Consumer Advertising Law Blog

FTC Announces Proposed, Revised Green Guides--More Guidance on Appropriate Shades of Green

The much anticipated proposed, revised Green Guides were announced today (the FTC's news release can be found here).  Why did the revisions take longer than expected?  The need for evidence, according to Jim Kohm who gave a preview of the revisions at the NAD annual advertising conference earlier this week.  Mr. Kohm explained that the FTC "kept the Guides the way they were unless we had evidence supporting a change."  The evidence collected, through workshops and consumer perception studies, is reflected in the new Guides, and the FTC Staff during the comment period is particularly interested in gathering more.  The new Guides include some updates to prior guidance, address some entirely new claims, and declined to provide guidance in other areas. 

What's Revised?

• General Green Claims: The suggestion that general environmental claims be avoided has been strengthened considerably.  The consumer research showed that half of consumers took away from a "green" or "environmentally friendly" claim a broad meaning of widespread environmental benefit.  Any such claims should be qualified (e.g., Green = compostable).  Marketers should look closely at the net impression conveyed by an ad or label, including the visuals and use of any seals or certificates to make sure the benefits are not overstated.
• Certificates and Seals:  These are endorsements and as such any material connection to the certifying party must be disclosed.  If the product is self-certified by the manufacturer, that must be clear.  If a trade association is providing the certification and the marketer is a member of that association, this must be disclosed.  If the name of the certifying party is general (e.g., Green Smart v. Biodegradable Association), the basis for the certification must clearly accompany the certification. (e.g. "certified  for reduced chemical emissions during product usage.")  The standards themselves used for the certification presumably do not have to accompany the seal.  Thus, if a consumer or business wants to evaluate differences between products certified by competing certifying organizations or seals they will likely have to look for that information on the certifying organizations website.  This provision is is not new but some of the guidance that was found in the examples in the old Guides was moved up.
• Biodegradable:  For an unqualified claim, solid waste products must biodegrade in one year from disposal.  Anything destined for a landfill, reclycling center, or incinerator cannot include this claim because in the FTC's view decomposition will not occur within one year.  If such products will biodegrade in more than a year a qualified claim can be made that discloses the time in which the product is expected to biodegrade.  The example given for a product where an unqualified biodegradable claim may be appropriate is a planter that is intended to be put into the ground.  The Commission is seeking comments with respect to the standards for decomposition of liquid waste. 
• Compostability:  A product with such a claim must compost at the same rate as twigs, grass, and clippings, or be qualified.
• Recyclable:  The Guides ask for comment on the percentage of recycling centers in the marketer's sales area that must recycle a given product befor (1) an unqualified recycling claim can be made; (2) a qualified claim can be made ("may" not be recyclable"); (3) and a further qualified claim should be made ("only in the few communities that have recycling programs."  Staff has recommended 60% as the cut off for an unqualified claim.  However, no additional guidance is provided to determine how convenient a recycling facility must be before consumers are deemed to have "access" to it.  A "please recycle" reference is still seen as an affirmative recyclable claim.
• Ozone Safe:  The revised Guides have taken out the dated reference to HCFC claims, but have kept guidance on "no CFC" claims.
• "Free Of":  If a product removes one harmful ingredient but has another harmful ingredient that poses the same or similar environmental risk, a "free of" claim is not appropriate.  If the product never included the referenced ingredient and no products in the category include the ingredient then a "free of" claim could be deceptive as it may imply that competing products include the offending ingredient.  On the other hand the Commission noted that such information may be useful when comparing two different types of competing products, one type of which contains the harmful material and the other does not.   The Commission is seeking comments on the appropriate treatment of such claims.  The Staff did conclude that use of a "free of" claim is likely acceptable even if the product contains trace or de minimus amounts of the ingredient.  However, trace amounts of highly toxic materials such as mercury would be material to consumers and cannot be labeled "free of." 

What's New?

• Made with Renewable Materials: The Guides propose that marketers qualify the claim if the item is not made entirely of renewable materials and specify what the renewable material is, how it is sourced and why it is renewable.  The Commission is seeking comments specifically on these proposed qualifications. 
• Made with Renewable Energy: The Guides propose that unqualified claims are misleading if any part of the product was manufactured with energy derived from fossil fuels.  Specific guidance is not proposed regarding parts sourced from third parties but the Commission cites to its Made in USA standards which often require manufacturers to account for parts sourced from third parties.  The Commission asks for comments on whether the criteria for use of an unqualifed claim should extend to product distribution as well as manufacture.  The Guides also propose that marketers specify the source of the renewable energy and that renewable energy claims may not be made where the manufacturer generates renewable energy but sells RECs for the renewable energy they generate. 
• Carbon Offsets: The Commission opted to provide only limited advice in this area because of the limited extent of its authority and consumer perception evidence and ongoing debate among experts as to the appropriate standards for offset claims.  However, the Guides propose that marketers use appropriate accounting methods to properly quantify their emission reductions and to insure that they are not selling their reductions more than once.  Further, in the absence of a disclosure, it is assumed that the offset will occur in less than two years.  Finally, while the Commission decided not to address the thorny issue of additionality, the revised Guides do propose that if the basis for the offset is already required by law, the offset should not be advertised.   

What's Not Tackled?

• The Guides do not harmonize completely with international standards or adopt ASTM standards.  Mr. Kohm explained that many of the standards have a purpose beyond deception, but the FTC is not an environmental policy setter. 
• Sustainability
• Life Cycle Analysis
• Organic: The Guides do not address organic claims  Mr. Kohm said the FTC did not want to get ahead of the USDA in this area.
• Natural: While a big disappointment to some, the Guides are silent on "natural" claims as the FTC did not conduct research in this area and had no evidence to provide guidance on such claims at this point.

- Amy Mudge and Randy Shaheen

FTC Commissioner Brill Reviews Consumer Protection Headliners at NAD Conference -- Revised Green Guides Expected Tomorrow!

