Extracted from Law360
The Federal Trade Commission has finally moved to commence a regulatory review of the Green Guides — 10 years since their last update.
The FTC has requested public comment on various potential updates to the Green Guides at a time when green claims and commitments used to promote products and services are increasing to meet consumer demand and are coming under increasing scrutiny from regulators and litigators alike.
The comment period was originally set to expire Feb. 21, but the FTC has extended it until April 24. In addition, the FTC has announced that it will host a public workshop May 23 to examine recyclable claims as part of its review of the Green Guides.
While this process is ongoing, we examine how a potential update to the Green Guides may affect marketers' ability to make green claims and how marketers can continue to tout environmental benefits while mitigating regulatory enforcement and litigation risk.
Green Guides, and FTC and State Enforcement Priorities
Marketers of consumer goods, food and services are increasingly using environmental marketing claims to meet consumer demand for products and services with environmentally friendly attributes.
Understanding the regulatory standards that underpin various green claims is the first step in ensuring claims comply with applicable requirements.
At the federal level, environmental marketing claims are subject to the FTC Act of 1914, which declares unlawful "unfair or deceptive acts or practices in or affecting commerce."
While the Green Guides themselves are not separately enforceable, the FTC considers them "administrative interpretations of the FTC Act as applied to environmental claims."
The guides describe situations when claims may or may not be consistent with the FTC Act, helping marketers avoid making claims that are unfair or deceptive under Section 5 of the FTC Act. The FTC can and has taken action if a marketer makes an environmental claim inconsistent with the Green Guides.
The Green Guides, which were last updated in 2012, provide standards for a number of different types of claims, including general environmental benefit claims — e.g., an unqualified eco-friendly claim; compostable, degradable, recyclable, recycled content, free-of, nontoxic and carbon-offset claims; and renewable energy and renewable materials claims.
The Green Guides are informed by the FTC's views on how reasonable consumers likely interpret certain claims and are based on marketing to a general audience.
Beyond the Green Guides, state and local requirements or standards may also affect the contours in which marketers can make various green claims.
For example, California has taken an active role in regulating environmental marketing claims with the passage of S.B. 343 and A.B. 1201 in 2021.
Those laws place restrictions on the use of the chasing arrows symbol surrounding resin identification codes on plastic containers and update the state's restrictions on compostable and degradable marketing claims pertaining to the sale of plastic products in the state.
Other states have enacted their own laws governing environmental claims, such as Washington's and Maryland's standards for compostable and degradable claims.
Despite these myriad federal and state regulatory standards, enforcement from the FTC and states has historically been limited.
Over the past several years, the FTC has initiated enforcement actions against marketers targeting environmental claims such as "Green Promise" and "Eco Assurance" seals, volatile organic compound-free claims and "Certified Organic" as violations of the FTC Act. Enforcement tools range from the issuance of warning letters to the filings of federal lawsuits.
Cases resulting in monetary penalties are relatively sparse but have recently reached up to $3 million. These enforcement actions have typically included other equitable relief, such as requiring companies to stop making deceptive green claims or using other misleading advertising. A company that violates an enforcement order from the FTC could be subject to civil penalties of up to $50,120 per violation.
States and localities have also targeted companies making environmental marketing claims in violation of state consumer protection law — though publicized enforcement has been relatively limited.
Update to Green Guides, Claims of Focus
On Dec. 14, 2022, the FTC unanimously voted to approve the publication of a request for public comment in the Federal Register to commence a regulatory review of the Green Guides.
In its notice, the FTC points to increased attention to environmental concerns, such as climate change and issues driven by the COVID-19 pandemic, as fueling the proliferation of these type of claims and the need for this review to "ensure the Guides reflect changes in the marketplace over time."
Environmental focus and consumer interpretations of environmental issues have changed significantly in the last 10 years since the last Green Guides update.
The FTC requests public comment on a number of general issues, such as:
- Whether there is a continuing need for the Green Guides;
- Evidence since 2012 of consumer perception of environmental claims and interest in particular environmental issues;
- Evidence concerning the degree of industry compliance with the Green Guides;
- Any potential unfair or deceptive environmental marketing claims not covered by the Green Guides; and
- Whether the FTC should initiate a rulemaking on deceptive or unfair environmental claims, among other issues.
