On April 8, 2022, Kohl's and Walmart were fined for violating federal marketing laws, resulting from a Federal Trade Commission ("FTC") investigation alleging that the businesses had: 1) falsely marketed dozens of rayon textile products as being made of bamboo; and 2) misleadingly claimed that such "bamboo-derived" textiles were made using ecofriendly processes. In reality, the process of converting bamboo into rayon requires the use of toxic chemicals and creates hazardous pollutants. Pursuant to the Federal Trade Commission Act ("FTC Act"), and the FTC's Penalty Offense Authority, Kohl's and Walmart were ordered to stop making deceptive green marketing claims and to pay penalties, totaling $5.5 million.
The underlying allegations against Kohl's and Walmart should serve as a cautionary tale to those in the marketing industry. Specifically, if businesses want to promote their products as ecofriendly, they may face serious penalties if those claims turn out to be false.
Marketing Law Violations and the FTC
Pursuant to the FTC Act, the FTC is authorized to investigate false advertising and deceptive practices for the purpose of preventing businesses from misleading the consuming public. According to the FTC Act, false advertising occurs when businesses make misleading, deceptive, or plainly false claims about a particular product or service. Claims may be misleading if they imply something that is untrue (e.g., product materials) or leave out relevant information. Businesses that engage in false advertising often face serious consequences when investigated, including up to $43,792 in fines per violation.
Here, the FTC claims that Kohl's and Walmart had falsely marketed products as being made of "bamboo" when they were actually made of "rayon textile derived from bamboo." In addition, the FTC alleged that the businesses had misleadingly advertised that such "bamboo-derived" textiles were made using ecofriendly processes, when, in fact, such processes may be harmful to the environment.
False Environmental Claim Repercussions
According to the settlement agreements, Kohl's and Walmart must cease any and all publication of their deceptive environment-friendly claims. Unless they can prove so, the retailers must stop claiming that their products are made of bamboo and are ecofriendly (i.e., "claiming that [they are] produced free of harmful chemicals, using non-toxic materials, or in a way that is safe for the environment or non-polluting, or has any other environmental benefits"). In addition, Kohl's and Walmart are required to pay penalties of $2.5 million and $3 million, respectively (the largest penalties for such violations to date).
Given these risks, it is always best to obtain guidance from experienced marketing attorneys before launching any eco-conscious advertising campaigns.
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