green marketing and the ftc\'s green guides

$: Green Marketing And The FTC\'s Green Guides$
Green Marketing and the FTC’s “Green Guides”: A Legal Perspective

_____________ Association Environment Committee Meeting

January 26, 2011

Philip A. [email protected]

202.828.1233www.verdantlaw.com

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Verdant Law• Verdant is a Washington, DC law firm specializing in product risk management with a particular emphasis on sustainability and other environmental challenges.

• Mr. Moffat is the founder of Verdant and the author of the Green Chemistry Law Report, a blog focusing on legal developments, news and events in chemicals management and products regulation.

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Overview of Today’s Presentation

• Background on green marketing & “greenwashing”

• Overview of the regulation of green marketing in the United States

• Background on the FTC’s “Green Guides”

• Review of latest proposed revisions to the Guides

• Concluding observations and remarks

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Background on Green Marketing and “Greenwashing”

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Green Marketing• Many definitions of “green marketing” available.

– Generally refers to marketing products or services in a manner intended to communicate their environmental benefits.

– Also called “Environmental Marketing,” “Ecological Marketing,” and “Eco‐Marketing .”

• Number of environmental marketing claims is on the rise with an attendant increase in the number of those that are false or otherwise deceptive.

• According to TerraChoice, a leading environmental marketing firm considered an expert in the field, green advertising has increased almost tenfold in the last 20 years and has nearly tripled since 2006.

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Greenwashing• “Greenwashing” is a term of opprobrium applied to overstated marketing claims. It’s somewhat in the eye of the beholder. However, there are key stakeholders whose opinions matter – customers, competitors, and regulators.

• TerraChoice defines greenwashing as “the act of misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or service.

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“Seven Sins” of GreenwashingAccording to TerraChoice, greenwashing consists of:• The Sin of the Hidden Trade‐Off – suggesting a product is green based on

unreasonably narrow set of attributes while ignoring others• The Sin of No Proof – lacking substantiation for claim• The Sin of Vagueness – defining claim so broadly or vaguely that it’s likely to

be misunderstood• The Sin of Irrelevance – making an environmental claim that may be truthful

but is unimportant or unhelpful• The Sin of the Lesser of Two Evils – making claims that may be true within the

product category, but that risk distracting from the greater environmental impacts of the category as a whole

• The Sin of Fibbing – making a false claim• The Sin Worshiping False Labels – exploiting demand for third‐party

certification with “fake” labels or claims of certification7

Prevalence of Greenwashing• TerraChoice 2008/9 survey of 2,219 products with green claims

purchased from shelves of North American “big‐box” retailers found that 98% of products committed one of the sins.

• Widespread greenwashing has come to the attention of Congress.

– June 2009 House Subcommittee on Commerce, Trade, and Consumer Protection held oversight hearing, titled “It’s Too Easy Being Green: Defining Fair Green Marketing Practices.”

• Not all instances of greenwashing are violations of law, but there’s substantial overlap because they both are concerned about deception.

• Goal is compliance with the law while avoiding allegations of greenwashing.

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Why Do We Care About Greenwashing?

• Potential loss of market share to unscrupulous competitors

• Potential loss of market acceptance because of consumer cynicism – injury to brand/reputation

• Legal liability – Private party lawsuits

– Government enforcement

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Guidance and Resources Are Available• Many non‐governmental resources are available such as:

– Voluntary standards such as the ISO 14000 series on environmental labels and declarations;

– Best practice documents such as the one from the Asia‐Pacific Economic Cooperation Committee on Trade & Investment

– Codes of practice such as the one from the Australian Association of National Advertisers; and

– Consulting assistance from organizations such as UL Environment’s Environmental Claims Validation service.

• More resources are listed in the back of this presentation.

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Guidance and Resources Are Available• Many governmental resources are available, such as the:

– Guides for the Use of Environmental Marketing Claims ( the “Green Guides”), 16 C.F.R. Part 260, from the FTC;

– Green Marketing and the Trade Practices Act from the Australian Competition and Consumer Commission; and

– Guidelines for Making and Assessing Environmental Claims from the European Commission.