It has been an exciting two days at the National Advertising Division's Annual Advertising Law Conference. I moderated a panel where the FTC BCP Director of Enforcement, Jim Kohm, announced that the revised proposed Green Guides will be made available at 11AM EDT on October 6th. (Return here tomorrow for all the details!)

Commissioner Brill provided the keynote address yesterday where she gave a preview overview of the changes. By way of background, she reminded the audience that the original Green Guides, first published in 1992 and updated in 1996 and 1998, provide both general and specific guidance on how to make truthful and substantiated environmental marketing claims and "are more relevant than ever before." She said such claims can be important to environmentally conscious consumers, but only if true, particularly because these are largely credence claims or claims consumers cannot determine based on use if the product actually possesses the touted benefit. She said there were over 450 attendees to the three 2008 green workshops held by the FTC Staff. Further, the FTC commissioned consumer research on how consumers understand general environmental claims and specific claims such as biodegradable, renewable energy, renewable materials, and carbon offsets. The Guides needed updating to take into account new science and current consumer impressions of such claims. With the publication of the proposed Guides come a number of specific questions to which the FTC staff is soliciting comment. Commissioner Brill also said the staff is very interested in receiving evidence during the comment period, particularly any consumer perception studies others may have conducted. The goal of the new guides is to "provide better, evidence-based guidance."

Here is a preview of what can be expected tomorrow:

1. The proposed Guides strengthen that unqualified general environmental claims should be avoided. The consumer research found that when consumers saw a "green" or "environmentally friendly" claim that they took away that the product had specific and far reaching environmental benefits (e.g., nontoxic, recyclable, made with recycled content) and few products do all of these things. Use of such general claims, to avoid running afoul of Section 5, will need to be qualified clearly and conspicuously to tell consumers the specific environmental benefit(s) they can expect.
2. Use of Seals of Approval or environmental certificates will be treated like endorsements and should meet the criteria outlined in the FTC's Endorsement and Testimonial Guides. If the seal of approval is provided by a trade association in which the advertiser is a member, this must be disclosed. If the seal is not a third party seal, but issued based on an advertiser's internal certification program, this must be disclosed. A seal itself can claim a general environmental benefit, and qualifying language must be included making clear the expected benefit(s).
3. There is the potential for consumer deception through use of renewable energy and renewable materials claims, and so marketers must include language making clear what is renewable (e.g. use of wind energy in manufacturing).

Commissioner Brill also discussed the FTC's new substantiation language in its recent consent orders with Iovate and Nestle and in the notice complaint filed in the action against Pom. She said the new language is designed to improve the enforceability of the orders.While some have said this represents a shift to a more rigorous substantiation requirement and a departure from the standards articulated in the FTC's Deception Policy Statement, "reports of [the flexible substantiation standard's] demise are greatly exaggerated -- it is alive and well." She explained that the two clinical studies required to support future claims contained in the orders was based on agreement by the FTC's experts that this was the level of substantiation required in these particular cases. She said going forward that the FTC "will use the new provisions on a case-by-case basis depending on what experts say is needed for the claims at issue."

She also reviewed the revised Testimonials and Endorsement Guides, which "confirm that well-settled truth in advertising principles apply to new media" and provide "important new and expanded guidance" that she is "confident industry will put into practice." We plan to blog further about this later in the week when we will detail comments provided by Mary Engle, Director of Advertising Practices, on enforcement of the new guides in the year since they were issued. Stay tuned!

- Amy Mudge

Schwarzenegger Throws Out Ban on “Biodegradable” Claims, Makes FTC’s Green Guides the Rule for Compostable Plastic Bags

As we previously reported, on August 25, the California legislature passed S.B. 1454, a bill that would have prohibited labeling any plastic product sold in California as “biodegradable,” “degradable,” or “decomposable,” based on the theory that such claims were inherently misleading to consumers in the absence of clear scientific standards supporting these claims.

On September 28, Governor Schwarzenegger vetoed the bill. In the veto statement, the Governor cited his concern “about the much more expansive universe of plastic products that this bill would regulate and the unforeseen consequences that could result from such a vast expansion.” Instead, the Governor said, he signed S.B. 228, pertaining to compostable plastic bags, which “represents a reasonable next step in providing information to the consumer and recyclers about the differences in biodegradable products.” The new law enacted by S.B. 228 aligns California law with the FTC’s Green Guides. Specifically, starting July 1, 2011, manufacturers of compostable plastic bags meeting specific ASTM standards will be required to ensure these bags are “readily and easily identifiable” from other plastic bags, “in a manner that is consistent with the [Green Guides].” Under the statute, “readily and easily identifiable” means: (1) labeled with a certification logo indicating the bag meets the ASTM standard; and (2) the bag is green and labeled with the word “compostable” in one-inch letters. A compostable bag may not display a recycling symbol, such as a chasing arrow resin identification code. The statute expressly provides that “[a] manufacturer is required to comply with this section only to the extent that the labeling requirements … do not conflict with the Federal Trade Commission Guides for the Use of Environmental Marketing Claims.” Thus, Governor Schwarzenegger stopped California from regulating biodegradable claims more strictly than the rest of the country, preserving the possibility of uniform nationwide environmental marketing standards, at least for now.

- Suzanne Wilson and Elizabeth Frank

Is It Something in the Soil? “Not Biodegradable in California” Disclaimers Likely to Increase

Summer is ending, and the highly anticipated revisions to the FTC’s Green Guides have still not arrived. As regular readers will recall, the FTC issued its Green Guides in 1992, partly in response to manufacturers’ requests for a uniform standard for making environmental claims. (For additional background, see here.) The current Green Guides allow biodegradability claims if the claim is substantiated by competent and reliable scientific evidence and qualified to the extent necessary to avoid deceiving consumers about the product’s ability to degrade in the environment where it is customarily disposed (i.e., landfills) and the rate and extent of degradation.

