FTC Finalizes ‘Rules of the Road’ for Environmental Marketers in Update to Green Guides
The Federal Trade Commission (FTC) has finalized the latest version of the Guides for the Use of Environmental Marketing Claims (Green Guides). Effective October 11, 2012, the Green Guides provide marketers with insight regarding when environmental marketing claims are unfair or deceptive and therefore subject to enforcement under Section 5 of the Federal Trade Commission Act (FTC Act), 15 U.S.C. 45. With the new Green Guides, the FTC is aiming to strengthen, add specificity to, and enhance the FTC’s guidance on making general environmental benefit claims.
Purpose of the Green Guides and the FTC Enforcement Strategy
The FTC first promulgated the Green Guides in 1992 as a means of helping marketers and businesses avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 45. While the Green Guides are administrative interpretations of the law and are not independently enforceable, the FTC will likely use the Green Guides as a set of standards to inform what is considered unfair or deceptive marketing and therefore subject to enforcement. The Green Guides address 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. In the new Green Guides, the FTC has made clear that its guidance is also applicable to claims made during “business-to-business” transactions.
In a 2009 congressional hearing, James A. Kohm, Associate Director of the Enforcement Division in the Bureau of Consumer Protection at the FTC, declared that the latest revisions of the Green Guides would be the first step in the Commission’s “multi-tiered approach” to combat what he referred to as a “tsunami of environmental marketing” that developed over the past decade. According Associate Director Kohm’s prepared statement, the Commission planned on first, promulgating new rules and guides to make the “rules of the road” clear for businesses; second, directly challenging fraudulent and deceptive advertising through enforcement actions; and third, by informing consumers.
The 2012 Revision of the Green Guides
The new Green Guides include guidance on a number of specific claims that could be made by marketers. Some claims addressed in the new Green Guides simply were not as prevalent when the guidance was last revised in 1998, such as claims related to carbon offsets, claims made regarding renewable energy, and sustainable or organic / natural claims.
General Environmental Benefit Claims – The new Green Guides specifically state that companies should avoid making “unqualified general environmental benefit claims because they are likely difficult to substantiate.” The FTC advises companies that they “use clear and prominent qualifying language to convey that a general environmental claim refers only to a specific and limited environmental benefit(s).” For example, if a business was to advertise that a product was manufactured in a facility that is powered by solar power, the business should not market the product as being made with “green” energy or “clean” energy. Instead, the business or marketer should provide the appropriate qualifier to the general environmental claim (e.g., the product is made with solar powered energy).
Carbon Offsets – The new section on carbon offsets cautions marketers not to advertise carbon offsets when the activity that forms the basis of the offset is required by law.
Certifications and Seals of Approval – The Green Guides provide that it is deceptive to misrepresent that a product or service is endorsed or certified by an independent third party.
Free-of Claims – For the first time, the Green Guides provide guidance as to when it is deceptive to misrepresent, directly or by implication, that a product, package, or service is free of a chemical or ingredient that may be a concern to the environment.
Renewable Energy Claims – With regard to renewable energy, the FTC advises that consumers are likely to interpret the use of the term “renewable” differently than what is intended by marketers. Marketers are encouraged to minimize the risk of deception by specifying the source of the renewable energy, (e.g. solar or wind energy).
Renewable Materials Claims – As with other claims, the new Green Guides advise that claims – both implied and express – that a material is renewable, be substantiated. Marketers are advised to “clearly and prominently” qualify renewable materials claims. Further qualification is required for products that contain less than 100 percent renewable materials.
Recent Enforcement Actions
In late October 2012, the FTC announced the first enforcement settlements since finalizing the Green Guides. These latest settlements involved “free of” claims made by two US paint companies. According to the FTC, by labeling paints as “VOC free” or containing “Zero VOCs,” two paint companies had misled consumers to believe their paints were free of volatile organic compounds (VOCs) when the paints at issue actually contained more than trace amounts of VOCs. See In the Matter of The Sherwin-Williams Company, FTC File No. 112 3198; and In the Matter of PPG Architectural Finishes, Inc., FTC File No. 112 3160.
While the proposed consent orders do not address whether any penalties are associated with the settlements, the FTC is seeking injunctive relief. Specifically, the proposed consent orders prohibit the companies from claiming that their paints contain “zero VOCs,” unless such a claim is supported by competent and reliable scientific evidence that the paint contains no more than trace levels of VOCs.
The Green Guides provide general guidance to businesses and marketers on how to avoid making environmental claims that could run afoul of the FTC Act’s prohibition against unfair or deceptive acts or practices. Each business and marketer must analyze the statements and assertions made with respect to its products to ascertain whether the representation could be seen as crossing the line. How is this done? First, be sure any claim made by the business, environmental or otherwise, can be substantiated in the manner required by the FTC. Next, ensure that all internal review processes (operations, sales and legal) understand the need for legitimate substantiation of any assertion made with respect to renewable energy or claim of carbon offset. If any claim is ambiguous or unclear without the disclosure of certain qualifications, conditions or caveats, be sure such disclosures are included in the marketing materials, and are also clearly and prominently displayed in close proximity to the claim you are qualifying.
Michael Weller is an environmental and energy attorney in the Environmental Strategies Group at Bracewell & Giuliani LLP. Joe Tirone is a partner in the firm’s energy practice, focusing on energy project and infrastructure development, mergers and acquisitions, and project finance.
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