FTC releases proposed "Green Guides" revisions
Executive Summary
Last month, the Federal Trade Commission (FTC) released the long-anticipated proposed revisions to its Guides for the Use of Environmental Marketing Claims—the so-called “Green Guides.” These proposed revisions aim to respond to changes in the marketplace and to address the proliferation of environmental claims in all types of marketing by providing guidance on the types of claims the Commission would consider unfair or deceptive in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. Although the Guides will not be finalized before next year, they are of immediate relevance in that they provide a glimpse into the Commission’s current thinking on environmental marketing claims and potential related enforcement actions.
Perhaps most relevant to marketers in all industries is the Commission’s caution against general environmental claims and the use of unqualified certifications and seals. General claims, such as “green,” “environmentally-friendly,” or “eco-safe,” have become prominent in the marketplace, yet the FTC’s consumer perception research found that these claims imply both specific and far-reaching environmental benefits, making them misleading unless properly qualified and substantiated. The FTC deems unqualified product certifications and seals of approval to often constitute general environmental benefit claims and, therefore, to be misleading unless properly qualified. The FTC’s position that the qualifications for seals and certifications be clear, prominent, and specific is likely to impact a broad range of popular seal and certification programs.
The proposed, revised Green Guides are notable not just because of the new positions the Commission takes but also because of the positions the Commission chooses not to take. The proposal first includes changes concerning those claims already addressed in the Guides, such as “degradable,” “compostable,” “recyclable,” “free-of,” and “non-toxic,” as well as new guidance on the use of certifications and seals. Second, the proposal addresses new claims not covered in the current Guides, such as those concerning renewable energy, renewable materials, and carbon offsets. The proposal, however, does not include guidance on certain claims that have become quite prominent in the marketplace, such as “sustainable,” “organic,” and “natural,” nor does it provide guidance on life-cycle analysis or require that such analysis be done to substantiate certain claims—omissions the Commission acknowledges.
The proposed, revised Guides and the accompanying Federal Register notice are over 200 pages in length and available on the FTC’s website.1 Below, we briefly summarize key points in these documents and highlight areas where the FTC has expressly requested comment. We encourage companies in all affected industries to carefully consider how these revisions may affect current and future marketing efforts.
Background
The FTC’s Green Guides were first issued in 1992 and were revised in 1996 and 1998. Given the proliferation of environmental claims in the marketplace, rising concerns over “green washing,” and the length of time since the FTC last reviewed the Guides, last month’s release was highly anticipated. The revision process began in 2007 and has included three public workshops, solicitation of public comments, and the commissioning of consumer perception research. It is clear that this consumer research weighed heavily in the Commission’s revisions of the Guides.
While the Green Guides constitute guidance and are not legally enforceable, they are crucial in revealing what the FTC considers unfair and deceptive and, therefore, what the Commission’s enforcement policy might be. Further, this document will surely inform state authorities and the class action bar, providing guidance on what types of claims are potentially considered deceptive. For these reasons, the Green Guides carry great import and should not be ignored.
Proposed Revisions to the Claims Currently Addressed in the Guides
In addition to some non-substantive changes throughout the Guides intended to make them easier to read, the FTC proposes updating its guidance concerning the following claims already addressed in some fashion in the current Guides.
General Environmental Benefit Claims. The current Green Guides permit general claims of environmental benefit, as long as they can be substantiated. The revised Guides, however, would not allow unqualified general environmental benefit claims, such as “eco-safe,” “eco-friendly,” and “green.” Based on its review of consumer research, the FTC concluded that such claims are difficult, if not impossible, to substantiate because “[v]ery few products, if any, have all the attributes consumers seem to perceive from such claims,” including “no negative environmental impact.” Therefore, clear and prominent qualifying language should be used, limiting the claim to a specific substantiated benefit. Notably, the Commission says in the Federal Register notice explaining the revisions, “websites cannot be used to qualify otherwise misleading claims that appear on labels or in other advertisements because consumers likely would not see that information before they purchase.” (emphasis added)
Certifications and Seals of Approval. The current Guides cover certifications and seals in just one example, but the proposed, revised Guides create a new section devoted to certifications and seals, which includes the following key guidance:
Recyclable. The proposal highlights the advice in the current Guides that use of this claim depends on how many consumers and communities have access to recycling facilities for the advertised product and makes its three categories of claims clear.