California has taken a different approach to these labeling claims. On August 25, the California legislature passed a law that would prohibit labeling any plastic product sold in California as “biodegradable,” “degradable,” or “decomposable.” Senate Bill 1454 now awaits action by Governor Schwarzenegger, who must approve or veto all bills by September 30. SB 1454 includes strong findings that, because there is no American Society for Testing and Materials (ASTM) standard specification for the term “biodegradable” for plastic, the term is inherently misleading to consumers. The bill states that consumers are more likely to litter a plastic item labeled “biodegradable,” which results in harm to the state and its environment.

Current California law prohibits labeling plastic bags and food packaging with the terms “biodegradable,” “degradable,” or “decomposable.” An example of the results of the current California law is evident in the label on the package of a popular brand of doggy waste pick-up bags. S.B. 1454 expands the scope of products subject to these labeling restrictions to include all products made of plastic or plastic components. Marketers would still be permitted to label a product “compostable” or “marine degradable”  if and only if the product meets the applicable ASTM standard specification at the time of sale. The bill provides for civil penalties for the violation of the law and expressly states that the remedies in the bill do not preempt consumer protection laws such as California’s Unfair Competition Law.

National marketers will hold their collective breaths to see whether other state legislatures also seek to set standards for environmental marketing claims. If they do, it will be difficult to realize the goals of uniformity and predictability envisioned by the FTC Green Guides. Absent uniform standards, consumers are likely left more confused, not less, by a patchwork of labeling requirements. We hope a consistent nationwide approach to environmental marketing regulations is adopted, but stay tuned here for future developments.

- Suzy Wilson and Elizabeth Frank

Can the FTC Use the Green Guides to Challenge Corporate Environmental Image Advertising?

A recent law review article in the Penn State Environmental Law Review, "Thinking Green or Scheming Green? How and Why the FTC Green Guide Revisions Should Address Corporate Claims of Environmental Sustainability," (permission to post received from the Author, the Law Review, and Westlaw) focuses renewed attention on whether the FTC has jurisdiction over corporate imaging advertising. The article assumes that the FTC’s green guides do not currently encompass general claims by corporations that their business practices are “environmentally friendly, socially responsible, and sustainable” and calls upon the agency to expand the reach of its Green Guides to cover such practices. As the law review article points out, many corporations want to be considered “green” not only to bolster their image, but also to remain competitive in their respective industries.

One of the key issues here is whether the First Amendment permits the FTC to pursue Section 5 cases against allegedly misleading corporate image advertising. Opinions on this issue are divided. FTC Commissioner Rosch, in a speech at the National Advertising Division’s annual law conference. expressed the view that whether the First Amendment protects corporate environmental image advertising poses “difficult constitutional issues.” He concluded that the first amendment “shield” is likely available to many corporate image environmental ads regardless of whether the “message” is true or false. However, he went on to say that he does not believe that all such ads are shielded, particularly those that may be “predominantly commercial in their purpose and effect.” He concluded that “the closer the image claims are associated with specific branded products…the less likely it is that the First Amendment provides absolute protection.”

The California Supreme Court in a 2002 case reached an arguably narrower conclusion about the scope of the First Amendment. In a challenge to an advertisement by Nike relating to working conditions in its overseas factories the California Supreme Court reversed the lower court and concluded that “because the messages in question were directed by a commercial speaker to a commercial audience, and because they made representations of fact about the speaker’s own business operations for the purpose of promoting sales of its products, . . . [the] messages are commercial speech.” [Nike v. Kasky 45 P.3d 243] The U.S. Supreme Court had an opportunity to review the Nike case and perhaps offer some more concrete guidance in this area but determined instead that certiorari had been improvidently granted.

So, making sure that your corporate image environmental advertising is accurate may just be a good business practice or it may be a smart legal practice as well.

- Randy Shaheen and Danielle Sims

What's in Your Shampoo? Group Seeks to Expand USDA Authority to Regulate Organic Products

The Department of Agriculture regulates organic agricultural products through the Organic Foods Production Act of 1990 ("OFPA") and its National Organic Program ("NOP").  However, the regulatory status of personal care products has long been uncertain.  In 2008 USDA stated that such products could not falsely claim or imply that they meet USDA organic standards but that USDA did not otherwise have jurisdiction over the labeling of personal care products that are not made up of agricultural ingredients.  In 2009 the National Organic Standards Board recommended that the NOP regulations become mandatory for personal care products.  However, no action has been taken on that recommendation.  Finally, in a 2009 Lanham Act case a number of personal care product companies successfully argued that a claim that some of their products were falsely labeled as "organic" fell within the purview of USDA and must first be pursued there. 

That victory may turn out to be pyrrhic.  Recently the Organic Consumers Association ("OCA") and three organic personal care manufacturers filed a complaint with USDA against thirteen personal care product companies.  The complaint alleges that each of the thirteen companies processes agricultural products and manufactures personal care products that are labeled and sold as "organic."  However, the complaint alleges that the products consist primarily of non-organic agricultural material, including numerous petrochemicals, and that most products only contain water extracts of organic herbs and/or reconstituted aloe vera organic powder concentrate.  The complaint requests that USDA impose civil penalties for mislabeling and order the companies to cease and desist from labeling their products as "organic."

OCA's view is that USDA has the authority under the OFPA to impose civil penalties on any person knowingly labeling a product "organic" that is not in accordance with the Act.  If USDA adopts OCA's position, it could lead to a significant expansion of USDA's authority to regulate organic products.  In the meantime, OCA is also waging war on the public relations front.  Members of the group dressed as large shampoo bottles (we presume, nonorganic) stood outside the National Products Expo West mocking the allegedly offending products and handing out flyers detailing the lack of regulation on organic personal care products. These efforts may be bearing fruit.  Just today OCA announced that Whole Foods will tighten its requirements for organic claims on personal care products.    