• Again, more resources are provided at the back of the presentation.

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Regulation of Green Marketing Claims in the United States

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Regulation of Green Marketing in the United States• Self‐regulatory bodies – e.g., Council of Better Business Bureaus,

National Advertising Division (“NAD”)

– Consumers and competitors can refer cases

– NAD has no authority to impose penalties or enjoin activities, but it can refer cases to the FTC

• State Attorneys General or Consumer Protection Agencies

– Some laws modeled on Federal Trade Commission Act (“FTC Act”)

– Some laws modeled on Uniform Deceptive Trade Practices Act

• Private parties, including consumers and competitors, pursuing common law claims or claims under state and federal statutes

• Federal Trade Commission (“FTC”) through the FTC Act13

Private Causes of Action• Consumers and competitors might pursue various claims:– Common law fraud, negligent or intentional misrepresentation;

– Violation of state consumer protection statutes (available in some states to consumers and/or competitors); and

– Violation of Section 43(a) of the Lanham Act for “false or misleading description[s] of fact” in commerce. (Note: Courts are split on availability of consumer action).

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FTC Regulation of Green Marketing Claims

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FTC Act and the “Green Guides”• Section 5 of the FTC Act, 15 U.S.C. § 45, authorizes the FTC to

take legal action against “unfair or deceptive” practices in commerce.

– Section 5 applies to more activities than advertising.

– Doesn’t give FTC the authority to set environmental policy or standards (e.g., testing protocols.

• FTC published the Green Guides to help advertisers avoid making unfair or deceptive claims under Section 5.

• Green Guides are non‐binding administrative interpretations of law.

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FTC Act and the “Green Guides”Because the Green Guides are non‐binding administrative interpretations:• They don’t preempt federal, state, or local law. Compliance with those

laws will not necessarily preclude FTC enforcement of Section 5. However, several states, such as Maine, incorporate the Guides into their laws. (Similarly, compliance with voluntary standards won’t guarantee compliance.)

• The Guides merely reflect the FTC’s views on how reasonable consumers likely interpret certain claims. In other words, they are guidance on how to avoid deceiving consumers.– Marketers may use alternative approaches to those the FTC suggests if

they satisfy the requirements of Section 5. However, claims made inconsistent with the Guides will receive greater scrutiny and face increased risk of enforcement.

– In any enforcement action, the FTC must prove that the challenged act or practice is unfair or deceptive in violation of Section 5 .

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Scope of the Guides • Guides apply to claims about the environmental attributes of a product, package, or service in connection with the marketing, offering for sale, or sale of such item or service to individuals, businesses, or other entities.

• The guides apply to environmental claims in any marketing medium, whether asserted directly or by implication.

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Principles Established in the Guides• Guides establish principles to avoid unfair or deceptive

practices. Focus is primarily on preventing deception.• Deception is not defined in the FTC Act, but FTC has a Policy

Statement on Deception.• According to the Policy, “a representation, omission, or

practice is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers’ decisions.” – A consumer is acting reasonably if its understanding of a claim is

consistent with a “significant minority” of consumers.– Link to Policy is available at the back of this presentation.

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Principles Established in the Guides• Marketers must identify all express and implied claims that the

advertisement reasonably conveys, and ensure that all reasonable interpretations of their claims are truthful, not misleading, and supported by a reasonable basis. (Evaluate the entire context.)

• For environmental marketing claims, a “reasonable basis” often requires “competent and reliable scientific evidence”.– Basically, an objective evaluation process used by a qualified

professional, and generally accepted as accurate and reliable by that person’s profession, using an amount and quality of information normally required by standards of relevant scientific fields.

– No “cherry picking” of data, and no “willful blindness” to full body of available data.

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Principles Established in the Guides• Qualifications and disclosures should be clear, prominent, and

understandable.

• Claim should specify whether it refers to the product, the product’s packaging, a service, or just to a portion thereof.

• Don’t overstate, directly or by implication, an environmental attribute or benefit – don’t emphasize negligible benefits either.

• Comparisons should be clear about what’s being compared and substantiated.