Free-of (also No and Does-Not-Contain). The current Guides do not specifically address these claims, aside from in a few examples, but the proposal would create a new section devoted to these increasingly popular claims. The proposal advises that, even if true, claims that an item is free of a substance may be deceptive if: 1) the item has substances that pose the same or similar environmental risk as the substance not present, and 2) the substance has never been associated with the product category. Notably, the FTC notes that “free of” claims may be appropriate even when an item contains a de minimis amount of a substance that would be inconsequential to consumers, and it cautions that “free of” claims may convey additional environmental benefit or comparative superiority claims.
Non-Toxic. Because the Commission found that consumers likely believe a non-toxic claim conveys that a product is non-toxic both for humans and the environment, the proposal advises that marketers qualify claims as necessary to avoid deception. The proposal also cautions against relying only on certain regulatory thresholds to support claims that products are non-toxic.
Ozone-Safe/Ozone Friendly. The proposal only makes minor changes to guidance for these claims to reflect changes in regulations concerning ozone-depleting chemicals. Although cholorofluorocarbons (CFCs) have been banned for years, the FTC declined to advise against “no CFCs” claims because of their continued usefulness to consumers.
Proposed New Guidance
The FTC’s consumer perception research suggests that “renewable” claims may be misleading because consumers may interpret them differently than marketers intend. Therefore, the proposal advises marketers to include context for the claims in terms of the specific materials and energy used. Because the FTC’s study did not actually test the effect of qualifying these claims, it specifically seeks comment on whether qualifying language will reduce consumer confusion. The proposed guidance with regard to “renewable claims” follows:
Made with Renewable Materials. In its proposal, the FTC advises that marketers qualify this claim with specific information about the renewable material, such as what it is, how it is sourced, and why it is renewable. It also advises that marketers qualify this claim if the item is not made entirely with renewable materials, excluding minor or incidental components.
Made with Renewable Energy. If the power used to manufacture any part of a product was derived from fossil fuels, the FTC advises that marketers avoid unqualified renewable energy claims. The proposal advises that marketers qualify claims by specifying the source of renewable energy (e.g., wind or solar) and qualify claims if less than all, or virtually all, of the significant manufacturing processes involved in making the product or package were powered with renewable energy or conventional energy offset by renewable energy certificates (RECs). Notably, the Commission concluded that it did not have a sufficient basis to advise marketers to disclose that their renewable energy claims are based on RECs. Also, the proposed Guides provide guidance to avoid double counting renewable energy. For example, according to the proposal, a company should not sell RECs for renewable energy it generates onsite and then tout its renewable energy facility in advertising. According to the FTC, “[b]y selling RECs, the company has transferred the right to characterize its electricity as renewable.”
In addition, the proposal adds a section to the Guides on carbon offset claims. Carbon offsets are credits or certificates that represent reductions in greenhouse gas emissions, and although the FTC received many comments concerning these claims, it provides only the following, limited guidance concerning the claims in its proposal.
Carbon Offsets. First, it advises that marketers should have competent and reliable scientific and accounting methods to ensure they are properly quantifying emission reductions and not selling those reductions more than once. Second, the proposal advises disclosure if the offset purchase funds emission reductions that will not occur for two years or more. And, third, the proposal advises against advertising a carbon offset if the activity that forms the basis of the offset is already required by law.
Popular Claims Not Addressed
In the Federal Register notice, the Commission acknowledges that the proposed, revised Green Guides do not address some claims popular in the marketplace. For example, the proposal fails to include the claims “biobased,” “carbon neutral,” and “carbon footprint.” The FTC provides its rationale for declining to include the following:
Sustainable. Although the claim has become quite popular, the FTC consumer perception research indicated that the claim alone has no single environmental meaning to a significant number of consumers and that it conveys non-environmental characteristics (e.g., durable or long lasting). Consumers also apparently viewed the claim differently than general environmental benefit claims. Therefore, the FTC it concluded that general guidance in the Green Guides is not appropriate for the claim. Nevertheless, the FTC noted that, when used in combination with environmental terms or images, use of “sustainable” may be perceived as an environmental claim and must be appropriately qualified and substantiated.