- Randy Shaheen & Jessica Halbert

FTC Asks Once Nicely - Warning Letter to Retailers Seeks to Cut Down Deceptive Bamboo Labeling

After bringing recent enforcement actions against several companies for falsely advertising products as “100% bamboo fiber” when they were in fact made of rayon, the FTC sent out a warning to more than seventy-eight companies urging them to review their bamboo products and correct any misleading labeling. (Although rayon is created from the cellulose found in trees and plants, including bamboo, it is a man-made fiber that is processed with harsh chemicals and not considered to be environmentally friendly.) The FTC hopes that the warning letters will “serve as a wakeup call to all companies, regardless of their size.”, and the letters went to well known names as Bed, Bath & Beyond and Amazon.com. 

The warning letters contain a synopsis of FTC decisions regarding the use of proper fiber names in textile labeling and advertising, and are intended to give companies time to take curative steps by removing or correcting any false or misleading bamboo references. If any of the letter recipients is later found to have mislabeled rayon products, the FTC can seek civil penalties of up to $16,000 per violation. The warning letters, as well as the recent enforcement actions brought against companies selling rayon, highlight the FTC’s continuing commitment to prosecute misleading “green” advertising.

While the FTC is still working on revisions to its Green Guides, the Commission is struggling with the appropriate limits to place on marketers, so as not to allow them to convey to consumers a deceptive and overly broad message while touting benefits of a product for the environment. However, in its decisions regarding bamboo, the FTC made it clear it would be appropriate for companies to advertise “Rayon Made with Bamboo,” which truthfully conveys the fact that the manufacturers used bamboo to make the rayon but does not overstate the benefits of the product. Marketers should take a close look at any environmental claims being made about their products and make sure any limitations are clearly conveyed with appropriate disclaimers. 

- Danielle Sims and Randy Shaheen

Claims of Alleged “Greenwashing” Squeak Past Motion to Dismiss

While marketers await the expected overhaul of and revisions to the FTC’s Environmental Marketing Guides, the existing FTC’s Green Guides should not be ignored. For example, the Guides advise that use of seals of approval should be accompanied by information that explains the basis of the award. Further, if the seal implies that a third-party has certified the product, the certifying party must be independent from the advertisers and have professional expertise in the area that is being certified. The FTC warns marketers against using environmental seals suggesting that a product is environmentally superior to other products if the manufacturer cannot substantiate this broad claim.

Recently, the Northern District of California denied S.C. Johnson & Son’s motion to dismiss state law claims for unfair competition and false advertising arising from SCJ’s labels for its Windex and Shout products (find the opinion here). The plaintiff, whose complaint we previously reported on here, alleged that SCJ’s “Greenlist” label is deceptively designed to look like a third party seal of approval, which it is not, and that the label falsely represents that the products are environmentally friendly. The label features a stylized drawing of two leaves and a stem. On the reverse side of the label, which is read through the back of the Windex packaging, the text states: “Greenlist™ is a rating system that promotes the use of environmentally responsible ingredients. For additional information, visit www.scjohnson.com.”

The putative class representative, Wayne Koh, alleged that he and others would not have purchased Greenlist-labeled Windex at its allegedly premium price had he known that Greenlist was actually created by SCJ, not a third party, and that Windex is not environmentally friendly.

SCJ argued that Koh had not alleged a cognizable injury under California’s Unfair Competition Law, Bus. & Prof. Code § 17200 et seq., and that no reasonable consumer could have found the Greenlist label misleading. The court recognized that being induced to purchase a product one would not otherwise have purchased is not loss of money or property within the meaning of Section 17200 as long as one still received the benefit of the bargain. Here, however, the plaintiff argued that he did not receive the benefit of the bargain because he paid more for a product that he believed was environmentally superior to other products. Thus, the court allowed the claim to proceed.

The court also rejected SCJ’s argument that no reasonable consumer could have found the Greenlist label misleading, stating that whether a business practice is deceptive is usually a question of fact that is not appropriate for decision on a motion to dismiss. The facts that the Greenlist label makes no mention of a third party, describes Greenlist as a “rating system” (not a seal of approval), and directs consumers to SCJ’s own website “may weaken the case for deceptiveness,” according to the court, but these facts do not allow the court to rule on the issue as a matter of law.

Finally, the court allowed Koh to include claims arising from a Greenlist label on Shout products even though plaintiff purchased only Windex. The court reasoned that Koh alleged that SCJ used the Greenlist label on multiple products, including one that he purchased, and there is no bright line rule that different product lines cannot be covered by a single class.

So when do we expect the proposed revisions to the FTC’s Green Guides to be announced? If we had a nickel for every time we were asked that question, we would be very green. Our best guess is late spring based on unofficial conversations with FTC Staff. In the meantime, marketers should continue to exercise considerable caution in making broad, general green claims and in using seals or other references to certification as the plaintiffs’ bar is not delaying action pending FTC updates.

- Vicki Shapiro and Amy Mudge

You Say Biodegradable, NAD Says Compostable

As many of you know, most trash ends up in landfills and landfills are typically designed to prevent biodegradation because of really nasty things that can happen involving gas.  Thus it is often difficult to make a biodegradable claim because the FTC requires that products with such a claim biodegrade within a reasonably short period of time following customary disposal. If it won't breakdown in a landfill, but it will degrade in a backyard or commercial compost facility, it can likely be labeled "compostable." 

 Yesterday, the NAD posted a press release summarizing its findings in a challenge brought by Method Products about advertising claims made by Clorox for its Green Works Natural Cleaning Wipes, whereby Clorox described the wipes as “biodegradable” but then added qualifying language on the back of the container that said "biodegradability validated in typical compost conditions.”

In other words, the question before the NAD was, can you make a broader (and presumably more consumer friendly) claim of "biodegradable" but then qualify it to clarify that what you really mean is that the product is essentially compostable.  Because Clorox stated that it was transitioning to new packaging that would use the term "compostable", NAD did not have to directly address the issue, but noted that it "appreciated" Clorox's decision to discontinue the biodegradable claim in favor of a compostable claim.

- Randy Shaheen and Danielle Garten

Is My Product Really Better Than Your Product?

