how to spend their money. The FTC will continue to weed out deceptive seals and certifications like the one in this case.” Whether the FTC will focus enforcement efforts on companies using third party seals, and if so, the level of due diligence the FTC will require to investigate the bona fides of the certifying body remain to be seen. The FTC is making good on its promise to continue to investigate green claims while it works to finalize the revised Green Guides.

- Elizabeth Frank and Amy Mudge

Commenters Assert Proposed Green Guides Restrict Information Consumers Want to Know

If you were thinking of commenting on the FTC’s proposed revision of the Green Guides, put the pen down. The comment period officially ended last month. The FTC received over 300 public comments. Many of the comments have focused on the FTC’s position that general claims such as “green” or “environmentally friendly” cannot be used unless qualified. The proposed revised Guides strengthen the FTC’s position based on consumer perception research that, unless qualified, such claims convey broad sweeping environmental benefits and cannot be used.

By way of example, the Washington Legal Foundation (WLF), a non-profit public interest law and policy center based in Washington, D.C. that advocates for free-market policies and the protection of free speech rights of the business community, filed formal comments. WLF believes that the FTC’s proposed ban on all unqualified general environmental claims is a disservice to consumers and an infringement of First Amendment rights protecting commercial speech. The FTC based its prohibition of unqualified claims on the results of a consumer perception study that asked participating consumers whether they thought a specific product advertised as “green” or “eco-friendly” possessed the following attributes: (1) recyclable; (2) made from recycled materials; (3) biodegradable; (4) compostable; (5) made with renewable energy; and (6) made with renewable materials. Because a significant number of consumers responded that they believed that a product advertised as “green” or “eco-friendly” possessed one or more of those attributes, the FTC concluded that many consumers are misled by unqualified general environmental claims. WLF contends that, in their experience, a majority of consumers are not readily familiar with the meaning of these terms and had the terms not been provided, only a small fraction would have volunteered those attributes on their own. Thus, WLF believes that the results of the FTC’s study are an unsound basis for a blanket prohibition against unqualified claims. To the contrary, WLF believes that most consumers assume that a product labeled “green” or “eco-friendly” has some unspecified environmental advantage. As long as a marketer can substantiate that advantage, it is the WLF’s view that the FTC cannot reasonably conclude that the claim is “deceptive.” In the few instances where the marketer cannot substantiate such a claim, the FTC should bring an enforcement action. A categorical ban on all such generalized claims, however, cannot pass First Amendment muster. In addition, a categorical ban as proposed by the Green Guides would deter manufacturers whose product truly contains an environmentally-friendly attribute from conveying such information due to the expense of adding disclaimers that qualify their environmental claim.

WLF also has concerns with the Green Guides’ restrictions on the use of the term “degradable.” Under the current language, marketers cannot use the term “degradable” even if it will degrade in the presence of water and oxygen if the product is likely to be disposed in environments (such as landfills) that lack those elements. In WLF’s opinion, not only does the rule cut against the commonly understood definition of “degradable” and “biodegradable”, but it also deprives consumers of information they want to have. For example, such a rule would deprive consumers of the ability to differentiate between non-degradable plastic bags and plastic bags that are degradable only when exposed to water and oxygen. Given the controversy in a number of communities over the use of plastic bags, it is unlikely that a consumer would not choose the latter if it had access to such information. WLF contends that saavy consumers already understand that “degradable” products are not likely to degrade in a landfill and that a more sensible solution to the risk that consumers could be deceived by claims that a product customarily disposed of in a landfill is degradable is to require a short disclaimer to accompany the degradable claim, such as “degradable under appropriate environmental conditions.”

Finally, WLF expressed concern over the FTC’s proposal to prohibit marketers from advertising a carbon offset if the activity that forms the basis of the offset is already required by law. Similar to their objections to the FTC’s proposed restrictions on the use of the word “degradable”, WLF believes that carbon offset advertising is information consumers want to know, regardless of whether the activity is being done voluntarily or is required by law. Thus, given the importance some consumers place on carbon offsets, a company’s motivation for participating in carbon offset programs should be irrelevant to whether a company can advertise this activity.

While it will take the FTC Staff some time to review the many comments and consider whether and how to incorporate them into the revised Green Guides, we would expect to see final guides sometime this spring or early summer, followed by heightened FTC enforcement in the environmental marketing area.

- Amy Mudge and Chester Choi

NAD Rebuffs Biodegradable Claims of Packing-Peanut Manufacturer

While the FTC reviews the many comments received relating to the proposed revised Green Guides, the National Advertising Division (NAD) continues to opine on the level of substantiation needed to make various green claims. The latest of which is its opinion (summary) on the use of the term “biodegradable” by FP International (FP), a company making a packing material called “Biodegradable Super 8 Loosefill”, commonly known as packing peanuts. The Super 8 product is made from recycled polystyrene and is a member of what FP calls its “Green Family” of environmentally-friendly products.