• Bottom line: Tell the truth, don’t overstate your case, substantiate your claims, be transparent in your choices, and strive for clarity and specificity in your claims.

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History of the Green Guides• Green Guides initially issued in 1992, and were revised in 1996 and

again in 1998.• In 2007 and 2008, the FTC requested comments on the Guides and

held a series of public meetings to explore possible revisions in light of current “green” claims, such as “carbon neutral” & “sustainable.”

• Public meetings addressed:– carbon offsets and renewable energy certificates;– green packaging claims; and – green building and textiles.

• FTC also conducted a “consumer perception” study in 2009 to better understand how consumers interpret some of the current “green” claims.

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Latest Proposed Revisions• In October 2010, the FTC released its long‐awaited proposed revisions for public comment. 75 Fed. Reg. 63552.

• The public comment period closed on December 10, 2010.

• FTC received over 300 submissions in response. ____________ Association filed comments.

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Overview of the ProposalRevisions to guidance on claims already addressed:− General environmental benefit

claims;− Certifications and seals of

approval;− Degradable;− Compostable;− Ozone‐Safe/Ozone‐Friendly;− Recyclable− Recycled Content; and− Free‐of/Non‐Toxic.

New guidance on claims not currently addressed:− Carbon offsets;− Made with renewable

materials; and− Made with renewable

energy.

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Overview of the Proposal• FTC made no changes, although it kept, the existing guidance on:– Source reduction claims; and– Refillable claims.

• FTC declined to adopt specific guidance on:– Organic and natural claims;– Sustainable claims; and – Life Cycle Assessments (LCAs) as claims or substantiation of claims.

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Revisions to Guidance on Claims Already Addressed

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General Environmental Benefit Claims• Includes claims such as “environmentally‐friendly,” “green,” etc.

• Marketers should not make unqualified general environmental benefit claims. It is difficult, if not impossible, to substantiate all express and implied claims. Current Guides merely discourage their use.

• Qualifications should be clear and prominent, and should limit the claim to a specific benefit. For example, “Green – Made with Recycled Materials.” – Substantiation required for specific benefit used to qualify claim.

– Marketers should ensure the advertisement’s context does not imply deceptive environmental claims.

– Also, be careful that attribute used for qualification doesn’t imply product provides a net environmental benefit.

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Seals of Approval and Certifications• Certifications and seals of approval are “endorsements” covered by

the FTC’s Endorsement Guides, 16 CFR Part 255.– Endorsements must reflect honest opinion of endorser; marketer

remains liable for deception occurring through endorsements.– Marketer or endorser must have substantiation for all conveyed claims.– Marketer must disclose “material connection” with endorser (e.g.,

member of association giving the certification). Connection affects independence of endorsement.

– Environmental endorsements require expertise ‐ qualified experts must be used and their evaluation must be based on actual exercise of that expertise.

– Endorsements of an organization must reflect collective judgment of organization.

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Seals of Approval and Certifications

• Unqualified certifications or seals convey general environmental benefit claim.

• Marketers should use clear and prominent language limiting the claim to particular attribute(s) for which they have substantiation.

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Degradable• For solid waste products other than those destined for landfills,

incinerators, or recycling facilities, the proposal clarifies that the “reasonably short period of time” for complete decomposition is no more than one year after customary disposal. If otherwise, must qualify claim.

• Marketers should notmake unqualified degradable claims for items destined for landfills, incinerators, or recycling facilities because decomposition will not occur within one year.

• Qualify claims with:– Product’s ability to decompose in environment of customary

disposal; and– Rate and extent of degradation.

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Compostable• Product or package must break down (i.e., become mulch) safely and

timely in an appropriate home device or pile, facility or program.

• Proposal clarifies that “timely” means approximately the same time as the material with which product or package is composted.

• Unqualified claims are deceptive if break down will not occur “timely” or if appropriate facilities are not available to a substantial majority of consumers or communities (i.e., 60%)

• Qualifications potentially needed:– Type of composting device, facility or program;

– Availability of appropriate composting facility or program; and

– Safety, rate, and extent of break down.