We’ve commented often in this space about how virtually everyone is jumping on the green marketing bandwagon. I couldn’t help noticing that fact even while on vacation. Standing in line at the beach to buy ice cream for my kids a poster implored me to ask for a cone instead of a dish because ice cream cones were the “environmentally cone-scious” choice. (Thankfully, bad puns don’t violate Section 5 or else we’d be in trouble here as well.) Ice cream cones have an obvious environmental advantage over dishes and plastic spoons when it comes to waste disposal, but as many of you no doubt know, you can’t always stop the inquiry at the most obvious. If ice cream cones were made from a scarce plant found only in rain forests then they might not be better for the environment in that regard than a plastic spoon or cardboard dish. A general, unqualified claim of environmental superiority likely has to be true in all respects, not just one or two.

Of course, ice cream cones aren’t superior to dishes and spoons when it comes to making me fat or, even more importantly these days, causing obesity in kids. However, as a general rule, if you’re going to tout the benefit of a product you generally only need to disclose any downsides if they are closely related to the advertised benefit. For example, in its Food Advertising Enforcement Policy Statement, the FTC notes that if you market a product as low in cholesterol it may be misleading to omit the fact that the food is high in sodium since sodium can lead to many of the same health problems that low cholesterol is designed to avoid. So will it be the environment or your waistline, or maybe just go with a kid size scoop on a cone and have it all. Either way, the advertiser probably doesn’t have a duty to inform your choice.

- Randy Shaheen

FTC and NAD Cut Down Bamboo Claims

Last week the FTC announced its latest actions in the agency’s reinvigorated environmental enforcement efforts.  In complaints against four companies -- Sami Designs, LLC (d/b/a Jonäno); CSE, Inc. (d/b/a Mad Mod); Pure Bamboo, LLC (website); and The M Group, Inc. (d/b/a Bamboosa) -- the FTC alleged that these companies made false and misleading statements about their products being made from “bamboo fiber,” the environmentally friendly nature of the manufacturing process, and the products’ biodegradability, as well as violated the Textile Act and Rules.  (And they scooped us on the best play on words using bamboo in their press release:  “FTC Charges Companies with ‘Bamboo-zling’ Consumers with False Product Claims.”)

Bamboo is popular in environmentally conscious circles for its ability to grow quickly without the use of pesticides.  (Long-term readers of this blog will recall that bamboo was a topic of interest during the FTC’s workshop on green building and textile claims in July 2008.)  The companies charged by the FTC advertised that their textile products were made of bamboo or bamboo fiber.  The FTC did not contest that bamboo was used as the raw material for the manufacture of the textiles used.  The FTC alleged that despite this, the final product was not bamboo or bamboo fiber but rayon that happened to be produced from cellulose derived from bamboo.  Thus, under the consent orders agreed to by Sami Designs, CSE, and Pure Bamboo, these companies are allowed to state that the source of cellulose for their textile is bamboo as long as they also state the recognized generic name of the fiber, e.g., “rayon made from bamboo.”  In addition to the Textile Act issue, this also emphasizes the need to be as specific as possible when making statements that might implicitly convey claims of environmental benefits.

Sami Designs and The M Group both included descriptions of the manufacturing process on their websites a couple of clicks from the main pages.  The FTC declined to find that sufficiently qualified the companies’ claims, alleging that these disclosures were not clear and conspicuous or in close proximity to the claims made.

The FTC also objected to these three companies making claims that their manufacturing processes were environmentally friendly when the processes used toxic chemicals and released hazardous air pollutants.  As we’ve discussed in this space many times before, general claims of environmental benefit, such as “environmentally friendly” or “green,” standing alone, are likely to be considered deceptive.

Pure Bamboo and The M Group also made biodegradability claims about their products.  Consistent with its recent enforcement actions, the FTC alleged that these claims are deceptive because textile products are usually disposed of by recycling or in a landfill, neither of which present conditions that will allow textiles to break down completely as required in the Green Guides.

BCP Director on Guides Revisions, Advertising Enforcement

On Wednesday, the FTC’s BCP Director, David Vladeck, testified before a Senate subcommittee responsible for consumer protection issues about deceptive advertising and the FTC’s enforcement and education efforts. We think of particular interest to our readers, the Director’s oral testimony provided updates on the state of the FTC’s revisions of its Endorsements and Testimonials Guides and Green Guides. (Click here for video of the entire hearing.)

The Director addressed two controversial issues that have emerged from the Endorsements and Testimonials Guides revisions (which we have previously blogged about here, here, and here). First, he explained that eliminating the “results not typical” safeguard will simply place advertisers using testimonials on equal footing with other advertisers who currently cannot take advantage of the safe harbor. Thus, advertising using testimonials will have to meet the same substantiation standards as any other advertising. Second, the Director briefly addressed the proposal that consumer bloggers be required to disclose any compensation they receive from advertisers. Although he stated that he believed this was the right rule, he did not strongly commit, stating that the FTC will carefully consider comments before finalizing the new guides.

The Director also provided a brief update on the status of the Green Guides revisions. The FTC recently got clearance from OMB to conduct its proposed consumer perception study, the results of which are expected in the Fall. With this baseline data on how consumers interpret green claims, the proposed revised Guides may be out by the end of the year.

The Commission’s prepared written testimony provides a good overview of its advertising agenda, which will focus on a few areas of particular concern:

• Health and safety claims, such as weight loss, cold prevention, and cancer cure claims;

• Endorsements and testimonials;

• Green claims; and

• Scams exploiting the economic downturn.

 Of note, the testimony states that deceptive weight loss claims would continue to be a top priority and that the FTC would increase its scrutiny of health claims in food advertising.

The written testimony also laments that the FTC’s funding has not kept pace with the increasing complexity of advertising claims and media, but praised Staff for their ability “to do more with less.”

