"Green" advertising is everywhere today. Walk the aisles of a local supermarket or turn on the television, and messages that a product is "environmentally friendly," "earth smart," or just plain "green" abound. Today's marketplace, if judged by these labels, is better for the environment than ever before. But what do these labels really mean, and how do we know if they are true?
The Federal Trade Commission (FTC) has authority under the Federal Trade Commission Act to take action against persons engaged in false or deceptive advertising. As listed on the FTC's Web site, from 1990 to 2000 the FTC brought 37 proceedings alleging that a business made deceptive advertising claims relating to the environmental attributes of a product or service.
Almost all of these proceedings were administrative proceedings in which the FTC and the respondent ultimately settled by agreeing to a "consent order." The consent order typically prohibited the respondent from making certain environmental claims, and required it to keep records of its marketing efforts and make those records available for future FTC inspection. In some cases, the FTC brought a lawsuit in federal court in lieu of an administrative complaint. These cases also settled, with the FTC and the defendant agreeing to entry of a stipulated judgment that included monetary penalties and an injunction.
Since 2000, enforcement actions to prevent deceptive environmental claims have not been an agency priority. But this may change soon. Last November, the FTC announced it was revising its so-called "Green Guides," the agency's policy statements about environmental advertising, for the first time in a decade. After the revised Green Guides come out later this year, the FTC is expected to devote more energy to enforcing them. A new administration in January may also result in increased enforcement efforts, since both major parties' candidates are using their concern for the environment in campaigning this year.
What can we expect the FTC's future enforcement efforts to look like in the area of environmental marketing? The agency's past consent orders and stipulated judgments provide some clues, albeit imperfect ones.
These proceedings, from the 1990s, reflect the marketplace as it existed then. Among the top areas of concern for the agency: 38 percent of the 37 proceedings addressed "biodegradable" or "photodegradable" claims; 32 percent addressed claims of "recyclable"; and 27 percent addressed claims of "ozone friendly" or "CFC free." These categories are not mutually exclusive, and many proceedings addressed more than one type of environmental marketing claim.
While some environmental marketing claims in use in the 1990s are still widely used to market products today -- "recyclable" -- others are not -- "CFC-free" is decidedly passé, since CFCs were banned long ago. Recent years have brought new environmental marketing claims, for example, claims that energy usage is "renewable" or "sustainable," or that a building was designed to be "green."
Even with the swiftly changing marketplace and the shifting political landscape, the FTC's past enforcement actions offer some basic lessons that can help businesses think like the FTC. Here are just four of them.
1. To see from the FTC's perspective, see from the consumer's perspective.
An environmental marketing claim may be "deceptive" even if there is no proof that consumers were actually misled -- and even if the claim is technically correct. The FTC's view is that liability under the FTC Act is based on whether the "act or practice is likely to mislead, rather than whether it causes actual deception." Furthermore, as the former commissioner of the FTC remarked, the "Green Guides focus on how consumers interpret or understand claims, not on what terms like 'biodegradable' may mean scientifically." A FTC consent order from 1993 is illustrative. The respondent sold an aerosol cleaning product called "Perfect Duster II." The product's packaging claimed that the aerosol "contains no ozone depleting CFCs." This claim was technically accurate, since the product did not contain any chlorofluorocarbons. Nonetheless, the FTC ordered the respondent to cease and desist from making this claim, because Perfect Duster II contained HCFC-22, a CFC-substitute that also depletes the ozone layer. The FTC reasoned that respondent's label would likely be understood by consumers to mean that the aerosol product did not contribute to ozone depletion, an untrue claim.
2. Substantiation is mandatory, not optional.
The FTC's position is that businesses bear the burden of gathering and maintaining evidence to back up their environmental claims. Even if an environmental claim happens to be true, it is false and misleading if the business cannot show a reasonable basis to substantiate it.
In another FTC proceeding from the early 1990s, a diaper manufacturer advertised that its disposable diapers were "biodegradable," and better for the environment than other diapers. The FTC's complaint did not allege that the respondent's claims were factually inaccurate. Instead, the respondent was ordered to cease and desist from making biodegradable claims unless and until it obtained competent scientific evidence substantiating its claim.
3. Broad statements of environmental benefit can be dangerous. The vast majority of the FTC proceedings examined (84 percent) included the allegation that the respondent's claims about some broad environmental benefit were deceptive. The Green Guides warn that broad claims like "environmentally friendly" may convey a wide range of meanings to the reasonable consumer, and that these express or implied claims must be substantiated, or appropriately qualified, to avoid deception. Put more simply, broad claims of environmental benefit invite scrutiny of every aspect of a product's environmental impact.
For example, a company advertised that its de-icer was "environmentally safe" because it contained calcium magnesium acetate (CMA), which purportedly has certain environmental benefits. The FTC alleged that while the de-icer did contain CMA, the de-icer was 95 percent sodium chloride (rock salt), the environmental harm from which overwhelmed any benefit provided by the CMA. The respondent was ordered to stop advertising its product as environmentally safe.
4. If a picture is worth a thousand words, those words must not be deceptive. Environmental marketing claims need not involve words. The Green Guides provide the example of a "globe icon" used on a product label, and conclude that such a label "is likely to convey to consumers that the product is environmentally superior to other products." The FTC warns that if a manufacturer cannot substantiate this broad claim, and does not appropriately qualify the claim using clear and prominent language, the claim is be deceptive.
In the mid-1990s, the White Castle restaurant chain put the three-chasing-arrows recycling symbol on its food packaging, along with the word "recyclable." The packaging, though technically recyclable, could only be processed at one of a few collection facilities nationwide equipped to recycle material contaminated by food. The FTC alleged that the statement "recyclable" and the depiction of the three chasing arrows was deceptive, because an ordinary consumer would assume that the product could be readily recycled. The authors predict that as environmental marketing becomes more sophisticated, using a set of tag lines, "green" logos, symbols and images will come under increasing scrutiny.
Most of the FTC's efforts to stop deceptive environmental advertising did not result in fines. But even without fines, the consequences of an FTC enforcement action are significant. These can include the out-of-pocket costs of retracting an advertising campaign or changing product labels, as well as attorneys' fees; harm to a business' reputation and customer relationships; exposure to private consumer lawsuits; and the disruption and indignity of placing one's present and future marketing efforts under the government's microscope. The current period of relative under-enforcement against deceptive environmental marketing claims will likely come to an end, and there is no time like the present for businesses to ensure that their "green" marketing practices are consistent with the FTC's interpretation of the FTC Act.
Huie is an associate and Veenstra a summer associate in the San Diego office of Latham & Watkins LLP.