As energy efficiency and environmentally conscious products have become “all the rage,” government oversight of related advertising claims have increased and, as such, manufacturers, producers, suppliers and advertisers of “green” products must be especially careful to avoid unfair or deceptive claims in their advertising.
Part I of this two-part series on the legal risks in green marketing treats two of the principal federal laws that require attention in devising a green marketing plan. Part II, which will be posted next week, samples a few state laws that impact marketers of green products and services.
Federal Trade Commission Act – Green Guides
Section 5 of the Federal Trade Commission Act authorizes the FTC to regulate the advertising of goods and services. Persons and corporate entities who engage in any unfair or deceptive acts or practices in their marketing activities are subject to disciplinary action, which may include injunctions, corrective advertising, restitution and/or civil fines of up to $16,000 for each violation.
In 1992, the FTC first issued its Guide for the Use of Environmental Marketing Claims, also known as the "Green Guides," for the purpose of assisting advertisers of products and services having environmental attributes to avoid making deceptive or untruthful marketing claims in violation of the FTC Act. The Green Guides establish general principles that apply to all sales promotional activities and provide direction on particular environmental marketing claims. Some "general principles" under the Green Guides include (1) the use of clear, conspicuous and understandable qualifications and disclosures in advertising, (2) the avoidance of overstatements relating to environmental attributes, especially ones created by implication, and (3) substantiation. Direction on particular environmental marketing claims in the Green Guides relates to the use of terms connoting general environmental benefits, such as "eco-friendly," and representations on specific attributes, such as degradability, recycled content, and ozone safety and friendliness.
Although in years past, the FTC had not prosecuted very many companies for making false and unsubstantiated marketing claims relating to the alleged environmental attributes of their products, this has started to change. For example, in 2009, the FTC brought seven enforcement actions over claims related to the biodegradability of certain paper products and claims related to the bamboo content of certain textile products and, early this year, the FTC issued written warnings to 78 retail operations, such as Bloomingdale’s, Bed Bath & Beyond and Sears, instructing them to refrain from labeling and advertising certain clothing items made from rayon as bamboo products.
The FTC’s stepped-up efforts to curb false, misleading or unfair green marketing claims, sometimes referred to as “greenwashing,” should give pause to every business that participates in the green economy and should encourage these firms to develop and update regularly a marketing plan that is compliant with the Green Guides. In this regard, there is no better time than the present, as this task is likely to become even more challenging once the FTC amends and supplements its Green Guides, which is expected to occur at the end of this summer. Indeed, in a recent article published online by Advertising Age, the author predicts that these new Green Guides could “radically reshape” what marketers may say about the green goods and services they sell and includes comments about how the new Green Guides may even “render most of the more than 300 environmental seals of approval now in currency on packaging and products largely useless and possibly in violation of FTC standards.” If this speculation turns out to be true, advertisers of green products and services will likely have no choice but to rethink their marketing strategies.
Moreover, the FTC is not the only watchdog to be concerned about. On the contrary, commercial competitors may file a private lawsuit for false advertising under Section 43(a) of the Lanham Act. This statutory provision and Section 5 of the FTC Act are similar in that they both contain broad generic standards of "misrepresentation" and "deceptiveness." Businesses have already utilized Section 43(a) of the Lanham Act to challenge the validity of their rivals’ green marketing claims and will likely continue to do so, making this statutory cause of action a powerful tool against greenwashing.
The foregoing demonstrates some of the legal pitfalls at the federal level that manufacturers, producers, suppliers and advertisers of green goods and services may encounter and must consider when devising a marketing plan for product packaging, labels or promotional literature. Potential liability is also significant at the state level. Stay tuned for Part II of this series, which will feature a discussion of selected state consumer protection and specific green marketing laws.