- Matt Shultz

NAD Referees Dell-Apple Battle Over Green Claims

NAD recently issued a decision regarding Dell’s complaints about Apple’s green claims for its MacBook computers (the press release can be found here). The decision came after Dell instigated a battle with Apple, first in the blogosphere, then in the more formal forum of NAD. Dell’s complaint centered around Apple’s claims of having “the world’s greenest family of notebooks” and being the “world’s greenest.” Dell also had an issue with Apple using EPEAT ratings as the basis for their claims.

NAD issued a “halvsies” decision for both Dell and Apple. NAD acknowledged EPEAT as “recognized industry methodology” and that the information Apple touted should be freely communicated to consumers.

In a win for the Dell team, NAD did suggest that Apple alter its “world’s greenest family of notebooks” claim to make clearer that the basis of the comparison is between MacBooks and competitors’ notebooks rather than a comparison of entire product lines. Additionally, NAD suggested that Apple stop calling itself the “world’s greenest,” gently noting that the Toshiba Portégé notebooks actually have higher EPEAT ratings than the MacBooks. The NAD's decision once again demonstrates how difficult it can be to substantiate broad environmental claims.

The complaint by Dell comes on the heels of several green issues making headlines. A recent House subcommittee hearing entitled “It’s Too Easy Being Green” sought to address the onslaught of environmental marketing. At the hearing, FTC Bureau of Consumer Protection’s enforcement director James Kohm cautioned that, while there are plenty of valid, substantiated green claims out there, there is also a whole group of greenwashing bad apples.

What Else Do Turtles and the Green Guides Have in Common Besides Color?

That would be speed. The much anticipated updates to the FTC Environmental Marketing Guides have been put on a longer track to allow the FTC Staff to undertake additional fact gathering about how consumers perceive the current generation's environmental claims like "sustainable," "renewable," and statements regarding a product's life cycle. In recent past speeches by FTC Staff, the proposed revisions were expected sometime this summer. We are not gambling folks when it comes to parting with greenbacks, but if we had to bet, we would not anticipate additional guidance until the end of the year and perhaps not till 2010.

At the terrific recent ABA Antitrust Section Consumer Protection Conference, Jim Kohm, the Director of Enforcement at the BCP and the coordinator of the Green Guides update, explained that "we hoped to get more consumer evidence from our workshops and requests for comments. This was not the case." Kohm expressed the staff's priorities in providing updated guidance on substantiation standards for current generation environmental marketing claims: "It is important to move quickly. It is more important to get it right." Kohm provided the standard disclaimer given when FTC commissioners or staff speak at such events that the comments he was making were not those of the Commission or any individual commissioner, also adding "they may not even be my own comments as of tomorrow!" Even making allowances for Kohm's dry wit, the course has been set for the FTC to conduct its own consumer perception research. The FTC first announced its intent to undertake its own research in October 2008 planning to hire a third party to conduct qualitative research with approximately 7,000 consumers. In an updated notice published in May, the FTC provided more detail including that it planned to study consumer's understanding of unqualified general environmental claims such as "green," and whether a consumer believes such general claims imply a product has specific environmental benefits. The study will also examine general claims coupled with a specific representation, such as "Green -- Made with renewable materials" to determine if consumers perceive such a claim implies environmental benefits beyond the specific attribute mentioned. Additionally the FTC plans to examine whether environmental claims suggest anything about the environmental impact through the life cycle of a product from its production and transportation through its use and disposal. Finally, the FTC will examine consumer's understanding of renewable energy and reduced carbon claims. The scope of the study has been reduced and now the FTC plans to sample 3,700 consumers using an Internet survey conducted by Harris Interactive, Inc. Undertaking such consumer research is not necessarily common at the FTC but not unprecedented. For example, the Commission tested consumer perceptions of "Made in USA" claims in connection with its drafting of the Made in USA Enforcement Policy Statement and guides for business.

What are businesses that want to tout the environmental benefits of their products to do while waiting for the Green Guides revisions? Kohm offered some advice: "Life cycle analysis claims are almost impossible to substantiate so stay away from them." He also pointed to the current Green Guides as still providing the FTC's views on what is necessarily to substantiate recyclable, recycled, and biodegradable claims and avoid "stepping over the line," and pointed to several recent settlements involving biodegradable claims as detailed here. He also said the Commission will continue to go after companies who "live over the line," making claims that, in his view, can never be substantiated, using as an example recent cases brought against companies making allegedly false gas and energy saving claims.

David Mallen from the National Advertising Division also spoke on the green panel. NAD sees a number of these cases, and Mallen thinks this is not a short term fad, explaining that "green marketing runs on guilt, and there is lots of potential for abuse." Environmental claims most common to NAD's docket are those involving general environmental claims, comparative claims, biodegradable and degradable and environmental certificates. Mallen warns advertisers against a common stumbling point where "many companies develop a product with a particular environmental benefit but attempt to parlay that into a broader claim." Because green marketing is "faith-based advertising" as consumers cannot readily verify the claims, "trust is critically important."

Companies Promote Green, Lawyers See Green

Increasingly, companies that have begun advertising products as green are spending green to defend those claims in court against allegations of greenwashing.  And it’s not enterprising environmental groups that are the only ones in on the action; the Federal Trade Commission has also beefed up enforcement efforts, as was detailed here.

As it has become “hip” for consumers to buy green products and reduce their carbon footprint, environmental claims on products have increased exponentially.  One environmental marketing group has pegged the increase in green advertising over the past two years at 79 percent, and of the green advertising on the market, the group has indicated that 98 percent of the claims contain at least one of what the group calls the seven sins of greenwashing.  The report can be found here.  The sins include hidden environmental trade-offs, no proof of environmental benefit, vague environmental qualifications, as well as irrelevant, false, or misleading environmental claims, and finally, claims that may be true but ignore larger environmental issues.  With an increased focus from environmental groups, litigation over greenwashing has picked up and is likely here to stay.

