On October 20, 2016, the Federal Trade Commission and the U.S. Department of Agriculture co-hosted a roundtable discussion in Washington, D.C., entitled “Consumer Perceptions of ‘Organic’ Claims: An FTC and USDA Roundtable.” The purpose of the roundtable was to help the agencies better understand how consumers interpret “organic” claims when used in connection with nonagricultural products, which fall outside the scope of the USDA Agricultural Marketing Service’s National Organic Program (NOP).
By way of background, the FTC originally issued the Guides for the Use of Environmental Marketing Claims, commonly referred to as the “Green Guides” in 1992, and revised them in 1996 and 1998. In 2010, the FTC proposed further revisions to the Green Guides, and solicited feedback from industry and the public in an effort to make a final decision on what revisions might be appropriate. While the agency had solicited public comment and consumer perception survey evidence regarding “organic” claims, no such feedback was received. Because the FTC did not believe it had enough evidence regarding how consumers perceive organic claims, the 2012 revision of the Green Guides did not address them. The only other available guidance regarding organic claims comes from the USDA National Organic Program; however, the NOP’s jurisdiction is limited to agricultural products, and therefore the guidance’s applicability is limited to those products. Thus, advertisers of nonagricultural products must frame organic claims without the benefit of any directly applicable regulatory guidance.
Earlier this year, the FTC decided to revisit the issue of organic claims for nonagricultural products. Toward that end, the FTC and USDA conducted a consumer perception survey to identify any consumer misconceptions of “recycled” and “organic” claims. The survey did not identify any significant misunderstanding of recycled claims, but did suggest that a substantial number of consumers are confused as to the meaning of the term “organic” when used with nonfood products such as personal care products, mattresses and dry cleaning service. Thus, the purpose of the roundtable was to spark additional discussion on the topic and elicit additional public comment and other consumer perception evidence.
Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, delivered the opening remarks at October’s roundtable. Rich noted that the FTC is charged with protecting consumers from deceptive claims, including organic claims. She explained that Section 5 of the FTC Act governs these claims, and that the FTC examines reasonable consumers’ interpretations when determining whether enforcement action is warranted.
The panelists participating in the roundtable included a representative from the USDA National Organic Program, representatives from the FTC, participants from consumer advocacy groups, a participant from the Organic Trade Association (OTA), and researchers who have studied consumer perceptions of organic claims. There were three separate panel discussions, described below.
Consumer Misperceptions: The first discussion focused on consumer misperceptions of organic claims in the marketplace. Panelists recognized that organic claims seem to appeal to consumers interested in living a more natural lifestyle, and noted the obvious void of applicable guidance regarding use of the term “organic” to describe nonagricultural products.
It was suggested that, in connection with personal care products, consumers might believe that organic means 100% organic or free from harmful chemicals, when that is not necessarily what the claim was intended to convey.
Panelists also discussed the FTC/USDA survey’s finding that many consumers believe the term “organic” to mean the same thing when used to describe food and nonfood products. Many panelists believed that this demonstrates significant consumer confusion. Panelists also suggested that the term “organic” may suggest that the manufacturing or production processes were conducted in a certain way, which may or may not be the case.
Survey Findings: In the second panel, participants discussed the FTC/USDA survey’s finding that a significant number of respondents believed that a product should not be described as organic if it contains between 1% and 10% of materials derived from chemical, man-made processes. This finding was coined the “percentage problem” and was particularly interesting because USDA permits use the USDA organic seal if 95% of the product’s ingredients fit the definition of organic. Products containing 70% organic ingredients are similarly permitted to make the “made with organic” claim.
Laura Koss from the FTC Bureau of Consumer Protection noted that the agency’s focus is on deceptive claims, which are evaluated from the perspective of the reasonable consumer. She underscored the fact that marketers are responsible for both express and implied claims, so advertisers should be mindful of what an organic claim might imply.
One of the researchers noted that, according to a study, consumers were willing to pay the highest premium for a 100% organic product, and were still willing to pay a high premium for 99% organic products. Where products were only 95% organic, the willingness to pay a premium began to decline, and respondents were not willing to pay more money for products that were only 70% organic. FTC noted that these findings were interesting because they seem to quantify materiality.
Panelists also discussed some of the limitations on the FTC/USDA survey, which underscored the need for further research. Additionally, the question of requiring a “not USDA certified” disclaimer was raised. FTC noted that if such a disclaimer was going to be required, there would need to be solid evidence that consumers take away the false impression that organic implies USDA certification.
More Evidence Needed: The final discussion focused on the additional evidence that would be helpful to the FTC in crafting guidance, and how the guidance might look. In terms of the need for more research, panelists indicated that the following topics warrant further attention: (1) measuring deception in economic terms; (2) consumer understanding of USDA organic vs. organic; (3) perception of product labels before terms are defined vs. after terms are defined; (4) effect of USDA labels on nonfood products; and (5) eye-tracking studies measuring whether consumers would focus on “non-USDA certified” on product labels. Panelists agreed that further research on these topics would be helpful. FTC underscored the need for additional consumer perception evidence and public comments.
USDA expressed a desire to be actively involved in the process of drafting revised guidance to avoid inconsistencies. Most panelists agreed that two different sets of standards could cause further consumer confusion. In fact, most panelists (other than those from the FTC) seemed to be calling for specific guidance that not only defines organic, but also monitors the manufacturing process for compliance. FTC, on the other hand, seemed reluctant to issue overly specific guidance, particularly without solid consumer perception evidence. FTC also noted that, if and until revised guidance on organic claims in the nonagricultural context is issued, enforcement might be the appropriate way to deal with the void.
Why it matters: The overall purpose of the roundtable was to assist the FTC with determining whether the Green Guides should be further revised to incorporate guidance on organic claims in the context of nonagricultural products. The discussion, however, seems to have highlighted more questions than answers. There appeared to be a disconnect between the regulation and oversight recommended by USDA, OTA and consumer advocacy groups, and FTC’s ultimate jurisdiction. Various FTC staff explained that the purpose of any revised FTC guidance would be to assist businesses with complying with Section 5 of the FTC Act, and not to educate consumers or otherwise regulate the manufacturing process of nonagricultural products.
The public is urged to provide comments and other evidence that would shed light on consumer understanding of the term “organic” when used in connection with nonagricultural process. The deadline for providing commentary is December 1, 2016.