FTC Proposes Revised Guidelines for "Green" Claims

October 8, 2010
MGKF Special Alert

Businesses that have worked to capitalize on "green marketing" trends may soon be subject to a new set of Federal Trade Commission (FTC) guidelines that attempt to prevent companies from making unfair or deceptive environmental claims, sometimes referred to as "greenwashing." The FTC is seeking comment on these proposed revisions to its Guides for the Use of Environmental Marketing Claims, otherwise known as the "Green Guides," through December 10, 2010.

What are the Green Guides?

Section 5 of the Federal Trade Commission Act generally prohibits "unfair methods of competition" and "unfair or deceptive acts or practices." In 1992, the FTC chose to address this standard with respect to environmental claims by issuing the Green Guides. While the Green Guides are promulgated at 16 C.F.R. Part 260, they are not regulations that are separately enforceable. Instead, they are considered to be administrative interpretations of the FTC Act as applied to environmental marketing claims. While the Green Guides do not have the force and effect of law, the FTC can—and has—taken enforcement actions under §5 of the FTC Act against companies that have made environmental claims inconsistent with the Green Guides.

The FTC has amended the Green Guides twice before: in 1996 and in 1998. At the end of 2007, the FTC announced that it was beginning its decennial review of the Green Guides one year early due to the increased proliferation of environmental marketing claims. The FTC held three public workshops in 2008, addressing carbon offsets and renewable energy certificates, green packaging, and green building and textiles. In addition, the FTC commissioned its own consumer perception study in 2009, involving almost 4,000 people, to evaluate how consumers understand environmental claims. Based upon the results of that study and the public comments from the workshops, this week the FTC approved issuing the proposed revised Green Guides by a 5-0 vote.

What are the proposed revisions to the Green Guides?

The proposed revisions to the Green Guides encompass both changes to existing guidelines, plus some new guidelines applicable to environmental marketing claims that have become more popular recently. Highlights of areas covered by the proposed revisions include:

General Environmental Benefit Claims: Unqualified general environmental benefit claims, such as "green" or "eco-friendly" are prohibited. These types of terms carry a number of implied environmental benefits that are difficult to substantiate. Accordingly, these claims should be qualified using clear and prominent language that limits the claim to specific environmental benefits.

Environmental Seals of Approval or Certifications: This section notes that uses of environmental seals of approvals or certifications are covered by the FTC’s "Endorsement Guides" and provides specific examples in the environmental context. These seals of approval do not obviate the need for companies to be able to substantiate any environmental claims. Companies employing these endorsements should qualify these endorsements for specific environmental attributes and disclose any relationships with the certifying party.

Renewable Energy: Claims about the use of renewable energy to manufacture products should be qualified if power derived from fossil fuels was used to manufacture any part of a product. Marketers should also specify the renewable energy source (e.g. wind, solar, etc). Companies that generate renewable electricity but sell RECs representing that generation cannot represent that they use renewable energy.

Carbon Offsets: Marketers must be able to support any carbon offset claims especially with respect to the amount of emission reductions and assurances that the offsets have not been "double counted." In addition, companies should disclose if the emission reductions will occur outside a two year window, and advertised offsets must not be generated by activity already required by law.

"Sustainable" claims and use of "life cycle" analysis: Notably, the FTC declined to address claims of "sustainability" in the revised Green Guides, stating that the Commission did not have enough basis to provide meaningful guidance on the use of "sustainable" as an environmental term. Similarly, the FTC declined to propose guidance about the use of life cycle information citing a lack of information about consumer perception of these claims and the complexity of such claims. The FTC also declined to require companies to complete life cycle analyses (LCAs) to substantiate environmental claims or to follow a particular LCA methodology.

The 200 page Federal Register notice, which can be found here http://www.ftc.gov/os/fedreg/2010/october/101006greenguidesfrn.pdf, provides new guidance for a number of other environmental marketing claims including claims that products are degradable, compostable, recyclable, or free of toxic materials. If you have any questions about either the Green Guides or submitting comments on the FTC’s proposed revisions, please contact Todd D. Kantorczyk (tkantorczyk@mgkflaw.com) or (484) 430-2359, or any other member of our Sustainability Practice Group.