FTC Proposal to Modernize Green Guides Clarifies Environmental Marketing Standards
Clean Energy, Climate Change & Sustainability Law Alert 10/11/10 Cynthia A. Faur, Nicole M. Murray
On October 7, 2010, the Federal Trade Commission (the "FTC") proposed long-awaited revisions to its environmental marketing guidelines known as the Green Guides. Last revised in 1998, the Green Guides became outdated as "green marketing" exploded over the last 10 years. The proposed Guides address what marketers can say in advertising about the use of renewable materials, renewable energy and carbon offsets and other similar environmental marketing claims such as "green" or "environmentally friendly." The FTC's message is clear: the FTC will be more aggressive against false or misleading environmental claims. The FTC enforcement of false or unsubstantiated environmental claims has increased in 2010. Once the revisions are finalized, enforcement will likely continue to be an FTC priority. Comments on the proposed rules can be submitted to the FTC until December 10, 2010.
What are the Green Guides?
The Green Guides are federal regulations directed to environmental marketing claims made in advertising. But they are not firm rules. Instead, the Guides outline general principles and provide specific guidance about consumer perception and how to substantiate and qualify claims. As a result, environmental claims that comply with the Green Guides are less likely to be found to mislead consumers or otherwise be viewed as deceptive.
The FTC's proposed revisions to the Green Guides are the result of significant public and corporate input over the past three years and the completion of consumer perception study undertaken by the Commission to evaluate the general public's perception of environmental claims in advertising. The FTC's general advertising principles are unchanged. All advertising claims, including environmental claims must be specific, substantiated, and not misleading or deceptive. The proposed revisions, however, clarify the steps companies will need to take to substantiate and qualify their environmental claims.
Proposed Revisions to Guidelines for Common Environmental Marketing Claims
The proposed revisions to the Green Guides address numerous types of environmental marketing claims, including the use carbon offsets, compostable claims, degradability claims, free-of and non-toxic claims, refillable claims and renewable materials claims. The following is a short discussion of the proposed Green Guide provisions relating to some of the most the common types of environmental claims seen in today's marketplace: general environmental claims; use of seals of approval and endorsements; recycling claims; biodegradability claims; and renewable energy claims.
General Environmental Claims
Perhaps the most sweeping change is the limitation on general environmental claims. Many products claim to be "environmentally friendly," "eco-friendly" or "green." Under the proposed new Guides, unqualified claims such "environmentally friendly" will likely face regulatory scrutiny in part because the FTC's consumer perception study revealed that almost one-third of consumers surveyed interpreted a general claim like "green" or "eco-friendly" to indicate that a product had no negative environmental impact at all. In the vast majority of cases, that would not be true, and in any event would be almost impossible to substantiate. Instead, advertisers should provide clean and prominent qualifications, and should limit the claim to a specific benefit. Marketers should ensure the advertisement's context does not imply deceptive environmental claims.
Seals of Approval and Endorsements
Another type of environmental claim that has become more prevalent in marketing is the use of seals and third-party endorsements. Because the use of seals and endorsements has increased dramatically, the FTC proposed adding a whole new section of the guides to address this topic. Among other things, the FTC clarifies that environmental seals and endorsements are subject to the "Endorsement Guides" at 16 C.F.R. Part 255, which provide the administrative guidance for the proper use of seals and endorsements in marketing. The FTC also proposes that seals and endorsements, like general environmental benefit claims, should not be used without qualifying statements that can be substantiated. Finally, the FTC proposes that a seal or endorsement type claim may be substantiated if the seal or endorsement is based on competent and reliable scientific evaluation.
Claims regarding the ability of a product to be recycled or the recycled content of a product are not new to marketers, consumers, or the Green Guides. Nevertheless, consumer perception and the need to qualify and substantiate such claims remains an issue, and in its proposed revisions to the Green Guides, the FTC has proposed clarifications to its already extensive discussion of recycling and the use of recycled material. Of particular note is the FTC's requirement that an unqualified "recyclable" claim may only be made for products for which a substantial majority (approximately 60 percent) of consumers are able to recycle the material within the distribution area for the product. If recycling is not available to a "substantial majority" of consumers, additional qualification of the claim is necessary.
A different subset of recycling claims, involving the recycled content of products, resulted in more recommendations for revisions. The current guides do address recycled content. However, the FTC specifically rejected a number of proposals regarding recycled content claims. The FTC's studies suggested that consumers would be misled if advertisers used averaging or other alternative calculating methods to determine the recycled content across product lines, especially in the case where one product line contained recycled materials but the other product line did not. As a result, the FTC declined to approve any such revisions and requested additional comments about potential qualifications that could make such claims accurate.
Claims that products or packaging are biodegradable have been the subject of enforcement actions, proposed bans, and now, new regulation under the Green Guides. In 2009, the FTC took enforcement action against three companies for selling products that were labeled "biodegradable" but that the FTC believed were routinely disposed of in landfills, where it is extremely unlikely that the products would actually degrade within any reasonable period of time. In California this past August, the Senate passed a bill that would have banned all biodegradability claims for plastic products, but the Governor vetoed the law in September. Biodegradability claims are under such scrutiny because of concerns that the claims could be misleading or deceptive. In the revisions to the Green Guides, the FTC has also proposed new guidance for these claims in order to clarify what constitutes a reasonable time period for a product to degrade. Specifically, the FTC proposes that biodegradability claims, unless they are qualified to indicate otherwise, will be assumed to mean that the item will break down within a one year time period under the conditions in which the product is normally disposed.
Renewable Energy Claims
Renewable energy claims are not specifically addressed in the 1998 Guide. In recent years, however, many companies have begun to use renewable energy as a component of their production processes or have begun to purchase renewable energy credits ("RECs") to offset their fossil fuel derived energy usage. The new Guides contain several recommendations to ensure that renewable energy claims are not misleading. The key takeaway, however, is that companies should not claim that a product is made with renewable energy unless all or virtually all of the product's components were made with renewable energy and the company retains ownership of the RECs associated with that renewable energy.
The Green Guides do not apply just to consumer-based advertising; they also apply to business-to-business
marketing. As discussed above, the proposed revisions to the Green Guides are extensive and cover many types of environmental marketing claims. The FTC is seeking comment on all aspects of its proposed revisions to the Green Guides. Comments on the proposed revisions may be submitted to the FTC until December 10, 2010. For assistance developing comments or evaluating green claims about your company's product or service in light of the proposed revisions to the Green Guides, contact Cindy Faur at (312) 715-5228 / email@example.com or Nikki Murray in Chicago at (312) 715-5241 / firstname.lastname@example.org, Katea Ravega in Phoenix at (602) 230-5541 / email@example.com or your Quarles & Brady attorney.