On June 9, 2009, the Federal Trade Commission (“FTC” or “Commission”) testified on its efforts to ensure truthfulness of environmental or “green” marketing claims before the U.S. House Subcommittee on Commerce, Trade, and Consumer Protection of the Committee on Energy and Commerce. Noting the “virtual tsunami” of environmental marketing, the FTC announced it will continue its efforts to ensure that green advertisements are “truthful, substantiated, and not confusing to consumers.”

In order to protect consumers from unfair or deceptive practices, the FTC explained its multi-tiered approach of (1) issuing rules and guides for businesses, (2) challenging fraudulent and deceptive ads through enforcement actions, and (3) publishing materials to help consumers make informed purchasing decisions.

The FTC’s Guides for the Use of Environmental Marketing Claims (“Green Guides” or “Guides”), 16 C.F.R. Part 260, are the centerpiece of the agency’s environmental marketing program, according to the testimony. The Green Guides, first issued in 1992 and most recently revised in 1998, help advertisers avoid making “unfair or deceptive” claims in violation of the Federal Trade Commission Act (“FTC Act”) by describing the basic elements needed to substantiate specific environmental claims. While the Guides “provide the basis for voluntary compliance” with section 5 of the FTC Act, “[c]onduct inconsistent with the positions articulated . . . may result in corrective action by the Commission under Section 5 if, after investigation, the Commission has reason to believe that the behavior falls within the scope of the conduct declared unlawful by the statute.” § 260.1.

The Green Guides currently include general principles, applicable to all environmental marketing claims, as well as guidance on specific claims, such as “biodegradable,” “compostable,” “recyclable,” “recycled,” “refillable,” and “ozone safe.” For example, the Guides provide that “[a] product or package should not be marketed as recyclable unless it can be collected, separated or otherwise recovered from the solid waste stream for reuse, or in the manufacture or assembly or another package or product, through an established recycling program.” § 260.7(d). The Guides likewise state that “[a] recycled content claim may be made only for materials that have been recovered or otherwise diverted from the solid waste stream, either during the manufacturing process (pre-consumer), or after consumer use (post-consumer).” § 260.7(e).   Numerous hypotheticals, demonstrating how to qualify specific claims to avoid deception, are also provided.

In response to the increase in green marketing, the FTC announced that it is currently reviewing the Guides “to ensure they are responsive to today’s marketplace.” Specifically, the FTC is reviewing public comments, and it plans to conduct its own research on consumer understanding of additional green marketing claims, such as “eco-friendly,” “sustainable,” and “carbon neutral.” Insight on such consumer perceptions is crucial in ultimately determining what constitutes a deceptive claim.

In addition to the Guides, the FTC testified that it actively targets misleading green claims through civil prosecutions. In this regard, the Commission announced new actions against Kmart Corp., Tender Corp., and Dyna-E International, alleging that each company made false and unsubstantiated claims that their products – disposable plates, wipes, and towels, respectively – were biodegradable. The administrative complaints alleged that the companies could not substantiate that their products would “decompose into elements found in nature within a reasonably short period of time after customary disposal,” as advised by the Guides, because “the substantial majority of solid waste is disposed in landfills, incinerators, and recycling facilities.”

At this time, Kmart and Tender have agreed to settle their cases, while the case against Dyna-E will be litigated. Under the settlements, Kmart and Tender have agreed to orders that bar them from making deceptive “degradable” product claims, and that require them to have competent and reliable evidence to support green product claims. In addition, both settlements include record-keeping and reporting provisions.

To emphasize its law enforcement efforts, the FTC also noted recent actions against marketers of home insulation and “miracle” devices advertised to dramatically increase gas mileage in cars. In one insulation action, the agency alleged that the insulation’s R-value (measure of resistance to heat flow) was only one-quarter of what the advertiser claimed. There, a court order required the defendants to pay a $155,000 civil penalty, revise its claims, and substantiate any future energy-related claims.

A final approach taken by the FTC, according to the testimony, involves the creation and distribution of materials “to help consumers make informed, green purchasing decisions and avoid energy savings scams.” This effort to educate consumers includes interactive websites that provide information on energy conservation and how to avoid phony gas-saving devices.

Why This Matters: The FTC, through its testimony before the House and latest enforcement actions, has clearly demonstrated that it will continue to ensure that green advertisements are “truthful, substantiated, and not confusing to consumers.” The principles articulated in the Green Guides remain important and conduct inconsistent with the Guides may result in legal action by the FTC. Recent actions based on “biodegradable” and “energy efficient” claims may indicate the beginning of a green marketing enforcement trend. Therefore, advertisers should consult the Green Guides and/or legal specialists in this area to avoid making environmental claims that risk being considered “unfair or deceptive” by the FTC. In addition, advertisers should exercise caution before using terms such as “eco-friendly,” “sustainable,” “carbon neutral” and others that are not included in the Green Guides, and that are currently being studied and followed by the FTC.