One of FP’s competitors, Starchtech, Inc., a company whose packing materials are made from starch, challenged green-friendly claims made by FP on its packaging as well as in various advertising materials. Promotional statements highlighted FP’s claim that the Biodegradable Super 8 Loosefill product was biodegradable and would “decompose completely within 9 to 60 months” [whether in a landfill (without air) or if littered elsewhere on the ground (with air)]. NAD also examined some of FP’s more-general claims, including those stating that its products were more environmentally-friendly than products made from starch.

TerraChoice’s Greenwashing Report

TerraChoice has just released its most recent greenwashing report entitled The Sins of Greenwashing: Home and Family Edition. While TerraChoice is not a government agency, its report takes cues from the Federal Trade Commission’s Green Guides, the most recent of which is currently up for public comment. The FTC’s Green Guides discuss current environmental issues and lists potential “green” claims.

The TerraChoice report starts off by indicating that there have been both positive and negative developments in the past year, highlighting the fact that the amount of greenwashing has gone down slightly and “the number of ‘greener’ products has gone up by 73%.” TerraChoice’s methodology includes visiting the same locations and looking at the same products, comparing “green” claims from year to year. The problem is that while there are more green products available, 95% of “greener” products commit one of TerraChoice’s seven “Sins of Greenwashing,” which are described on the tenth page of the report. Baby products, toys, household cleaners, construction materials, and consumer electronics were the product areas in which TerraChoice found the most greenwashing.

The report also found that “big box” stores such as Wal-Mart and Target provide the broadest set of green products with legitimate environmental certifications. According to TerraChoice, these big box stores offer a higher percentage of products with legitimate green certifications, have more products that are free of greenwashing, and have a larger overall selection of green products.

As part of its findings, the report offers companies tips on “good green marking”:

1. Use honest statements to describe the total life-cycle impacts your product will have on the environment,
2. Don’t overstate your impact, as customers will be happy that you’re taking steps in the right direction; and
3. Ask your customers to support your green journey.

By following these steps, companies will be able to take advantage of their green status while helping a good cause. In fact, the study found that legitimate green labeling occurred most often in mature, experienced product markets.

Throughout the report, TerraChoice also attempts to show consumers how they can use their purchasing power to create a greener world, focusing on progress that has been--and can be--made. The report recommends seeking out products with legitimate, certified labels such as EcoLog, Green Seal, and Nordic Swan. For a full list of legitimate environmental standards and certifications, see page 30 of the report.

While steering clear of greenwashing may be important for business and policy reasons it’s worth pointing out that not all greenwashing practices are necessarily unlawful. For example one of the greenwashing “sins” is the Sin of Lesser of Two Evils. According to TerraChoice this is when environmental qualifiers such as “organic” or “green” are placed on products in which the entire product category is of questionable environmental value. For example, labeling a hybrid SUV as “green” might be greenwashing. However, from the standpoint of Section 5 there is nothing unlawful about promoting a hybrid SUV as having less of an environmental impact than a conventional SUV. Such claims, assuming they are substantiated, allow consumers to make informed choices about lawful products.

- Randy Shaheen and Michael Thorpe

A Closer Look at Proposed Green Guides Revisions: Spotlight on Offsets

When the Green Guides were first issued in 1992, Time Magazine had not long ago run a cover story on the coming ice age, Tipper Gore was arguably the more famous of the Gores, cows were known for producing milk not methane, and folks still remembered that carbon was something you put between two sheets of paper when you were typing and wanted a second copy. In other words, nobody much worried about carbon emissions or offsetting them.

A lot has changed.

In its proposed revisions, the FTC takes a first, tentative step to providing guidance on carbon offset claims. However, there are still a number of areas where the agency (for now) has decided not to provide guidance. Even so, of course, the FTC retains the right to proceed under Section 5 if it finds a particular claim misleading.

So where has the agency provided direction?

First, you can't claim you're free of something if you contribute to the same or a similar environmental harm through other means. So, if you've offset your carbon but emit a not insignificant amount of other  greenhouse gases, and haven't offset those, then an unqualified carbon offset claim may be misleading.

Second, the greenhouse gases a company offsets are already in the atmosphere, but, depending on the type of offset, it may be years before those emissions are fully offset. For example, if you plant a tree today, it will "offset" carbon dioxide as it grows and matures . . . or it could get hit by lightening, struck by a car or gnawed down by a beaver and offset little if any carbon. Companies' practices have differed in how they deal with this issue. However, the proposed revision states that for an offset claim to be unqualified, the offset must fully occur in less than two years.  The Commission, however, is specifically seeking comments on this proposal.

