United States: Environmental False Advertising: An Earth Day Green Guide Review

Last Updated: April 27 2017
Article by David A. Kluft

Earth Day is coming up on April 22, which means that a lot of consumers are going to be reminded to think green, and to buy green. What if your company is looking to access this vast market of environmentally-minded shoppers, but your product or service isn't really that environmentally conscious? Can you just go ahead and label yourself "Green" anyway? Who's gonna notice?

Well, the Federal Trade Commission (FTC) for one. The FTC monitors marketing claims asserting the environmental attributes of products and services, and evaluates these claims principally by reference to the " Green Guides," a series of FTC guidelines initially promulgated in 1992 and most recently updated in 2012. In addition to the FTC, the Green Guides are also used by the National Advertising Division, a self-regulatory mechanism for the advertising industry, before which the veracity of advertising claims is often challenged.

The object of the Green Guides is to help marketers avoid FTC and NAD actions by ensuring that environmental advertising is not deceptive and not in violation of Section 5 of the Federal Trade Commission Act. The Green Guides contain specific advice as to many common environmental marketing buzzwords, such as claims that products are "recyclable," "compostable," "biodegradable" or "renewable."

Since 2012, the Green Guides also contain a prohibition against unqualified "general environmental benefit" claims, such as "Green" or "eco-friendly." For example, simply calling a product "eco-friendly" without more explanation is considered deceptive because the term can reasonably mean a lot of different things to a lot of different consumers. Unless the advertiser can substantiate all of those meanings, the claim is deceiving at least some reasonable consumers.

To help you get ready for the Earth Day barrage of environmental advertising claims, here are some Green Guide-related matters before the FTC and NAD that have resulted in an opinion or other resolution since around the time of the last Earth Day.

A Battery of False Claims

LEI Electronics' advertisements for its Eco Alkaline batteries made almost every Green Guide claim you could think of. According to LEI, Eco Alkaline batteries were "landfill conscious," "carbon free," "carbon neutral," "recyclable," "compostable" and, gosh darnit, just "the world's most eco responsible battery." According to Energizer Brands, however, these claims were nonsense. Quick as a bunny, Energizer initiated an action before NAD, and NAD mostly agreed with Energizer.

Among other things, LEI advertised that its product was "made from 80% recyclable materials," but it turned out that this was only true about the packaging. LEI called its product "recyclable," but the Green Guides provide that you should not label a product "recyclable" unless at least 60% of the likely consumers have access to an established recycling program for the product, which apparently was not the case here. LEI also issued an internet advertisement for its battery that began:

Every day, in millions of homes around the world, people set aside their vegetable scraps and throw them into the compost bin in their yards. They convert their rubbish into a potent, nutritious plant manure. What a powerful idea.

Does this imply that the Eco Alkaline battery is compostable? Energizer and NAD thought so. Is the Eco Alkaline battery compostable? Nope.

LEI agreed to discontinue the above-described claims, but refused to stop calling its product "carbon neutral." LEI participates in programs through which it had obtained "carbon free" certifications, but under the Green Guides that certification alone is not sufficient; the advertiser must also be able to independently substantiate the claim communicated by the certification. Here, LEI based its "carbon neutral" claim in part on a life-cycle assessment that calculated the product's carbon footprint in Canada. NAD rejected this study as irrelevant to the U.S. market. Pursuant to standard NAD policy and practice, that part of the case has been referred to the FTC. Energizer Brands LLC v. LEI Electronics, Case #5927 (2016).

What does Biodegradable mean?

How long does it take for something to biodegrade? And how long does a reasonable consumer think it takes something to biodegrade? Turns out the answers to these questions are pretty different.

The Green Guides state that if you use the word "biodegradable," without further qualifying how long the degradation will take, you are impliedly stating that the product will degrade within "a reasonably short period of time." What is a "reasonably short period of time"? One year, according to the Green Guides. Therefore, if you call your product "biodegradable" without more, and it will not degrade within one year, the FTC may consider your marketing deceptive.

ECM BioFilms manufactures an additive that promotes biodegradation in plastics, and in many instances it marketed its product as "biodegradable" without qualifying that statement with a time period. In 2013, the FTC filed an administrative complaint against ECM alleging in part that, because the ECM product did not degrade within one year, ECM's unqualified "biodegradable" claim was impliedly deceptive.

An Administrative Law Judge held that the FTC could not simply rely on the "one-year rule" in the Green Guides, but had the burden of proving that at least a "significant minority" of reasonable consumers would believe that the word "biodegradable" without further qualification meant degradation in one year. After a three week trial, the ALJ found that the FTC had not met this burden. Based on the record before him, the ALJ found that, at best, a "significant minority" of consumers believed that "biodegradable" by itself implied degradation in five years. Therefore, the FTC's allegation that ECM had implied a "one year" period failed.