This last point is important because unlike the Green Guides, FTC regulations are separately enforceable and allow for civil penalties of up to $50,120 per violation. Therefore, marketers should be closely watching the FTC's next steps to determine whether a rulemaking on deceptive or unfair environmental claims is initiated.
In addition, the FTC requests comments on specific issues and claims that it says has generated increased attention and interest over the last several years, including:
- Carbon offsets and climate change
- Ozone-safe and ozone-friendly
- Recycled content
- Energy use and energy efficiency
We expect significant comment on claims relating to recyclability, recycled content, carbon offsets, climate change and sustainability given their proliferation in the marketplace, the various ways these terms are used and potential changes in consumer perception since 2012.
Litigation Challenges Mount
While the standards set forth in the Green Guides are not themselves enforceable, litigants often leverage the standards to allege that green claims amount to deceptive advertising under state consumer protection laws.
Environmental claims related to food, food packaging, cleaning products, personal care products and other consumer goods have all been targets in these suits.
In addition to product labeling claims, environmental, social and corporate governance reports, websites, executive statements and other media have all been targets for these challenges.
A particular focus has been on general environmental benefit claims — e.g., sustainability and related claims — as well as recyclable, biodegradable and compostable claims.
Marketers have had mixed success in fending off these challenges, with courts frequently denying motions to dismiss these cases, concluding that the plaintiffs have plausibly alleged deception.
For example, Spindel v. Gorton's Inc. — filed in the U.S. District Court for the District of Massachusetts in 2022, challenging as deceptive a seafood manufacturer's claims that its tilapia products were sustainably sourced — survived, in part, a motion to dismiss.
The plaintiffs alleged that the tilapia is "made from tilapia industrially farmed using unsustainable practices that are environmentally destructive and inhumane."
In its ruling on the defendant's motion to dismiss, the court found that the plaintiffs did assert a "plausible (albeit hotly disputed) claim that [the] tilapia are sourced, in part, from unsustainable Chinese fish farms with 'environmentally destructive and inhumane' practices."
Separately, Earth Island Institute v. Bluetriton Brands, filed in the District of Columbia Superior Court in 2021, alleged that a beverage company's representations that it is sustainable and environmentally friendly are deceptive given the company's alleged "significant and ongoing contributions to plastic pollution and its depletion of natural water resources."
In denying the defendant's motion to dismiss, the court found that the plaintiff plausibly alleged deception, even concluding that the statements made across a multitude of platforms outside of product labeling "could be found to have the same effect on the consumer as direct advertising, or statements on the packaging or label of the product itself."
More recently, we have seen just a handful of courts granting motions to dismiss these challenges. Many defendants have also opted to settle claims.
As marketers look to distinguish their products and as the plaintiffs bar views environmental labeling claims as another frontier to conquer, lawsuits challenging environmental marketing claims are likely to continue to rise.
Best Practices for Marketers
While the FTC's regulatory review of the Green Guides is ongoing, marketers and other interested parties should consider whether to file a comment addressing one or more issues.
Separately, the FTC announced it will host a public workshop May 23, called "Talking Trash at the FTC: Recyclable Claims and the Green Guides" to examine recyclable claims as part of its review of the Green Guides.
In announcing the workshop, the FTC explained that the workshop will cover: the state of recycling practices and recycling-related advertising; consumer perception of current and emerging recycling-related claims; and the need for any updates to the Green Guides related to recycling claims.
In the interim, to mitigate potential risk, marketers should continue to review claims in light of the shifting regulatory and litigation landscape.
Marketers should carefully consider the FTC's list of claim categories, whether others should be included — and the value of setting a level playing field for all marketers making the claim — and the appropriate parameters for ensuring such claims are not unfair or deceptive.
As marketers await the FTC's next steps on its Green Guides update, they should consider some best practices to mitigate potential regulatory enforcement and litigation risk.
Monitor regulatory and legislative developments and evaluate how they may affect the use of existing or potential green claims.
Determine whether existing substantiation is sufficient to support claims or whether additional substantiation may be needed. Vet third-party certifying bodies — simply relying on certifications to substantiate claims may not fully insulate the claim from risk.
Weigh the use of other measures to minimize risk, such as using disclaimers or qualifying language, where possible.