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Ozone‐Safe/Ozone‐Friendly• Proposal contains minor updates to examples to reflect

changes in Clean Air Act regulations concerning ozone‐depleting chemicals.

• No claim if product contains any ozone‐depleting chemical.• Deceptive to make claim if product contains volatile organic

compounds (VOCs) that may cause smog by contributing to ground‐level ozone formation. – Consumer perception evidence suggest this claim likely conveys that the product is safe for the atmosphere as a whole.

– Query whether appropriate qualification could be made.32

Recyclable• Proposal highlights the three‐tiered analysis, previously contained

only in examples, for disclosing the limited availability of recycling programs.

– Tier 1 ‐ “Substantial majority” (i.e., 60%) of consumers/communities have access to recycling facilities —Marketer can make an unqualified recyclable claim.

– Tier 2 ‐ “Significant percentage” of consumers/communities have access to recycling facilities —Marketer should qualify recyclable claim (e.g., package may not be recyclable in your area). No “positive” qualifications – i.e., “Check to see if...” is not adequate qualification.

– Tier 3 ‐ Less than a “significant percentage” of consumers/communities have access to recycling facilities —Marketer should qualify recyclable claim (e.g., product is recyclable only in the few communities that have recycling programs or provide specific percentages).

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Recyclable• Inconspicuous use of Society of the Plastics Industry mobius (i.e., chasing arrows with number in center) on bottom of product or package is not a recyclable marketing claim and does not require substantiation.

• Conspicuous use of symbol would be such a claim that would require appropriate qualification and substantiation.

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Recycled Content• FTC defines recycled content to include recycled raw material, as well

as used, reconditioned, and re‐manufactured components that have been recovered or otherwise diverted from the solid waste stream.

• Unqualified claims of recycled content are appropriate if the entire product or package, excluding minor, incidental components, is made from recycled material.

• For items that are partially made of recycled material, the marketer should clearly and prominently qualify the claim to avoid deception about the amount or percentage, by weight, of recycled content.

• For used, reconditioned, or re‐manufactured components, the marketer should clearly and prominently qualify the recycled content claim to avoid deception about the nature of such components. Consumers frequently do not considered these to be “recycled.”

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Recycled Content• Recycled content claims may distinguish between pre‐consumer

and post‐consumer materials.

• For pre‐consumer claims, marketer must have adequate substantiation that material was diverted from waste stream. Consider:– amount of reprocessing required;

– whether subsequently used in original or different manufacturing process; and

– whether subsequent use in different process is established standard practice, potentially defeating diversion argument.

• Percentage of recycled content may be based on the annual weighted average of the recycled content in a product, unless obvious deception would occur.

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Free‐of/Non‐ToxicFree‐of:

– Proposal expands current guidance advising that even if true, claims that an item is free‐of a substance may be deceptive if:

• the item has substances that pose the same or similar environmental risk as the substance not present; or

• the substance has never been associated with the product category.

– Also free‐of claims may be appropriate when item contains a de minimis amount of a substance. Depends on whether a reasonable consumer would consider the amount material to purchasing decision.

– Potential for consumer deception. Some “free‐of” claims may convey additional environmental claims, including general benefit or comparative superiority claims. Qualify if so.

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Free‐of/Non‐ToxicNon‐toxic:

– Such claims likely convey that an item is non‐toxic both for humans and for the environment generally.

– Cannot rely on compliance with regulation as substantiation if regulation does not support all such express and implied claims.

– Qualify claim if substantiation would not otherwise support all conveyed claims.

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New Guidance on Claims Not Currently Addressed

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Carbon Offsets• Marketers should have competent and reliable scientific

evidence to support their carbon offset claims, including using appropriate accounting methods to ensure they are properly quantifying emission reductions and are not selling those reductions more than once.

• Marketers should disclose if the offset purchase funds emission reductions that will not occur for two years or longer.

• Marketers should not advertise a carbon offset if the activity that forms the basis of the offset is already required by law.

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Renewable Materials• FTC study found large potential for consumer confusion with this type of claim.

