Tim Muris,
Maryanne Kane,
Christine Wilson
Given the proliferation of “green” claims in corporate advertising, the Federal Trade Commission (“FTC”) recently has increased its scrutiny and enforcement efforts regarding environmental advertising claims. On June 9, 2009, the Commission announced three new enforcement actions challenging environmental claims as fraudulent and deceptive. The FTC complaints alleged that three companies, Kmart Corp., Tender Corp., and Dyna-E International, made false and unsubstantiated claims that their products were biodegradable. Kmart Corp. and Tender Corp. settled the FTC’s charges, but the Dyna-E matter will proceed in administrative litigation. These three enforcement actions represent the latest in a series of FTC initiatives to target misleading claims that tout “green” attributes of products and services.
The Commission announced its three new environmental advertising cases on June 9, 2009 at a hearing before the House Energy and Commerce Committee’s Subcommittee on Commerce, Trade, and Consumer Protection. The hearing focused on various dimensions of environmental advertising, including “greenwashing” and other environmental marketing practices that may be deceptive or confusing to consumers. At the hearing, the Commission affirmed its commitment to bring enforcement actions to “target misleading green claims, false energy savings claims, and bogus gas-saving devices.” In the FTC’s complaints against Kmart Corp., Tender Corp., and Dyna-E International, the agency alleged that although the defendants had claimed their products were “biodegradable,” their products typically are disposed in landfills, incinerators, or recycling facilities, where it is impossible for waste to biodegrade within a reasonably short time.
Kmart Corp. and Tender Corp. agreed to settle the FTC’s charges with orders that bar the companies from making deceptive “degradable” product claims and that require them to have competent and reliable scientific evidence to support their environmental claims. The settlement with Tender also requires the company to disclose clearly whether any biodegradable claim applies to the product, to the packaging, or to a component of either. Both settlements contain record-keeping and reporting provisions to assist the FTC in monitoring the companies’ compliance.
At the hearing, the FTC also testified that it is currently updating its Green Guides, the “rules of the road” for individuals and businesses that make environmental marketing claims. First issued in 1992, the Green Guides explain how consumers understand commonly used environmental claims and describe the basic elements needed to substantiate environmental claims. They also provide examples of how marketers should qualify specific claims to avoid deception. In November 2007, to launch its update of the Green Guides, the FTC sought public comment regarding whether the Green Guides should address certain claims, such as “carbon neutral” and “sustainable,” that were not common when the Commission first issued the Guides over a decade ago. In addition, last spring, the FTC held a series of public workshops on emerging green marketing issues and sought additional public comment in connection with the topics addressed at each workshop. The FTC now plans to conduct consumer perception research focused on consumer understanding of particular “green” marketing claims, such as “eco-friendly,” “sustainable,” and “carbon neutral.” The Commission expects that the consumer perception survey and its analysis will be completed later this year.
We expect environmental marketing to continue as an enforcement priority for the FTC and a matter of Congressional interest. In concluding its testimony, the FTC stated that “companies must compete on the basis of legitimate advertising claims and consumers must be able to rely on those claims. The Commission, therefore, will continue its efforts to ensure the truthfulness of environmental marketing.”
Marketers who wish to tout the “green” attributes of their products and services are well advised to adhere closely to the FTC’s advertising substantiation principles in general and to the Green Guides in particular. Companies also should be prepared to adapt their marketing strategies to conform to the revised Green Guides once they are issued.