The latest private greenwashing suit hails from San Jose, California.  Wayne Koh filed a class action suit against SC Johnson & Sons, Inc., for a label placed on its popular cleaning product Windex.  The complaint is available here.  It alleges that SC Johnson’s creation of its own standard and logo for the environmental impact of its products, rather than the use of a third party standard, is misleading.  Additionally, Koh argued the ingredients in Windex pose an environmental risk.  Toyota has had to deal with litigation over the differential in its popular Prius Hybrid’s EPA estimated mileage per gallon and the actual mileage achieved on the road.  And in February, several environmental groups sued Tide, Ajax and other household products for the alleged presence of dangerous chemicals in their products.  Greenwashing claims have also popped up in international litigation, for example in England, against Shell Oil for an oil project in Canada.  In Australia there have been calls for an investigation into some of Australia’s major companies for alleged greenwashing.  So before using environmental claims to make your competitors green with envy, make sure they’re given a careful review.

New Wave of Green Enforcement?

On June 9, Jim Kohm, Associate Director of Enforcement at the FTC’s Bureau of Consumer Protection testified before the House Subcommittee on Commerce, Trade, and Consumer Protection on the FTC’s green marketing efforts. He took the opportunity, to announce enforcement actions against Kmart, Tender Corp., and Dyna-E International, perhaps signaling the promised start of a significant green marketing enforcement push. The FTC’s administrative complaints alleged that Kmart, Tender Corp., and Dyna-E made false and unsubstantiated biodegradability claims for their American Fare paper plates, Fresh Bath Wipes, and Lightload Towels, respectively.

Kmart and Tender Corp. entered into consent orders resolving the cases against them (here and here). The consent orders are for settlement purposes only and are not admissions of wrongdoing or that the facts alleged in the complaints are true.  The case against Dyna-E, however, will proceed to Part 3 litigation before an FTC ALJ.  Dyna-E may be banking on an anaerobic biodegradability report posted on the product website that concluded:

[I]t is reasonable to assume that the product [Lightload Towels], excluding the packaging, is biodegradable in virtually any biologically-active environment, including soils, aquatic habitats, sewage, and biologically-active landfill conditions.

In contrast, the FTC alleges in its complaint against Dyna-E that the biodegradability claim is false

because a substantial majority of total municipal solid waste is disposed of by methods that do not present conditions that would allow for [the product] to completely break down and return to nature, i.e., decompose into elements found in nature, within a reasonably short period of time.

This suggests that the FTC is extremely skeptical of any biodegradability claims for consumer products because they usually end up in landfills. Dyna-E’s study also recommends using qualified biodegradability claims, which the advertising disclosed by the FTC does not appear to do.

In his testimony, Jim Kohm also noted that the FTC will be conducting a consumer perception study in connection with its Green Guides review (which regularly readers are familiar with). He stated that the study won’t be completed until later this year, suggesting that release of the revised Green Guides will be pushed back until late in 2009 or early 2010. Until then, the Kmart, Tender Corp., and Dyna-E cases indicate that the FTC is actively investigating green claims and renewing its enforcement efforts.

UPDATE (August 31, 2009): As we reported in June, the FTC filed an administrative complaint challenging Dyna-E’s claims that its Lightload towels are biodegradable. Last week, Dyna-E entered into a consent order resolving the matter.  The consent orders are for settlement purposes only and are not admissions of wrongdoing or that the facts alleged in the complaints are true. In its press release, the FTC, we think for the first time, admitted publicly that the biodegradability claims challenges it brought in June were part of a broad-based green claims enforcement campaign.

- Matthew Shultz

Go Green or Die? NAD Suggests Kibosh on Alarmist Claims Against Competitors

Apparently it’s not okay to scare your customers (too much) into buying your wares, at least not if the reasonable implication is to scare them away from competing products.  Southern Diversified Products, LLC faced a recent challenge for the advertising of its non-toxic Mythic Paints, a product free of carcinogens and volatile organic compounds (VOCs).  While touting its greener product--which took the company over six years of R&D to refine--Mythic painted a grim picture through ads describing how other paints may contribute to human illness, warning: “carcinogens and VOCs emitted by traditional paints have been linked to…eye, nose and throat irritation; dizziness; liver, kidney and central nervous system damage and even cancer.”  Even if literally true, Mythic’s competitors and the National Advertising Division (NAD) felt that the ads went too far.

NAD found that while the company had a reasonable basis to claim that Mythic Paints are non-toxic, free of carcinogens and VOCs and even to support its slogan, “Safe for People, Safe for Pets and Safe for Earth,” Mythic’s hubris lay in claiming that it was “safer” than more dangerous traditional paints.  NAD called upon the company to discontinue such comparative safety claims and to modify ads to “avoid conveying a message that exaggerates the risks and/or hazards” of competitors’ products.  In addition, since the company failed to prove that it is the only zero-VOC, zero-carcinogenic, premium quality latex paint in existence, NAD recommended that Mythic ditch its exclusivity claim.

A recent Consumer Reports investigation of VOC levels in paints advertised as Zero-VOC, eco-friendly products may have informed NAD’s decision.  The report revealed that even some Mythic paints contained VOCs at point of sale when retailers added colorants before purchase.  While NAD found that Mythic Paint technically qualifies as Zero VOC, since trace amounts in the pure product were within the "de minimis" level, it recommended that ads include “clear and conspicuous disclosure language” notify consumers that the final purchased product may not be VOC-free if retailers add colorants prior to sale.  The current label claim of “Zero VOC…Excluding addition of colorant” was insufficient notice, according to NAD, for consumers.

Eagerly awaiting the FTC update to its Green Guides, the ad industry has turned to recent decisions by NAD’s voluntary, self-regulatory forum for guidance about the dos and don’ts of environmental marketing claims.  The legal cap on VOCs varies.  Federal VOC limits for the sale of paint exceed some state and regional limits, particularly those in and around the Los Angeles area, which can be nearly eight times lower than the federal limits.