• Proposal would require qualification of allclaims with specific information about the renewable material (what it is; how it is sourced; why it is renewable).

• Qualify if the item is not made entirely with renewable materials (excluding minor, incidental components).

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Renewable Energy• FTC study found large potential for consumer confusion with

this type of claim.• Proposal would prohibit unqualified claims if the power used to

manufacture any part of the product was derived from fossil fuels.

• Qualify claim if less than all, or virtually all, of the significant manufacturing processes were powered with renewable energy or conventional energy offset by renewable energy certificates (“RECs”).

• Qualify all renewable energy claims by specifying the source (e.g., wind or solar).

• Marketers that generate renewable energy (e.g., by using solar panels), but sell RECs for all of the renewable energy they generate, should not represent that they use renewable energy. 42

Unchanged Guidance

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Refillable• Cannot make an unqualified “refillable” claim, unless the marketer provides the means for refilling the package.

• Either provide:– a system for the collection and refill of the package, or

– offer for sale a product that consumers can purchase to refill the original package.

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Source Reduction• Qualify source reduction claims (e.g., reduced weight, volume, or toxicity) to the extent necessary to avoid deception about the amount of the reduction and the basis for any comparison.

• Be specific about what’s being compared (e.g., new product to prior version of product or to competitor’s product).

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Topics for which the FTC Declined to Adopt Specific Guidance

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Sustainability• Consumer perception evidence shows no consensus that term conveys an environmental meaning – may mean environmentally beneficial, but may mean durable, long‐lasting, etc.

• Accordingly, FTC declined to adopt specific guidance, but noted that if context of sustainability claim implies environmental benefits, then those benefits need to be substantiated.

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Life Cycle Analysis• FTC declined to require Life Cycle Analysis (LCA) as substantiation for

general environmental benefit or other type of claim.– Too many different methodologies and field is still evolving. If LCA used to

substantiate, would need to meet “competent and reliable” scientific evidence standard.

– Note, however, that a general benefit claim could imply benefits across the life cycle, so evaluate, substantiate, and qualify as needed.

• FTC also declined to adopt specific guidance on use of LCA as a general environmental benefit claim (e.g., “Cradle‐to‐cradle). Too little information is available about consumer perception of claim.– However, FTC noted that context of LCA claim could convey a general

benefit claim for which all express and implied attributes would need to be substantiated.

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FTC Enforcement

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FTC Enforcement• In 2009, FTC launched seven enforcement cases after nearly a ten‐

year hiatus, challenging claims of “biodegradability” or use of an “environmentally‐friendly” manufacturing process. These claims are addressed in the 1998 (current) version of Guides.

• Once FTC finalizes latest proposal, enforcement should continue at comparable rate, but large‐scale enforcement initiative notanticipated in near‐term.

• Overview of typical enforcement process:– FTC serves complaint with date for administrative hearing;– After hearing, FTC issues report and order enjoining practices found

deceptive or unfair;– Defendant can seek modification or withdrawal of the order or appeal

to one of the federal Circuit Courts of Appeal; and – Violation of order can lead to civil penalties.

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Concluding Thoughts

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Observations and Predictions• FTC’s considerable efforts to revise Guides indicate Commission is

serious about combating greenwashing.

• However, a large‐scale enforcement initiative seems unlikely in the near‐term because of the Administration’s concern about the economy. That said, continued enforcement will occur to appease Democratic base, especially since little progress is expected on climate change before next election.

• Private party enforcement and competitor challenges through organizations such as NAD may rise, however.

• Larger companies are likely to fare better given in‐house expertise, access to other resources, and greater motivation to protect brand.

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Reminders• Green Guides provide a limited number of examples.

– If your situation is not addressed, carefully review claim before making it to ensure you have substantiation for all claims a reasonable consumer might see.

– Consider focus groups if necessary.• Guides are merely guidance, so deviations are allowed, but

they will be scrutinized. If planning to deviate, may want to consider focus groups to document claims and document lack of deception in the event of an FTC enforcement action.

• Bottom line advice: Tell the truth, don’t overstate your case, substantiate your claims, be transparent in your choices, and strive for clarity and specificity in your claims.

