"100% organic", "all natural", "biodegradable", "green certified"...what do all of these statements have in common aside from the fact that they're health conscious and eco-friendly? They can all quickly attract regulators and class action lawsuits. Just ask Bed Bath and Beyond, Johnson and Johnson, Nature Valley and American Sprits. This is a microscopic sampling of companies pursued over deceptive "green labeling", and these claims aren't just affecting large Fortune 1000 companies, they are equally (and increasingly) affecting smaller companies. As demonstrated by our list of affected-companies above, labeling claims are also not limited to food and beverage manufacturers but extend to supplements, cosmetic brands and even cigarette companies. The apparel industry serves as a good example, as it continues to grapple with allegations over deceptive labeling of rayon as (more natural) bamboo with a recent class action filed earlier this year. The FTC has also published a guide on avoiding exactly such claims (here).
In its most recent case, the FTC has brought a complaint against Moonlight Slumber mattresses over their allegedly false "organic" mattress claims. According to the FTC, "Moonlight Slumber described their products as “organic” and “a safe, organic alternative to traditional crib mattresses” with a “Natural Latex Core....including “eco-friendly plant-based foam.” The company also claimed that testing proved “there are no VOCs (Volatile Organic Compounds, commonly known as ‘Off Gassing’).” The mattresses however were determined to contain no such material - with only the cotton cover and ribbon containing organic materials. The company also lacked any meaningful scientific research to back up their claims. Additionally, Moonlight displayed a deceiving self-issued "green safety shield" certification. Claims related to VOC's and lack of off-gassing have been particularly problematic for the mattress industry. In 2013, while Tempurpedic faced a class action lawsuit, the FTC warned the mattress industry of deceptive green marketing practices. It should be noted, while some of the claims (and practices) employed by Moonlight might be construed as more blatant deception, companies have been pursued for statements that were considerably less misleading. In fact, due to the confusion and lack of strict standards around such labeling even companies that perform their due dilligence and utilize their green labels responsibly may find themselves the target of a complaint or action.
Companies making such claims need to be acutely aware of the risks associated, as they are particularly exposed to regulatory action and class action claims alleging deceptive advertising and unfair competition. In order to mitigate that risk, companies should:
- Avoid exaggerated statements such as 100% organic - even statements such as "100% juice" or "100% egyptian cotton" have proven problematic
- Exercise particular caution with products sold in CA, which is perceived as having the most strict laws/regulations.
- Avoid self-issued certifications such as green seals and eco-awards
- Perform and maintain strong supporting research to backup any such claims
- Work closely with specialized attorneys to ensure the usage of any terms are compliant and not perceived as over-reaching
Lastly, many companies may question the ability of their insurance policies to respond. Generally speaking, the advertising injury coverage component under a general liability policy will provide little to no coverage, however, certain D&O and E&O (professional liability) insurance policies may. While it will greatly depend on the specifics of the claim, this is most true for private companies whose d&o policies contain broad entity coverage. While insuring against regulatory investigations and fines can prove challenging, d&o policies are more likely to provide defense costs in connection with labeling suits and regulatory proceedings. Organizations should however pay close attention to policy exclusions that could negate coverage such as false advertising and anti-trust & unfair competition exclusions.