The U.S. Federal Trade Commission (“FTC”) has released final revisions to its Environmental Marketing Guides, commonly known as the “Green Guides.” The Green Guides, the FTC’s guidance document on enforcement of Section 5 of the FTC Act and similar state laws that prohibit deceptive or misleading marketing acts or practices, illustrate how the FTC monitors companies to ensure that advertisements of the environmental attributes of companies’ products are truthful.
Monday’s release of the new Green Guides comes two years after the FTC first announced proposed revisions to the guides to address increases in potentially deceptive green marketing. In October 2010 we offered you our insights into those proposed revisions and what they could mean to companies involved in making any sort of environmental claims (October 2010 update). Today, we review those important revisions and highlight the few changes that the FTC has made since that time in response to nearly 340 unique comments and over 5,000 total comments on the proposed draft.
While the revisions reflect substantial changes from the FTC’s old Green Guides, first published in 1992, the changes made since the 2010 proposal are relatively minor. As in 2010, the revisions shy away from proposing guidance on the terms “sustainable,” “natural,” and “organic.” However, there are some differences that may be significant. For example, the final revisions add as part of the Green Guides’ general principles that “when a marketer targets a particular segment of consumers, the Commission will examine how reasonable members of that group interpret the advertisement.” This suggests that the FTC may narrow how it interprets an advertisement depending on the target audience of that advertisement. Other examples of changes made since 2010 are highlighted below in an overview of the new Green Guides.
New Sections of the Green Guides
The FTC has added six new sections to the Green Guides, regarding the following types of environmental claims: (1) Carbon Offsets, (2) Certifications and Seals of Approval, (3) “Free-of” claims, (4) “Non-toxic” claims, (5) “Made with Renewable Energy” claims, and (6) “Made with Renewable Materials” claims.
No significant changes have been made to this section since it was proposed in 2010. Companies should have evidence to support their carbon offset claims, including using applicable accounting methods. In addition, the Green Guides advise companies to disclose if customer offset purchases fund emissions reductions that will not occur for at least two years, and the guides caution marketers not to advertise offsets if the activity that forms the basis of the offset is already required by law.
Certifications and Seals of Approval
The final revisions have made slight changes to the 2010 proposal with respect to certifications or seals of approval by third parties. These changes are mostly cosmetic. One revision, however, might suggest some flexibility on whether certifications and seals are considered endorsements subject to the FTC’s Endorsement Guides, 16 C.F.R. Part 255. The 2010 proposal advised that all uses of certifications or seals of third-parties were endorsements, whereas the final revisions provide that these uses “may” be endorsements. The suggestion seems to be that companies should look to the FTC’s Endorsement Guides for final determination. Other than this change, this new section still cautions companies from making general environmental benefit claims by not conveying the basis for a certification, as such general environmental benefit claims can almost never be substantiated.
“Free-of” and “Non-toxic” Claims
The 2010 proposal combined “free-of” and “non-toxic” claims into one new section. The final revisions separate out these claims into two distinct sections. With regards to “free-of” claims, the final revisions clarify that a company may make “free-of” claims where the product, package, or service at issue contains only a “trace amount” of the substance, as opposed to a “de minimis” amount. This is qualified by requirements that the “trace amount” of the substance is no more than an “acknowledged trace contaminant or background level,” that the substance does not cause material harm to consumers, and that the substance has not been added intentionally. The new section still advises that an otherwise truthful “free-of” claim may be deceptive if the product, package, or service at issue contains a replacement substance that poses similar risks, or if the substance is simply not associated with the product category.
Other than providing a separate section for “non-toxic” claims, the significance of the guidance has not changed. Companies should have scientific evidence substantiating a “non-toxic” claim, which when used generally conveys that a product is non-toxic for both humans and the environment, or should clearly and prominently qualify their claims as appropriate.
Made with Renewable Energy and Made with Renewable Materials Claims
These new sections deal with claims that products are made with either renewable energy or renewable materials. With regards to “made with renewable energy” claims, it is deceptive to make unqualified claims if fossil fuels or electricity derived from fossil fuels is used to make any part of the product. The final revisions qualify this cautionary statement by allowing companies to match any such non-renewable energy uses in its products with renewable energy certificates. The final revisions also add a suggestion that companies should specify the percentage of renewable energy used in making a product when making a qualified “made with renewable energy” claim.