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Resources and Guidance

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Statutes and Other Laws• Section 5 of the FTC Act (unfair competition)• Lanham Trademark Act• EU Directive 84/450/EEC (misleading advertising), as amended by

Directive 97/55/EC• Cal. Bus. & Prof. Code § 17580‐17581 (California Business and

Professions Code, Environmental Representations)• R.I. Gen. Laws 6‐13.3 (Rhode Island Environmental Marketing Act)• Mich. Comp. Laws 445.903 (Michigan Consumer Protection Act)• Ind. Code 24‐5‐17‐1 (Indiana Code, Environmental Marketing Claims)• Maine Rev. Stat. Tit. 38, s2142 (Maine Revised Statues, Advertising and

Marketing Claims)(See, ABA Pesticides Committee, Chemical Regulation, and Right‐to‐Know Committee E‐Reference Website Page.)

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FTC Resources• FTC, Guides for the Use of Environmental Marketing Claims

• FTC, Proposed Revisions to Guides for the Use of Environmental Marketing Claims (Federal Register Notice, October 15, 2010)

• FTC, Summary of Proposed Revisions to Guides for the Use of Environmental Marketing Claims

• FTC, Environmental Marketing Consumer Perception Study, Background Information

• FTC, Complying with the Environmental Marketing Guides

• FTC, Sorting Out Green Advertising Claims

• FTC Workshop, Green Packaging Claims

• FTC, "It's Too Easy Being Green"

• FTC, Environmental Enforcement Cases (1990‐2009)

• FTC Charges Companies with Bambooz‐ling Consumers with False Product Claims (August 11, 2009)

• FTC, Guides Concerning the Use of Endorsements and Testimonials in Advertising

• FTC, Statement on Deception

• FTC, Policy Statement Regarding Advertising Substantiation

(See, ABA Pesticides Committee, Chemical Regulation, and Right‐to‐Know Committee E‐Reference Website Page.)56

International (General)• ISO 14021:1999 Type II Environmental Labels and Declarations

• ISO 14025:2006 Type III Environmental Declarations

• Asia‐Pacific Economic Cooperation Committee on Trade & Investment, Best Practices of ISO 14021 (2003)

• The Eco Declaration, Standard ECMA‐370

• UL Environment, Environmental Claims Validation (ECV)

(See, ABA Pesticides Committee, Chemical Regulation, and Right‐to‐Know Committee E‐Reference Website Page.)

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International (Country‐Specific)• Australian Competition and Consumer Commission, Green Marketing and the Trade Practices Act

• AANA: Environmental Claims In Advertising And Marketing Code

• Australian Competition and Consumer Commission, ACCC Raises Concerns with Woolworths Select tissue products (March 18, 2008)

• Canadian Standards Authority, Environmental Claims: A Guide for Industry and Advertisers

• Canadian Competition Bureau News

• European Commission, Guidelines for Making and Assessing Environmental Claims

• New Zealand, Code for Environmental Claims

• Ethical and Environmental Marketing Claims: a Guideline from the Nordic Consumer Ombudsmen

• Norwegian Office of Consumer Ombudsman, Use of Environmental Claims in Marketing of Vehicles

• UK Department for Environment Food and Rural Affairs, Green Claims Code for Products

• UK Department for Environmental Food and Rural Affairs, Green Claims Practical Guidance

• The British Code of Advertising, Sales Promotion and Direct Marketing


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Self‐Regulatory Organizations• United Kingdom, Advertising Standards Authority

• Council of Better Business Bureaus, National Advertising Division

• The Australian Competition & Consumer Commission News Releases

• The Belgian Jury d’Ethique Publicitaire (Advertising Ethics Jury)

• International Chamber of Commerce, Advertising and Marketing Communication Practices (2006)

• International Chamber of Commerce, Framework for Responsible Environmental Marketing Communications (2010)


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Miscellaneous Resources

• TerraChoice, The Seven Sins of Greenwashing(2009)

• TerraChoice, The Sins of Greenwashing: Home and Family Edition (2010)


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