On appeal to the FTC Commissioners, the FTC changed tactics and abandoned its "one-year rule," at least for this case. The FTC reasoned that the ALJ had not found support for a "one-year rule," but had found support for a "five-year rule," i.e., if you use "biodegradable" without qualification, a "significant minority" of consumers will think the product will degrade within five years. Since ECM's products will not degrade within five years, the unqualified "biodegradable" claim was still deceptive. The Commissioners accepted this argument and reversed the ALJ's decision (with a partial dissent by Commissioner Maureen K. Ohlhausen).

ECM appealed to the Sixth Circuit, arguing that the "five-year rule" had no more factual support than the "one-year rule," because it represented the view of only a minority of consumers. ECM also argued that "nothing biodegrades within five years," let alone one year, so this consumer belief is scientifically invalid and should not be considered reasonable. (This argument would have had more force had ECM not also been telling consumers that its product biodegraded within five years).

On March 16, 2017, the Sixth Circuit rejected ECM's arguments and affirmed. The Court held that the FTC was entitled to prohibit advertisements that deceived only a "significant minority" of consumers. Furthermore, the Sixth Circuit held that the standard for "reasonableness" with regard to false advertising is not "scientific validity," but the "public's impression." ECM BioFilms, Inc. v. Federal Trade Commission, 2017 U.S. App. LEXIS 4609 (6th Cir. 2016).

It's Getting Hot in Herre

Last year, Nest Labs' Earth Day advertisements claimed that its programmable thermostat technology "saved energy." NAD initiated an action to determine whether this assertion was accurate and whether the claim "saves energy" was a "general environmental benefit" claim, particularly seeing as the claim had been made in the context of Earth Day. If it was a "general environmental claim," then simply claiming a product "saves energy" without further qualification would be a violation of the Green Guides and deceptive under Section 5.

Fortunately for Nest Labs, NAD determined that "saves energy" was a specific benefit claim that required no further qualification. NAD also found that Nest Labs' product was the real deal, and in fact did "save energy." In re Nest Labs, Inc., Case #6024 (2016)

NAD came to a similar conclusion with respect to Comcast Cable's claim that its Xfinity Home programmable thermostat feature also "saves energy." DirectTV, LLC v. Comcast Cable Communications, LLC, Case #5926 (2016).

The Toxic Avenger

The Green Guides state that it is deceptive to misrepresent, directly or by implication, that a product is "non-toxic." Applegate Insulation represented that a fire retardant additive in its insulation, "boric acid, is six times less toxic to humans than table salt." This claim was challenged before NAD on the grounds that, among other things, boric acid is classified by OSHA as a hazardous substance, a skin irritant, and a health risk to pregnant women. NAD recommended discontinuance of the claim, and the advertiser accepted the recommendation. North American Insulation Manufacturers Association v. Applegate Insulation, Case #5961 (2016).

A Fisherman's Tale

Prevention Pharmaceuticals, the purveyor of a fish oil concentrate sold as a dietary supplement, advertised that its product had the "highest purity levels" because it was "100% free of contaminants and toxins," as well as "free from heavy metals, contaminants and fillers." A competitor took issue with these claims on the ground that Prevention's product specifications allowed for background or trace levels of lead, mercury, arsenic, cadmium, PCBs and dioxins. Prevention defended itself by reference to the Green Guides. The Green Guides state that you can advertise a product as "free of" a substance, even if it contains a little bit of that substance, provided that "the level of the specified substance is no more than that which would be found as an acknowledged trace contaminant or background level."

But NAD rejected this defense and recommended the claims be discontinued anyway. NAD held that the Green Guide's allowance of trace contaminants was just fine when, for example, advertising the amount of formaldehyde emanating from home insulation. However, the "Green Guides do not purport to speak to the amount of toxins and heavy metals that are safe or desirable for humans to ingest." In other words, when you put something into your digestive tract, there is less room for error. Great HealthWorks, Inc. v. Prevention Pharmaceuticals, Inc., Case #5966 (2016)

"Diesel is Dirty"

Finally, we'd be remiss if we didn't mention the FTC's flagship environmental enforcement action against the Volkswagen Group. According to the FTC, while Volkswagen was promoting its line of diesel engine vehicles as "clean," it was all the while using illegal software (known as a Defeat Device) to cheat on EPA emissions tests. In two stipulated orders (for 2.0 and 3.0-liter models), Volkswagen recently agreed to a collective settlement in the neighborhood of $20 billion.

What's the Green Guide connection? Take a look at the complaint. Had the matter not settled, the FTC telegraphed that it was going to make a case under Section 5 in part based on deceptive "general environmental benefit" claims that had appeared all over Volkswagen advertising campaigns aimed at "progressive" and "environmentally-conscious" consumers." These campaigns including a series of advertisements encouraging do-gooders to "Do Your Part" by going diesel, as well as the genuinely funny "Old Wives' Tale" spots, and the not-so-funny "Green Police" Super Bowl ad. In re Volkswagen "Clean Diesel" Marketing, 2017 U.S. Dist. LEXIS 51340 (N.D. Cal. April 4, 2017).

Originally posted April 18, 2017.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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