With regards to “made with renewable materials” claims, the changes made by the final revisions are largely cosmetic. The FTC advises that these claims may be interpreted differently than intended by marketers, so companies should minimize risk by qualifying their claims and explaining what materials are used in their products and why those products are renewable.
Revisions to Old Sections of the Green Guides
In addition to adding the new sections discussed above, the final revisions also modify existing sections of the Green Guides regarding the following types of claims: (1) General Environmental Benefit, (2) Compostable, (3) Degradable, (4) Ozone, (5) Recyclable, and (6) Recycled Content. The sections on compostable claims, degradable claims, ozone claims, and recycled content claims remain largely the same with no significant changes from the 2010 proposal. There have been changes made to the sections on general environmental benefit claims and recyclable claims since the 2010 proposal, and these changes are highlighted below.
General Environmental Benefit Claims
Perhaps the most significant revision to the old Green Guides is in this section involving general environmental benefit claims. The final revisions, as did the 2010 proposal, clearly warn companies against making unqualified general environmental benefit claims. Such claims, the FTC explains, are difficult to interpret and it is highly unlikely that companies can substantiate all the possible reasonable interpretations. Companies should use “clear and prominent qualifying language” to limit these claims to specific benefits of a product.
The final revisions add one additional instruction to the 2010 proposal: “Marketers should not imply that any specific benefit is significant if it is, in fact, negligible.” Companies should be able to substantiate all claims that convey that a product is more environmentally beneficial overall because of a specific environmental benefit. As substantiation, the FTC suggests that companies analyze the environmental trade-offs inherent in the creation and use of the products at issue.
The Green Guides advise that companies should qualify claims that their products are recyclable to avoid deception about the availability of recycling programs and collection sites to consumers. Companies may make unqualified recyclable claims if applicable recycling facilities are available to a “substantial majority” of consumers or communities where the product is sold. The 2010 proposal informally interpreted “substantial majority” to mean at least 60 percent. The final revisions fully accept this interpretation.
The final revisions also clarify how companies should qualify recyclable claims when recycling facilities are not available to at least 60 percent of product consumers. Marketers may always qualify their recyclable claims by stating the percentage of consumers or communities that have access to applicable recycling facilities. Alternatively, marketers may qualify their claims by varying the strength of the claims depending on the availability of recycling facilities. The final revisions offer specific examples of qualifications that companies may use if recycling facilities are available to “slightly less” than 60 percent of product consumers as well as if recycling facilities are available only to “a few consumers.”
The Green Guides will soon be published in the Federal Register under 16 C.F.R. Part 260: Guides For the Use of Environmental Marketing Claims. The text of the Green Guides may be found on the FTC’s website. The Green Guides are interpretive, non-binding guidance, and are technically not binding. Any prosecution by the FTC will have to establish that the challenged act or practice is unfair or deceptive in violation of Section 5 of the FTC Act.
In California, public prosecutors, including the California Attorney General and County District Attorneys’ have prosecuted numerous green marketing cases using the broad powers granted by the Unfair Competition Law, Cal. Bus. & Prof. Code §17200 et seq., and California’s green advertising law, Business & Professions Code 17580 et seq. That law incorporates the FTC’s Green Guides by reference, and provides that conformance to the Green Guides is a defense to lawsuits brought under that section. Not to be left out, plaintiffs’ lawyers have also brought several private consumer class actions against consumer product companies, alleging that green claims were false and misleading, and that consumers who relied on such claims were entitled to refunds.
In sum, any company that wants to market the environmental attributes of their products, services, or operations should be familiar with the Green Guides, and should review proposed claims with their legal counsel to ensure that their practices remain compliant with the FTC’s final guidance.
Morrison & Foerster LLP is widely recognized as a leader among law firms on cleantech issues, including those concerning “green advertising” and also maintains full service environmental law and consumer products practices. If you would like assistance, please contact Bob Falk, Bill Tarantino, or Brooks Beard in our San Francisco office at (415) 268-7000, Peter Hsiao in Los Angeles at (213) 892-5200, or Reed Freeman or Julie O’Neill in Washington, D.C. at (202) 887-1500.