As consumers increasingly look for, and are willing to pay a premium for, environmentally friendly products, companies are increasingly seeking to capitalize on this market demand by making green marketing claims about products and packaging. Green marketing claims are regulated by the Federal Trade Commission (“FTC”), which is generally charged with preventing deceptive and misleading advertising under the Federal Trade Commission Act. The Commission has established specific guidelines for making environmental marketing claims in the Green Guides, which include a number of conditions and limitations on the types of green marketing claims a company can make about the environmental attributes of a product or its packaging. At their base, the Green Guides require green marketing claims to be substantiated, truthful and non-deceptive. In a show of its enforcement authority, the FTC recently brought enforcement actions against six companies for making allegedly false and misleading environmental claims.
The Evolution of the Green Guides
The FTC issued its first version of the Green Guides in 1992 in an effort to help companies avoid the pitfalls of deceptive environmental advertising. The Green Guides are set forth at 16 CFR Part 260, and they represent the FTC’s interpretation of the types of green marketing claims that are considered deceptive or misleading under Section 5 of the FTC Act. Under Section 5, the Commission has the authority to bring enforcement actions for deceptive and misleading claims about a product or its packaging.
Since the purpose of the Green Guides is to prevent deceptive and misleading claims, the guides focus on requiring companies to substantiate with scientific evidence any “green” claim made about a product or its packaging. Companies must possess that substantiation when the claims are made. In their current form, as finalized just last year, the Green Guides generally warn against making broad, unqualified environmental claims like “green” or “eco-friendly” because the FTC views these types of claims as difficult, if not impossible, to substantiate. The Green Guides provide specific guidelines for claims that a product or its packaging is: compostable, degradable, “free of” a substance, non-toxic, ozone-safe or ozone-friendly, recyclable, refillable, made of a recycled content, made with renewable energy, or made with renewable materials. The Green Guides also discuss the use of green certifications or seals of approval, as well as claims involving carbon offsets or source reduction.
An important element of the Green Guides is the requirement for qualifications of certain claims to prevent consumer deception. For example, if a product is labeled as “compostable,” but it is only compostable in an industrial composter, the Green Guides provide that the claim should be qualified so that the consumer knows that the product is only compostable in an industrial composter.
FTC’s Recent Enforcement Actions
Five of the six enforcement actions initiated by the FTC involve biodegradable plastics claims. In the complaint against ECM Biofilms, Inc. (“ECM”), the FTC alleges that the company markets purportedly biodegradable plastics that do not in fact biodegrade within “a reasonably short time after disposal,” and further alleges that ECM fails to substantiate its claims that the additives used in its plastic products make the plastic biodegradable.
The FTC brought similar complaints against four other companies, two of which are former ECM customers. These complaints charged the companies with misrepresenting that plastics treated with additives are biodegradable, biodegradable in a landfill, biodegradable within a certain amount of time, or have been tested or shown to be biodegradable. The Commission claimed that these companies did not have any reliable scientific evidence to substantiate these claims. The proposed orders for settling these complaints generally prohibit the settling parties from making any false biodegradability claims in the future unless supported by competent, reliable scientific evidence in accordance with the Green Guides.
Finally, in the sixth enforcement action, the FTC claimed that AJM Packaging Corporation (“AJM”) violated a 1994 consent order that barred the company from making unsupported environmental claims about its product or packaging. The Commission and AJM ultimately reached a settlement, which is reflected in the Stipulated Order recently entered by the DC District Court. Under the terms of the settlement, AJM agreed to pay a $450,000 civil penalty for violating the 1994 order and to enter into a new order with the Commission that is consistent with the current Green Guides. Specifically, the new order prohibits AJM from making unsubstantiated claims, and requires AJM to make certain disclosures that would qualify such green claims. The court order also preserved the FTC’s authority to seek additional penalties for any future violations of the new order.
Going Forward: Is It Easy Being Green?
These recent enforcement actions serve as an important reminder regarding the FTC’s interpretation of green marketing claims and the conditions, limitations and requirements for making them. It also signals the continuation of the close scrutiny being given to green marketing claims by the FTC. In the past several years, and as evidenced by these recent enforcement actions, the FTC’s enforcement activity for “green” claims has focused on protecting consumers from unsubstantiated and unsupported claims. Overall the FTC’s message continues to be loud and clear — companies who wish to make green marketing claims should be sure to comply with the Green Guides.