Green Marketing ClaimsRegulations and Potential Liability

Presented byWilliam C. MacLeod, Kelley Drye & Warren LLP

feestock

zero-impact

feedstock content

ECO-SMART

eco-friendly

sustainable

sustainability

renewable

renewable resourcelife cycle

recycled

recyclable

biodegradable

degradable

photodegradable

compostableRENEWABLE

BIO-BASED

NATURAL CONTENT

environmentally friendly

earth-friendly

ozone-friendly

cradle to cradlecradle to

grave CARBON OFFSETS

renewable energy credits

carbon neutral carbon

footprint

CLEAN ENERGY

environmentally preferable

environmentally safe

environmentally safe

naturally derived

non-toxic

energy intensity

energy efficient

Bioenergy

greenhouse gases

environmental management systems (EMS)

alternative fuels

green purchasing

New Buzz Words Reach Washington: Green Purchasing

Jan. 24, 2007: President Bush signs

Executive Order 13423, requiring federal agencies to procure goods and services that include biobased, environmentally preferable, energy efficient, water-efficient and recycled-content products.

Standards for Green Advertising Claims

FTC’s Green Guides – 16 C.F.R. Part 260 www.ftc.gov/energy

They do not have the force of law, but provide a safe harbor for advertisers.

They help advertisers understand how the FTC intends to apply Section 5 of the FTC Act.

What Does the FTC Require for all Ad Claims?

Consumer Perception: What claims does the ad convey to reasonable consumers?

Substantiation: Does the advertiser have “competent and reliable evidence” to substantiate those claims?

General Principles of the FTC’s Green Guides

Principle #1: Qualifications and disclosures necessary to avoid misleading consumers must be clear, prominent, and understandable.

Example: A company advertises its building product as “environmentally friendly” but does not explain how it is friendly for the environment. Using the phrase without specific qualifying language explaining what environmental qualities the building product has is deceptive if it leads consumers to believe that the product has far-reaching environmental benefits that the company cannot substantiate.

General Principles of the FTC’s Green Guides

Principle #2: Claims must be presented in such a way as to make it clear whether they relate to a product, the packaging, and/or the company’s practices.

Example: A cleaning product is labeled “biodegradable.” Although the chemical cleaner is biodegradable, the spray bottle is not. By itself, the claim may be deceptive if consumers understand the claim to mean that the entire product, including the packaging, is biodegradable. To avoid potential deception, it should be qualified to say, for example, “the chemical cleaning solution is biodegradable.”

General Principles of the FTC’s Green Guides

Principle #3: A claim must not overstate an environmental attribute or benefit, either expressly or by implication.

Example: A home building company advertises its new energy efficient homes as “guaranteed to provide a 30% decrease in utility bills.” This claim likely overstates the benefit because there are other factors that increase the cost of a utility bill, including utility rates, consumer behavior, and long-term maintenance costs. The company might consider instead saying that its new energy efficient homes “may be up to 30% more energy efficient than a typical 10-year old home (as defined by the U.S. Department of Energy’s Building America Program),” provided the company can substantiate such a claim.

General Principles of the FTC’s Green Guides

Principle #4: Comparative environmental claims must be presented in a way that makes the basis for the comparison clear.

Example: A washing machine is advertised as “30% more efficient.” This claim is ambiguous because it could be a comparison to the advertiser’s immediately preceding washing machine or to a competitor’s washing machine. The marketer should make the basis for the comparison clear, saying, for example, “30% more efficient than typical washing machines were in 2006.”

Types of Advertising Claims in the Green Guides

General environmental benefits Degradable, biodegradable, and photodegradable Compostable Recycled content Recylcable Source reduction Refillable Ozone safe/ozone friendly Non-toxic

Environmental Seals and Certifications

Independent from advertiser

Professional expertise in area

Certification does not insulate advertiser

Avoid broad claims

Climate Change

Renewed attention on the Green Guides

FTC’s Workshops on Green Guides – 2008

FTC Workshops on Specific Topics Under Review: Carbon Offsets and Renewable Energy

Certificates (“RECs”) – January 8, 2008 Green Packaging – April 30, 2008 Green Buildings and Textiles – July 15,

2008

How the Green Guides May Change

FTC’s current review of the Green Guides focuses on new claims that are not covered by the current Guides: Sustainable Renewable Carbon Footprint Carbon Neutral Bio-Based

States Are Monitoring Green Advertising

Many states, like California, Maine, Michigan and Rhode Island, have adopted standards consistent with the FTC guidelines.

» California’s Original Approach: required compliance with state-specific definitions of environmental terms (adopted by states including Indiana)» New York’s Approach: official state emblems or seals designate compliance with state definitions of environmental terms.

Potential Legal Consequences Of Deceptive Advertising

Cease and desist orders Refunds for consumers (redress) Disgorgement of ill-gotten gains Informational remedies – such as corrective

advertising, disclosures in future ads or on product labeling

Thank You!

Questions?

William C. MacLeodwmacleod@kelleydrye.com(202) 342-8811