The FTC partially answered the question of "additionality," i.e. if the tree would have been planted anyway, can you count it as an offset?  The agency stated that there were too many unresolved "technical and environmental policy issues" for it to propose any guidance with respect to additionality, but the agency did propose that, if the offset activity is required by law, it cannot be marketed as an "offset."

What is a legitimate offset? There has been scientific debate as to whether some activities truly offset carbon emissions (think iron fertilization to create plankton blooms). The FTC declined to provide guidance in this area. Nor do we think you should expect them to do so anytime soon, as this is largely a scientific and not a consumer perception issue. Specifically the Commission noted that identifying allowable offset projects would put the Commission in the role of setting environmental policy. The Commission did, however, make clear that offset claims must often be substantiated by competent and reliable scientific evidence.  The FTC also cautioned that companies should be wary in using RECs (renewable energy credits) as offsets in part because of issues relating to additionality and possible double counting by the REC generator and fossil fuel-fired facility.  Finally, the Commission warned that such obvious misleading practices as selling the same offset twice would constitute a violation of Section 5.

Last, but not least, the Commission also did not provide guidance on how companies should measure the carbon they claim to be offseting. For example, two companies may make similar products, but one obtains a lot more components from third parties. As a result, even though overall the carbon emission from the manufacture of the two products may be similar, one company may have far less carbon to offset if it considers only its own emissions. Is there an obligation to look "downstream" at least to some degree, particularly if the offset claim is an unqualified one?  In a similar vein, the Commission requested guidance on whether an unqualified claim that a product was manufactured using renewable energy would be interpreted to include other parts of the distribution chain, such as delivery trucks. We note that when addressing the use of Made in USA claims by manufacturers the Commission has indicated that materials sourced from third parties often must be included in the relevant calculation. 

Given the emerging nature of these claims and the as yet unresolved scientific debate surrounding some of these issues, expect to hear more from the Commission in the future, either through law enforcement activity or additional guidance. 

- Randy Shaheen

A Closer Look at Proposed Green Guides Revisions: Spotlight on Biodegradability

We posted yesterday on the FTC's proposed revisions to its Green Guides. As a follow-up, we will post periodically with more details on specific issues addressed in the FTC's proposed revisions. First up is "biodegradable/compostable". 

Biodegradable - Solids

Most stuff, at least solid stuff, we throw away ends up in landfills; 66% ends up in landfills or incinerators according to the FTC.  Landfills are dark places with little if any air and water.  Not only are these things necessary for all of us to survive, they're also essential for the natural processes that lead to biodegradation.  Degradability claims account for the highest number of environmental marketing cases, and the FTC has brought a number of cases, including some recent ones, challenging biodegradable claims for products which are destined to spend their eternal rest in landfills.  At the same time, science is working to solve this problem. For example, NAD addressed a claim that a plastic bag was oxo biodegradable, and a running shoe company is touting a sneaker midsole that it claims will biodegrade in landfills.  In both cases, however, the products still required a significant amount of time to biodegrade; 2-3 years in the case of the plastic bag and 20 years for the sneaker product. 

In its proposed revisions, the FTC has decided that a bright line rule might be easier for everyone.  So it's out with "decompose . . . within a reasonably short period of time after . . . disposal" and in with "must completely decompose within one year."  This "one year" rule is based upon consumer expectations as to how long it should take for a biodegradable product to decompose.  Of course, since Section 5 is all about disclosures, you can still make a biodegradable claim if the process will take longer than a year but you have to qualify the claim by stating how long it will take. So the next time you buy paper plates perhaps you'll see the claim -- "Biodegradable**in several hundred years."  Despite being urged to do so, the Commission also declined to endorse any particular testing protocol because it could not identify any that accurately replicated the heterogeneous conditions typically found in landfills.

Bottom line - Don't expect to see many biodegradable claims for solid waste.

ABA Event: The Revised FTC Green Guides - A Summary from the FTC

The Private Advertising Litigation Committee, the Consumer Protection Committee, and the Federal Civil Enforcement Committee of the ABA are co-sponsoring a teleconference next Tuesday, October 12, 2010 from 3:00 to 4:00 pm EST regarding the revisions to the FTC's Green Guides, which were released yesterday.

James Kohm, Associate Director of Enforcement for Bureau of Consumer Protection at the FTC, will provide an overview of the revisions. The event will be moderated by Amy Mudge of Arnold & Porter LLP and Dana Rosenfeld of Kelley Drye & Warren LLP.

Register here if you wish to dial in to the event. The event is free.

We encourage our readers to view our recent posting (found here) summarizing the changes to the Green Guides.