It's Not Easy Being Green: The Challenges of Green Marketing in the Wake of the Updated Green Guides | Practical Law

It's Not Easy Being Green: The Challenges of Green Marketing in the Wake of the Updated Green Guides | Practical Law

Marketers' use of environmental marketing claims is growing, as is the scrutiny on these claims. In response, the FTC recently updated its Green Guides, providing new grounds on which the FTC, NAD and private litigants can challenge false and misleading green marketing claims.

It's Not Easy Being Green: The Challenges of Green Marketing in the Wake of the Updated Green Guides

by PLC Commercial
Published on 12 Mar 2013 • USA (National/Federal)
Marketers' use of environmental marketing claims is growing, as is the scrutiny on these claims. In response, the FTC recently updated its Green Guides, providing new grounds on which the FTC, NAD and private litigants can challenge false and misleading green marketing claims.
Marketers increasingly seek to leverage consumers' environmental consciousness by touting the environmental friendliness of their products and services, a practice referred to as "green" marketing. The Federal Trade Commission (FTC) is the primary federal agency responsible for regulating environmental marketing claims and ensuring compliance with the Federal Trade Commission Act (FTC Act).
The FTC has described the recent influx of green marketing claims as a "virtual tsunami," a metaphor suggestive of the overwhelming force of these claims in the US marketplace. In response to this influx, in October 2012 the FTC released an updated version of its Guides for the Use of Environmental Marketing Claims (Green Guides).
The Green Guides, which the FTC originally released in 1992, provide marketers with guidance on making environmental marketing claims that are truthful and nondeceptive. They also provide new grounds on which the FTC, the National Advertising Division of the Council of Better Business Bureaus (NAD) and private litigants can challenge marketer's green marketing claims.

The Green Guides

The Green Guides are designed to provide marketers with helpful guidance on formulating truthful and nondeceptive environmental marketing claims. They are part of the FTC's effort to prevent "greenwashing," a practice by which marketers mislead consumers regarding their environmental practices, often to deflect attention from less favorable activities.
The Green Guides include:
  • General principles that apply to all environmental marketing claims.
  • Specific guidance on how consumers are likely to interpret particular claims.
  • Recommendations for how marketers can substantiate and qualify their claims to avoid making false or misleading statements.
The Green Guides are voluntary guidelines and are not directly enforceable, nor do they preempt federal, state or local laws. However, they are more than mere recommendations or guidance.
The Green Guides describe the types of environmental marketing claims that the FTC considers unfair or deceptive under Section 5 of the FTC Act. The Green Guides also serve as the measure against which the NAD and private litigants typically evaluate green marketing claims. Understanding and complying with the Green Guides is therefore highly beneficial for marketers looking to minimize the risk of challenge to their green marketing practices.

The Guidance in the Green Guides

The guidance in the Green Guides consists of:
  • General principles. These are overarching principles that marketers should follow when engaged in green marketing, such as ensuring that all environmental marketing claims are:
    • appropriately qualified;
    • not overstated;
    • adequately specific on whether they relate to the product, service or package.;
    • true and can be substantiated; and
    • clear, prominent and understandable.
  • Specific guidance. The revised Green Guides update the FTC's previous guidance on marketers' use of specific types of environmental marketing claims and add guidance on claims that have come into use only more recently. The specific guidance addresses:
    • general environmental benefit claims;
    • compostable claims;
    • degradable claims;
    • free-of claims;
    • non-toxic claims;
    • ozone-safe and ozone-friendly claims;
    • recyclable claims;
    • recycled content claims;
    • refillable claims;
    • renewable energy claims;
    • renewable materials claims;
    • source reduction claims;
    • "green" certificates and approvals;
    • the use of carbon offsets; and
    • renewable materials or renewable energy claims.
The updated Green Guides advise marketers to avoid making any unqualified general environmental benefit claims, such as "green" or "eco-friendly." The Green Guides explain that these sorts of claims are too difficult to support and suggestive of too vast a range of meanings not to deceive consumers.
The updated Green Guides also directly address greenwashing by requiring marketers to consider the environmental impact of the product or service as a whole, rather than on an isolated basis. The Green Guides advise marketers to avoid featuring an environmentally beneficial attribute of a product or service if the product or service has environmentally harmful attributes that effectively cancel out the environmental benefit.
For more information on the guidance and recommendations in the revised Green Guides, see Article, The Revised Green Guides: New Standards for Environmental Marketing Claims.

Growing Challenges to Green Marketing

As green marketing has grown in prevalence, so too has its risk of challenge. There are three principal avenues by which marketers can face challenge for their green marketing claims:
In all three cases, the Green Guides generally serve as the benchmark against which green marketing claims are evaluated.

FTC Investigation and Enforcement

The FTC Act:
  • Grants the FTC investigatory and enforcement authority over environmental marketing claims.
  • Requires that marketers can demonstrate a reasonable basis for each of their marketing claims.
In its investigative role, the FTC is responsible for monitoring advertising and marketing claims and identifying those it suspects to be false or misleading. Because the FTC itself cannot monitor all of the advertising and marketing claims made in the marketplace, its investigations often stem from the complaints of third parties, such as consumers, public interest groups and competitors.
If the FTC believes a violation has occurred, it may attempt to obtain voluntary compliance by entering into a consent order with the marketer. This is a settlement in which the marketer agrees to cease the activity in question, but does not admit to violating the law.
If the FTC and the marketer cannot reach a consent agreement, the FTC can submit the complaint for resolution in an administrative court proceeding. Initial decisions by administrative law judges can be appealed to the full FTC. Final decisions issued by the FTC can be appealed to the US Court of Appeals and, ultimately, to the Supreme Court.
If a violation is found, appropriate relief is issued. This may include:
  • A cease and desist order.
  • Civil penalties, consumer redress or other monetary remedies.
  • Corrective advertising, disclosures and other informational remedies.
For more information on complaints under the FTC Act, see Practice Note, Advertising: Overview: Complaints under the FTC Act.

NAD Actions

In addition to the FTC, the NAD, as the investigative unit of the advertising industry's system of self-regulation, can investigate and challenge environmental marketing claims that it suspects to be false or misleading. Similar to the FTC, the NAD accepts third-party complaints regarding environmental marketing claims and evaluates submitted claims and issues rulings based on whether the marketer can show adequate substantiation for the claims.
A failure to demonstrate a reasonable basis for the claim can result in a judgment by NAD against the marketer. While NAD rulings are not binding and may be appealed to the National Advertising Review Board, parties generally accept and implement NAD rulings. Failure to abide by a NAD ruling can result in the NAD referring the claim to the FTC for further review.
For more information on NAD Actions, see Practice Note, Advertising: Overview: Complaints to the NAD.

Private Actions

In addition to referring claims to the FTC and NAD, private litigants can bring civil lawsuits against marketers for false and misleading environmental marketing claims. These are often class actions brought against marketers after the FTC or NAD has taken action against them.
As the FTC Act does not provide for private rights of action, private litigants generally assert violations of state consumer protection or false advertising laws. The claims, however, frequently mirror the claims previously raised in an FTC or NAD enforcement action.
While these claims create additional risk for green marketers, they also offer marketers some additional defenses. The burden of proof in a private action differs from that in an action from the FTC or the NAD.
While FTC and NAD actions require only a finding that the claim is unsubstantiated, in a private lawsuit, a marketer's inability to substantiate a claim is not evidence that the claim is false or misleading. The plaintiff must affirmatively demonstrate that the claim is not true or misleads consumers.