Unsubstantiated Biodegradability Claims Sent to Landfill

Another company has failed in its quest for the Holy Grail of environmental marketing - plastic that will biodegrade in landfills.  Dispoz-O, the maker of “Enviroware” plastic utensils and tableware, advertised that its Enviroware products are “formulated to degrade in months when buried or discarded in a landfill,” and that “Enviroware cutlery, straws, hinged containers, plates, bowls, and trays are 100% biodegradable and come with a certificate of biodegradability.”  Dispoz-O argued that it used a proprietary additive with its plastic products that enabled them to biodegrade even under landfill conditions. 

Unfortunately for Dispoz-O the National Advertising Division, in a challenge from Solo Cup Company, found that its substantiation fell short of the competent and reliable scientific evidence standard outlined in the Federal Trade Commission’s Green Guides.  NAD noted that Dispoz-O’s tests had several faults.  Of note here is the fact that Dispoz-O had tested the biodegradability of the proprietary additive but not the actual products advertised.  Thus, even though Dispoz-O’s tested plastics, it tested only plastic “pellets” that were structurally different from the products advertised.  NAD concluded that in light of that fact “there was insufficient evidence upon which to conclude that the actual product would degrade at the same rate or to the same degree as the additive alone, or in a different or concentrated composition.”  Although not entirely clear, the NAD appears to have left open the possibility of substantiating a biodegradability claim without having tested the product itself so long as the materials tested are substantially similar to the advertised product.  Meanwhile, the search for the Holy Grail of environmental marketing continues.

Hybrid Has Owner Seeing Red Not Green

As anyone who has shopped for a new car knows, each car has a sticker, called a Monroney label, showing the EPA city driving and highway driving fuel economy ratings, among other information about the car.  The federal law mandating this fuel economy disclosure prohibits states from imposing other fuel economy disclosure requirements unless they are identical to the federal requirements.  A recent California Court of Appeal decision held that a challenge under California’s consumer protection laws to representations made about a hybrid’s fuel economy could proceed and was not preempted by this federal law.

Gaetano Paduano purchased a 2004 Honda Civic Hybrid, and in the first year driving the car, got between 23 and 30 mpg.  The Monroney label for this car showed EPA fuel economy ratings of 47 mpg for city driving and 48 mpg for highway driving.  In 2005, Paduano sued Honda for violations of California’s Consumer Legal Remedies Act (“CLRA”) and Unfair Competition Law (“UCL”), alleging that a brochure for the 2004 Civic Hybrid misleadingly asserted that a driver could achieve the EPA fuel economy ratings by driving the Civic Hybrid in the same manner as any other car.  In January, the California Court of Appeals reversed the trial court’s summary judgment decision for Honda on the CLRA and UCL claims.

The court found that Paduano was challenging the additional claims Honda made in its brochure that went beyond the required disclosures, not the required fuel economy disclosures themselves.  The court held that there were triable issues of fact because Paduano presented evidence--alleged statements made by various Honda dealerships--disputing Honda’s statements that a driver need not drive in a special manner to achieve the EPA fuel economy ratings, and Honda failed to present any evidence that it was more likely than not that a reasonable consumer would not find Honda’s statements false or misleading. 

The court rejected Honda’s arguments that Paduano’s deception claims were preempted by the federal statute requiring the disclosure of EPA fuel economy ratings.  Relying on the recent Supreme Court decision in Altria Group, Inc. v. Good, 129 S.Ct. 538 (2008), the court ruled that there was no direct preemption because California, through the CLRA and UCL, could establish and enforce a general duty not to deceive even though the federal statute prohibited state-mandated non-identical fuel economy disclosures.  The court further ruled that because Paduano’s deception claims would not affect the required fuel economy disclosures or require Honda to make any additional fuel economy disclosures if successful, there was no implied preemption.

It goes without saying that manufacturers and marketers must comply with laws mandating disclosure of information about their products--like the Monroney label requirements for cars.  Even though the Paduano case still must go to trial, it provides a warning for companies to be careful about what they say beyond what disclosure laws require.  These additional representations may be judged under traditional advertising principles--they must be true, substantiated, and not misleading.  Importantly, companies should not expect mandatory disclosure laws to protect them from potential liability arising from any such additional claims.

- Matthew Shultz

Green Claims Not in the Bag

As we eagerly await the anticipated revision by the FTC to its Green Guides, which most believe will address the next generation of environmental marketing claims, challenges to such claims under the current Guides are being aired in self-regulatory forums such as the NAD.  Earlier this month the NAD recommended that GP Plastics Corp. discontinue green marketing claims for its "PolyGreen" plastic bags used in the newspaper industry.  GP made three types of claims:

• General Claims of environmental benefit (e.g., "A greener tomorrow is in the bag"; "Eco-Friendly Plastic Newspaper Bags")
• PolyGreen bags are oxo-biodegradable (e.g. "100% oxo-biodegradable"; "disposable through ordinary channels")
• Recyclable claims (e.g., "Our bags are completely recyclable.")

GP used the term "oxo-biodegradable" as a next generation environmental claim that did not exist at the time the Green Guides were issued.  The term "oxo-biodegradable" refers to a two-step process.  In the first step, the plastic starts to break down under exposure to oxygen and heat.  In the second step, reactions with naturally occurring microorganisms cause the plastic to break down further into carbon dioxide, water, and biomass.  Although landfills are not ordinarily conducive to biodegradability, GP claimed that oxo-biodegradable plastics will degrade in two to three years in landfills, depending on the conditions. 

The NAD did not rule out the possibility of the use of a properly qualified biodegradable claim, but concluded that in the absence of additional disclosures consumers were likely to believe that oxo-biodegradable and biodegradable had similar meanings.  Given that the Green Guides state that products marketed as biodegradable must completely "decompose into elements found in nature within a reasonably short period of time after customary disposal,"  the NAD found that there was no evidence that oxo-biodegradable plastics quickly and completely break down in ordinary landfill conditions. (NAD also ruled against GP on its other two claims based upon traditional readings of the Green Guides.) GP plans to appeal the NAD's decision.

Bottom line - if you're going to tout a new technology, make sure consumers understand it.