Where the Regulators Do Not Tread: Lessons From the Greenlist Case

The enforcement environment for green marketing changed last month, not under the supervision of the Federal Trade Commission, but thanks to consumers.

Followers of greenwashing cases have watched with interest as SC Johnson faced a class action lawsuit, where California and Wisconsin consumers claimed that the company’s Greenlist seal deceived consumers, suggesting that an independent third party had certified several of SC Johnson’s famous products, including Windex.  The substance of the Greenlist certification program itself wasn’t so much the problem; the issue was that consumers were confused by the source of the Greenlist seal.  The basis for their claims under state consumer protection laws was that the seal was not adequately explained, and it was deceptive for SC Johnson to use a seal that looked like it was awarded by a neutral party.

SC Johnson put the case to rest on July 8, announcing a settlement of both the California and Wisconsin claims in a press release, later reported in this publication, and the Milwaukie Journal Sentinel, not far from SC Johnson’s Racine, Wisconsin headquarters.   SC Johnson has taken the dispute in stride, proceeding to expand its Greenlist program, learning from the case the importance of making clear disclosure.  On the other hand, SC Johnson has likely paid a significant sum to settle these claims (the terms of the settlement are confidential).

With the benefit of reflection on this case, one can make a couple important observations about regulation of green marketing in the United States.

First, the Greenlist case is a great example of the type of case that the FTC is not likely to bring. Historically, the FTC has announced relatively few cases involving the enforcement of the agency’s Green Guides, no more than a handful per year. Simply looking at the statistics, it’s clear that FTC enforcement in the area of green marketing is relatively limited.  And when the agency has publicly challenged green marketing claims, the claims involved were in clear violation of the Green Guides.  For example, the most recent enforcement action announced by the agency, in January 2011, was against the marketers of the Tested Green certification program, which was a sham because Tested Green didn’t actually test products.  The Greenlist case was certainly not as simple.  SC Johnson was in fact testing products against its own program, and there isn’t any evidence that SC Johnson sought to deceive consumers.  From the FTC’s perspective, challenging SC Johnson would have been a risky move, as the case was not an obvious winner for the agency.

Second, the Greenlist case may turn out to be the first of many lawsuits on the greenwashing issue, simply because lawyers managed to extract a settlement.  While FTC is cautious about prosecuting cases that it could lose, and cautious about political fallout, private plaintiffs lawyers don’t have those worries.  Their calculus is focused on the potential for major trial verdicts, or settlements.  And now that lawyers in California and Wisconsin have obtained one settlement in a major greenwashing case, expect them to pursue others.

It is unreasonable to argue that a single case makes a trend. But the settlement in the Greenlist case is a wake-up call of sorts.  FTC has served the economy and consumers by investing in the development of the Green Guides, and the New Green Guides, which set forth the rules of the road in green marketing.  (Interestingly, while the Green Guides are federal regulations that only the FTC can enforce, they are compatible with state consumer protection laws that private parties can enforce.)  But it may be private parties that do most of the greenwashing enforcement, especially when judgments and cash settlements are available.  So while government regulators have to deal with their budgets and political oversight, attorneys representing classes of consumers – call them self-appointed regulators – now have one more reason to be confident that they can profitably pursue greenwashing claims.

Joseph (Jay) Eckhardt is an attorney at Stoel Rives, LLP, based in Portland, Oregon.  Jay writes and speaks frequently on legal issues relating to green marketing and is the editor of the firm’s FTC Green Guides Resource Page.