Organic and Natural. The FTC noted other federal agency regulations and guidance concerning these claims and a lack of consumer perception evidence related to the claims as its reasons for not including the claims in the proposed Guides. It did, however, solicit further comment on the claims and make clear that, if reasonable consumers perceive these claims as general environmental benefit claims or comparative claims, marketers must have appropriate substantiation.
Life Cycle. Life cycle analysis refers to the assessment of a product’s environmental impact through all stages of its “life.” Like the Current Guides, the proposed Guides decline to define these claims or to require, as some have suggested, that life cycle analysis be conducted by marketers to substantiate certain claims.
Again, we encourage consideration of the FTC’s proposal and its potential impact on current and future environmental marketing plans. Please do not hesitate to contact your regular contact at Hogan Lovells US LLP or us with any questions.
Last month, the Federal Trade Commission (FTC) released the long-anticipated proposed revisions to its Guides for the Use of Environmental Marketing Claims—the so-called “Green Guides.” These proposed revisions aim to respond to changes in the marketplace and to address the proliferation of environmental claims in all types of marketing by providing guidance on the types of claims the Commission would consider unfair or deceptive in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. Although the Guides will not be finalized before next year, they are of immediate relevance in that they provide a glimpse into the Commission’s current thinking on environmental marketing claims and potential related enforcement actions.
Perhaps most relevant to marketers in all industries is the Commission’s caution against general environmental claims and the use of unqualified certifications and seals. General claims, such as “green,” “environmentally-friendly,” or “eco-safe,” have become prominent in the marketplace, yet the FTC’s consumer perception research found that these claims imply both specific and far-reaching environmental benefits, making them misleading unless properly qualified and substantiated. The FTC deems unqualified product certifications and seals of approval to often constitute general environmental benefit claims and, therefore, to be misleading unless properly qualified. The FTC’s position that the qualifications for seals and certifications be clear, prominent, and specific is likely to impact a broad range of popular seal and certification programs.
The proposed, revised Green Guides are notable not just because of the new positions the Commission takes but also because of the positions the Commission chooses not to take. The proposal first includes changes concerning those claims already addressed in the Guides, such as “degradable,” “compostable,” “recyclable,” “free-of,” and “non-toxic,” as well as new guidance on the use of certifications and seals. Second, the proposal addresses new claims not covered in the current Guides, such as those concerning renewable energy, renewable materials, and carbon offsets. The proposal, however, does not include guidance on certain claims that have become quite prominent in the marketplace, such as “sustainable,” “organic,” and “natural,” nor does it provide guidance on life-cycle analysis or require that such analysis be done to substantiate certain claims—omissions the Commission acknowledges.
The proposed, revised Guides and the accompanying Federal Register notice are over 200 pages in length and available on the FTC’s website.1 Below, we briefly summarize key points in these documents and highlight areas where the FTC has expressly requested comment. We encourage companies in all affected industries to carefully consider how these revisions may affect current and future marketing efforts.
Background
The FTC’s Green Guides were first issued in 1992 and were revised in 1996 and 1998. Given the proliferation of environmental claims in the marketplace, rising concerns over “green washing,” and the length of time since the FTC last reviewed the Guides, last month’s release was highly anticipated. The revision process began in 2007 and has included three public workshops, solicitation of public comments, and the commissioning of consumer perception research. It is clear that this consumer research weighed heavily in the Commission’s revisions of the Guides.
While the Green Guides constitute guidance and are not legally enforceable, they are crucial in revealing what the FTC considers unfair and deceptive and, therefore, what the Commission’s enforcement policy might be. Further, this document will surely inform state authorities and the class action bar, providing guidance on what types of claims are potentially considered deceptive. For these reasons, the Green Guides carry great import and should not be ignored.
