While the Federal Trade Commission (“FTC” or “Commission”) prepares a final version of its revised Guides for the Use of Environmental Marketing Claims (the “Guides” or “Green Guides”),1 the Commission continues to pursue its enforcement program following the principles enumerated in the existing Guides. Moreover, recent consumer lawsuits brought under California state law have relied on the Guides to challenge allegedly deceptive advertising claims.
First published in 1992,2 and amended in 19963 and 1998,4 the Green Guides are administrative interpretations of Section 5 of the FTC Act,5 which prohibit, among other things, deceptive acts or practices in or affecting commerce. The Green Guides are designed to help marketers avoid making deceptive claims by outlining general principles that apply to all environmental marketing claims. The Guides also provide “specific guidance about how reasonable consumers are likely to interpret particular claims, how marketers can substantiate them, and how they can qualify those claims to avoid consumer deception.”6 Although the Green Guides do not have legal force, violation of the principles that they enumerate may lead to enforcement under the FTC Act.7
In the wake of escalating FTC enforcement activities and consumer lawsuits challenging advertising claims that seek to highlight the environmental attributes or benefits of products, companies must be especially vigilant to ensure that their green marketing campaigns do not run afoul of federal or state law.
FTC WARNS RETAILERS THAT LABELING RAYON PRODUCTS AS BAMBOO IS MISLEADING
Last year, the Commission staff sent letters to 78 national retailers, including Wal-Mart, Target, and Nordstrom, expressing concern that the retailers were selling textile products labeled or advertised as bamboo that actually were made from rayon.8 FTC warned that failure to correct improper labeling and marketing of rayon textiles as bamboo may subject the retailers to enforcement actions.9 The warning letters were sent following FTC’s settlement of complaints accusing four companies of falsely claiming their rayon clothing and other textile products were “bamboo fiber.”10 The products were marketed under names such as “Pure Bamboo,”11 “Bamboo Comfort,”12 “ecoKashmere,”13 and “Bamboo Baby.”14 The complaints also challenged marketing claims that bamboo textile products have a variety of environmental benefits, including that they are manufactured using an environmentally-friendly process, that they retain the bamboo plant’s antimicrobial properties, and that they are biodegradable.15
As the Commission explained, while consumers may be enticed by the environmental benefits of clothing made from a sustainable and environmentally friendly resource, rayon does not provide the same environmental benefits as bamboo.16 Rayon is a fabric generated from plant fibers, which may or may not include bamboo, but its manufacturing process involves harsh chemicals and emits dangerous pollutants.17
In its warning letters, the FTC staff outlined the requirements for proper labeling and advertising of textile products, and requested that recipients remove or correct any misleading “bamboo” claims.18 The letters further notified the recipients that improperly labeling or advertising of rayon products as bamboo is misleading to consumers, and could subject them to FTC action under both the Textile Act (which regulates misbranding and deceptive advertising of textile fiber products) and Section 5 of the FTC Act, including civil penalties of up to $16,000 per violation.19
CONSUMERS IN CALIFORNIA SEEK JUDICIAL ENFORCEMENT AGAINST ALLEGEDLY DECEPTIVE GREEN MARKETING CLAIMS
The FTC has not been the sole watchdog over environmental marketing claims. Consumers have sought judicial relief from allegedly deceptive practices under several California state statutes, including the Unfair Competition Law (“UCL”) and the False Advertising Law (“FAL”).20 For example, in a consumer’s suit against the makers of Fiji Water, the plaintiff contended that the green water drop symbol on the Fiji Water label and packaging is misleading because it implies that an independent third party organization has endorsed Fiji Water as environmentally superior, when in fact, the green drop is purely the company’s marketing creation.21
In affirming the trial court’s dismissal of the complaint, the California Court of Appeals determined that the plaintiff’s interpretations of the Fiji claims satisfied neither: (1) the reasonable consumer test in the California UCL and FAL, which tests are derived from the FTC Act (i.e., a plaintiff must show potential deception of consumers acting reasonably in the circumstances); or (2) the reasonable consumer standard as expressed in the Green Guides (see 16 C.F.R. §260 7(a)(2011), which is incorporated in the State’s consumer laws (i.e., material implied claims conveyed to reasonable consumers).22 As a result, the court held that, because the green water drop symbol had no names or markings common to third party endorsements and was accompanied by a link to Fiji’s website, it did not “convey to a reasonable consumer in the circumstances that the product is endorsed for environmental superiority by a third party organization.”23 It, therefore, affirmed the trial court’s dismissal of the complaint.24
In contrast to the Fiji Water case, a federal district court in California recently denied a motion to dismiss a consumer’s complaint alleging that S.C. Johnson’s “Greenlist” label on its Windex products is deceptively designed to look like a third party seal of approval, and falsely represents that the product is environmentally friendly.25 In denying the company’s motion to dismiss, the court in Koh stated that “[g]iven the context described in the complaint, it is plausible that a reasonable consumer would interpret the Greenlist label as being from a third party.”26 In reaching its decision, the court evaluated the plaintiff’s interpretation of the Greenlist symbol in light of an example in the FTC’s Green Guides of a misleading marketing symbol: “In addition, guidelines issued by the FTC provide that a product label containing an environmental seal, such as a global icon with the text Earth Smart around it, ‘is likely to convey to consumers that the product is environmentally superior to other products’ and would be deceptive ‘[if] the manufacturer cannot substantiate this broad claim.’”27 On July 8, 2011, S.C. Johnson settled the case stating that it “could have been more transparent about what the logo signified” and that it “didn’t want customers to be confused.”28
THE USE BY MARKETERS OF THIRD-PARTY CERTIFICATIONS OR SEALS
Although these two cases reached different results, each highlights the need for advertisers to carefully consider the context, clarity, and manner in which they present or depict marketing symbols. This is particularly important given the increasing focus of FTC on the practices of a growing number of marketers who use third-party certifications or seals of approval to bolster their green marketing claims. While the current Guides cover this subject only briefly in a single example, the proposed revisions devote an entire section to third-party certifications and seals.29
As stated in the Guide revisions, the use of thirdparty certifications or seals provides consumers with a way to differentiate competing products based on independent and expert assessments.30 Thus, under the Guides, marketers are responsible for ensuring that a third-party certification or seal shown on their products is supported by competent and reliable scientific evidence.31 If the certification or seal is not legitimate, the marketer lacks the requisite substantiation of its claims, in violation of Section 5 of the FTC.32
Moreover, as the Guides provide, advertising claims must be adequately qualified with respect to the particular environmental benefit the product or service provides if reasonable consumers would otherwise be misled by or form a false impression about the product or service based on the claim.33 A marketer’s ability to meet this requirement and its substantiation obligations are particularly important considerations when making a general or implied claim about a product’s environmental attributes or benefits. Thus, when making broad claims of this nature, a marketer faces a slippery slope on which it can readily run afoul of the law.