Federal Trade Commission Issues Guidance/Steps up Enforcement Efforts on Green Claims

March 21, 2011

Consumers and businesses increasingly choose products based on claims about environmental impact and energy conservation. A current study suggests, for example, that the Energy Star label (under a program jointly sponsored by EPA and the Department of Energy) influences as much as 70% of television purchases. An often-cited 2005 nationwide survey found that 90% of consumers base their buying decisions, in part, on the perceived environmental impact of their product choice. The Federal Trade Commission (FTC) has primacy over making claims in this area involving business to consumer (and business to business) transactions, and has recently stepped up its enforcement efforts, including through revision of its "Green Guide" regulations in October 2010. Some issues the FTC will address have broad-reaching consequences, such as its action on a petition by the Union of Concerned Scientists asserting that green house gas reduction claims by ethanol producers are not based on "sound science."

The FTC regulates green product claims primarily under the Federal Trade Commission Act, 15 USC 45.[1] The FTC regulations on the subject include the Guides for the Use of Environmental Marketing Claims ("Green Guides" or "Guides"), as first issued in 1992 and last updated in 1998, see 16 C.F.R. 260 et seq.[2] In October 2010, and following an extensive consumer perception study, the FTC proposed a significant overhaul to the Green Guide and, in the same year, commenced efforts to substantially increase enforcement of regulatory requirements for green advertising, available here.[3] In the last year and a half, the FTC has brought three complaints challenging claims for "biodegradability" (asserting that products in fact broke down no faster than comparable materials in landfill environments) and another four complaints disputing claims that certain textile products were manufactured using non-toxic or environmentally "friendly" processes. In a settlement announced in January of this year, a company called Tested Green agreed to cease selling unsubstantiated environmental certifications (over 65,000 certifications had been issued at the time of the settlement). These increased recent enforcement efforts contrast with the total of 45 complaints brought since the first Guide was issued in 1992.[4]

In brief, the proposed new Guide provides the following revised standards for marketing claims:

Certifications and Seals must be substantiated and limited to specific product attributes, with a preference for substantiation by independent third parties, 16 C.F.R. Part 255.
Degradable designations must be based on demonstrable evidence that decomposition will occur in a reasonably short period of time, which must be no more than one year after customary disposal.
Compostable designations must be based on demonstrable evidence that the subject product or packaging will break down in approximately the same time as materials with which it is composted.
Recyclable designations must follow a determination that a substantial majority of consumers/communities have access to relevant recycling facilities for the subject product; otherwise, the claim must be qualified.
Renewable claims are to be accompanied by specific information, i.e., the source of renewable energy used in manufacture or feedstock replenished (consumers tend to confuse "Renewable" with the term "Recyclable").
Free of Toxics may be deceptive where more than "de minims" quantities of toxics are present or where the "target" substance has been replaced with another substance of comparable toxicity; claims that an item is "non-toxic" likely convey that the product is non-toxic both for humans and the environment.
Carbon Offsets claims must be based on "appropriate accounting methods" and reasonable commitments for maintaining the same.
Sustainable/Broad Claims that a product is environmentally friendly are typically untrue or impossible to substantiate; the FTC indicates that it will give particular scrutiny to such claims.

Companies should carefully review green marketing programs in light of the FTC's enforcement initiative. In some circumstances, additional substantiation and third party audits may be required to assure against sanctions (including "cease and desist order") in the event that the FTC files a complaint under the Act.

Please view related alert, "California's Approval of Proposition 26 May Undermine Green Chemistry and Global Warming Efforts."

[1] Internationally, green product claims are subject to both European Union pronouncements and ISO 14021 which is intended less as an enforcement standard than an effort to enhance sales of environmentally-friendly product. In the US, State and local governments are issuing their own guidance (not directly preempted by the Act) including, for example, California's regulation of plastic packaging and green chemical product design requirements related in our prior Alert.
[2] The FTC has issued other guides which indirectly relate to green product claims, including guides for Automobile Fuel Economy, Appliance and Energy Saver products. The FTC has consulted with EPA, DOE and Department of Agriculture on its Guides.
[3] The FTC last advised that it plans to promulgate the Guides in final form in summer 2011.
[4] NY Times "FTC Moves May Signal Start of "Greenwashing" Crackdown", February 3, 2010.