Proposed Revisions to the Claims Currently Addressed in the Guides
In addition to some non-substantive changes throughout the Guides intended to make them easier to read, the FTC proposes updating its guidance concerning the following claims already addressed in some fashion in the current Guides.
General Environmental Benefit Claims. The current Green Guides permit general claims of environmental benefit, as long as they can be substantiated. The revised Guides, however, would not allow unqualified general environmental benefit claims, such as “eco-safe,” “eco-friendly,” and “green.” Based on its review of consumer research, the FTC concluded that such claims are difficult, if not impossible, to substantiate because “[v]ery few products, if any, have all the attributes consumers seem to perceive from such claims,” including “no negative environmental impact.” Therefore, clear and prominent qualifying language should be used, limiting the claim to a specific substantiated benefit. Notably, the Commission says in the Federal Register notice explaining the revisions, “websites cannot be used to qualify otherwise misleading claims that appear on labels or in other advertisements because consumers likely would not see that information before they purchase.” (emphasis added)
Certifications and Seals of Approval. The current Guides cover certifications and seals in just one example, but the proposed, revised Guides create a new section devoted to certifications and seals, which includes the following key guidance:
- Third-party certifications and seals constitute endorsements and, therefore, are governed by the Commission’s Endorsement Guides.2
- In keeping with the Endorsement Guides, material connections between a certifier or seal organization and a marketer must be disclosed. This would include disclosure that a program was created by the marketer itself or by a trade association in which the marketer is a member.
- Similarly, if the name of the certifying organization does not make clear that it is an industry group, this fact should be disclosed.
- If a marketer touts its relationship with a third-party organization that has neither evaluated nor endorsed the environmental impacts of its products, it must make clear that use of the party’s seal, for example, refers to the marketer’s membership only and not to an endorsement.
- Unqualified certifications and seals are viewed as general environmental benefit claims and, therefore, must now be accompanied by clear and prominent language limiting the claim to particular attributes, as appropriate.
- Third-party certification does not eliminate a marketer’s obligation to have substantiation for all conveyed claims
Degradable. The revised Green Guides would clarify guidance concerning degradable claims for solid waste to make clear that the “reasonably short period of time” required for complete decomposition should be no more than one year after customary disposal. Notably, unqualified degradable claims would be considered deceptive for products or packages destined for landfills, incinerators, or recycling facilities because decomposition will not occur within one year. The Commission proposes to treat the new “oxo-degradable” and “oxo-biodegradable” claims entering the marketplace like all other degradable claims.
Recyclable. The proposal highlights the advice in the current Guides that use of this claim depends on how many consumers and communities have access to recycling facilities for the advertised product and makes its three categories of claims clear.
- If a substantial majority (at least 60%) of consumers/communities have access to recycling facilities, a marketer may make an unqualified “recyclable” claim.
- If a “significant percentage” of consumers/communities have access, the marketer should qualify the “recyclable” claim (e.g., “package may not be recyclable in your area”).
- If less than a “significant percentage” of consumers/communities have access to recycling facilities, the marketer should appropriately qualify the claim (e.g., “product is recyclable only in the few communities that have recycling programs”).
Free-of (also No and Does-Not-Contain). The current Guides do not specifically address these claims, aside from in a few examples, but the proposal would create a new section devoted to these increasingly popular claims. The proposal advises that, even if true, claims that an item is free of a substance may be deceptive if: 1) the item has substances that pose the same or similar environmental risk as the substance not present, and 2) the substance has never been associated with the product category. Notably, the FTC notes that “free of” claims may be appropriate even when an item contains a de minimis amount of a substance that would be inconsequential to consumers, and it cautions that “free of” claims may convey additional environmental benefit or comparative superiority claims.
Non-Toxic. Because the Commission found that consumers likely believe a non-toxic claim conveys that a product is non-toxic both for humans and the environment, the proposal advises that marketers qualify claims as necessary to avoid deception. The proposal also cautions against relying only on certain regulatory thresholds to support claims that products are non-toxic.
Ozone-Safe/Ozone Friendly. The proposal only makes minor changes to guidance for these claims to reflect changes in regulations concerning ozone-depleting chemicals. Although cholorofluorocarbons (CFCs) have been banned for years, the FTC declined to advise against “no CFCs” claims because of their continued usefulness to consumers.
Proposed New Guidance
The FTC’s consumer perception research suggests that “renewable” claims may be misleading because consumers may interpret them differently than marketers intend. Therefore, the proposal advises marketers to include context for the claims in terms of the specific materials and energy used. Because the FTC’s study did not actually test the effect of qualifying these claims, it specifically seeks comment on whether qualifying language will reduce consumer confusion. The proposed guidance with regard to “renewable claims” follows:
Made with Renewable Materials. In its proposal, the FTC advises that marketers qualify this claim with specific information about the renewable material, such as what it is, how it is sourced, and why it is renewable. It also advises that marketers qualify this claim if the item is not made entirely with renewable materials, excluding minor or incidental components.
Made with Renewable Energy. If the power used to manufacture any part of a product was derived from fossil fuels, the FTC advises that marketers avoid unqualified renewable energy claims. The proposal advises that marketers qualify claims by specifying the source of renewable energy (e.g., wind or solar) and qualify claims if less than all, or virtually all, of the significant manufacturing processes involved in making the product or package were powered with renewable energy or conventional energy offset by renewable energy certificates (RECs). Notably, the Commission concluded that it did not have a sufficient basis to advise marketers to disclose that their renewable energy claims are based on RECs. Also, the proposed Guides provide guidance to avoid double counting renewable energy. For example, according to the proposal, a company should not sell RECs for renewable energy it generates onsite and then tout its renewable energy facility in advertising. According to the FTC, “[b]y selling RECs, the company has transferred the right to characterize its electricity as renewable.”
In addition, the proposal adds a section to the Guides on carbon offset claims. Carbon offsets are credits or certificates that represent reductions in greenhouse gas emissions, and although the FTC received many comments concerning these claims, it provides only the following, limited guidance concerning the claims in its proposal.
Carbon Offsets. First, it advises that marketers should have competent and reliable scientific and accounting methods to ensure they are properly quantifying emission reductions and not selling those reductions more than once. Second, the proposal advises disclosure if the offset purchase funds emission reductions that will not occur for two years or more. And, third, the proposal advises against advertising a carbon offset if the activity that forms the basis of the offset is already required by law.
Popular Claims Not Addressed
In the Federal Register notice, the Commission acknowledges that the proposed, revised Green Guides do not address some claims popular in the marketplace. For example, the proposal fails to include the claims “biobased,” “carbon neutral,” and “carbon footprint.” The FTC provides its rationale for declining to include the following:
Sustainable. Although the claim has become quite popular, the FTC consumer perception research indicated that the claim alone has no single environmental meaning to a significant number of consumers and that it conveys non-environmental characteristics (e.g., durable or long lasting). Consumers also apparently viewed the claim differently than general environmental benefit claims. Therefore, the FTC it concluded that general guidance in the Green Guides is not appropriate for the claim. Nevertheless, the FTC noted that, when used in combination with environmental terms or images, use of “sustainable” may be perceived as an environmental claim and must be appropriately qualified and substantiated.
Organic and Natural. The FTC noted other federal agency regulations and guidance concerning these claims and a lack of consumer perception evidence related to the claims as its reasons for not including the claims in the proposed Guides. It did, however, solicit further comment on the claims and make clear that, if reasonable consumers perceive these claims as general environmental benefit claims or comparative claims, marketers must have appropriate substantiation.
Life Cycle. Life cycle analysis refers to the assessment of a product’s environmental impact through all stages of its “life.” Like the Current Guides, the proposed Guides decline to define these claims or to require, as some have suggested, that life cycle analysis be conducted by marketers to substantiate certain claims.
Again, we encourage consideration of the FTC’s proposal and its potential impact on current and future environmental marketing plans. Please do not hesitate to contact your regular contact at Hogan Lovells US LLP or us with any questions.
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