Free: ‘Green’ Is So Appealing

New_york_law_journal_jpegThe New York Law Journal ran a interesting piece recently that went into great depth about the legal technicalities of green marketing claims.  It’s important as companies continue market their green products and the greenness of their products, that the consumer not be taken or frustrated by false claims. 

Posted Sept. 15, 2008
By Christopher A. Cole and Linda A. Goldstein, The New York Law Journal

The marketing community has discovered the power of "green marketing."
Over the last year, brands have invested heavily in advertising devoted
to promoting products, services and brands as being "eco-friendly,"
"carbon-neutral" and environmentally "sustainable," among other
environmental buzzwords. Consumers are urged to buy "green" not only
for their own sake, but also for the very survival of the earth and its
climate. For example, they are bombarded with glossy ads touting the
environmental improvements in energy production, automobile manufacture
and forestry. And, they are offered cleaners and detergents that
contain only biodegradable, non-toxic ingredients.

Such ads often seek to convince consumers that they can help the
environment, while making little personal sacrifice. The premise is
that the consumer can buy the advertised eco-friendly product instead
of the environmentally inferior alternative, while obtaining equivalent
or better product performance at a comparable price. Presented with a
choice between two such comparably performing products, consumers will
often choose and even pay more for the product that best fulfills their
personal desire to improve the environment. Green marketers have
succeeded in adding environmental performance to the list of factors
consumers will consider before purchase, even for those products never
before marketed with environmental claims.

While green marketing claims can be a highly effective marketing tool,
many consumers unfortunately lack the information or knowledge
necessary to assess these claims on their own.

Green marketing claims are considered "credence claims," to borrow
Federal Trade Commission parlance. In other words, the consumer must
take the advertiser’s word for it that the product is environmentally
friendly. While the average consumers can determine on their own
whether a "non-toxic" cleaner removes stains, they are not capable of
verifying whether that cleaner kills germs as well as a traditional
brand, or whether the multi-syllabic ingredients on the label are
really "environmentally friendly."

Advertisers are struggling with the lack of published guidance
regarding how to substantiate and accurately describe the environmental
benefits of their products. Present regulation and guidance is
outdated, having been written at a time when the only common green
marketing claims were terms like "recyclable," "biodegradable" and
"ozone safe." This first generation of environmental marketing claims
was relatively easier to understand, define and support.

Today, not only have technologies and materials changed, but consumer
concern for the environment reaches far earlier into the product life
cycle. Consumers’ purchase decisions may be driven as much by the
externalities of product production as by what happens to the product
after it is thrown away. Many consumers pay attention to pollution, raw
materials, ingredients, and energy consumption both in production and
transport to market.

This shift in consumer attitudes, and marketers’ intense focus on
environmental issues has outpaced the development of regulation. The
gap may be narrowing, however, as we discuss below.

First, the Federal Trade Commission is developing updated standards for
environmental advertising claims. Second, private industry has begun to
police itself in the green marketing area through self-regulation and
private standard-setting organizations. And third, private false
advertising litigation has kicked into gear against alleged instances
of deception.1 We examine each development in more detail below.

FTC Revisions to Green Guides

The Federal Trade Commission polices advertising claims under Section 5
of the FTC Act. This includes most environmental marketing claims.

As with all other advertising claims, green marketing claims must
comply with the longstanding rules, articulated in FTC’s Deception
Policy Statement, that an advertiser must have substantiation for all
reasonable interpretations of the advertising claims it makes, and that
this substantiation must consist of a competent and reliable basis for
the claims.

In 1992, the FTC issued the first edition of its industry guides
regarding environmental marketing claims, which is still in effect. Now
commonly called the "Green Guides,"
these guides specifically define terms such as "recyclable" and
"biodegradable" and provide examples of how to phrase and substantiate
such claims in a variety of situations. Another area the Guides address
in detail is claims regarding chlorofluorocarbons and "ozone-friendly"
products. This was a hot issue in 1992, on the heels of the Montreal
Protocol, but is relatively insignificant today due to the successful
phaseout of CFC-depleting products.

More recently, in response to the new wave of green marketing claims
such as "sustainable," "eco-friendly" and "carbon neutral," the FTC has
begun the process of updating the 15-year-old Green Guides. It has
convened a series of public workshops to gather information on current
issues and concerns relating to environmental claims.

The first workshop,
which took place in January 2008, focused on the entirely new category
of green claims relating to global warming issues, such as renewable
energy and carbon offsets. The second, a few months later, dealt with green packaging claims. And the third, which took place in July, addressed green buildings and textiles.

Efforts to update the Green Guides may not be easy; illustrating the
difficulty is the now-ubiquitous marketing term "sustainable." While
this word is often used loosely by marketers to convey a general sense
of products or production practices that do not degrade the environment
over time, certain industries have adopted very specific and
quantifiable definitions.

In the forestry industry, for example, competing organizations have
published standards that include detailed definitions of "sustainable
forestry." There are sustainability standards issued by the Sustainable
Forestry Initiative (SFI), Canadian Standards Association (CSA), and
the International Organization for Standardization (ISO). SFI, for
example, will license the use of its certification label to a licensee
that substantiates claims regarding the percentage of fiber obtained
from independently certified forests adhering to sustainable forestry
practices.

The FTC likely does not want to substitute its judgment here for that
of forestry industry experts, and representatives of the forest
industry who submitted comments at the workshop generally asked that
FTC not disrupt their own efforts at self-regulation. It is likely the
FTC will endorse such efforts, and continue to monitor the
standard-setting organizations and standard-setting process. The
question remains, however, whether the marketing buzzword will retain
any meaning beyond those specific applications.

Another thorny area involves the advertising of claims related to
carbon offsets and Renewable Energy Credits (RECs). Carbon offsets are
the process for mitigating or offsetting the emissions of carbon
dioxide, a greenhouse gas. Advertisers sometimes sell products
promising to offset the greenhouse gas emitted in the production or use
of a product by funding or engaging in projects like wind farms, tree
planting, or methane-capture facilities. Advertisers also may promise
that the product was produced with RECs offsetting conventional fossil
fuel energy sources. RECs are tradable commodities representing proof
that a certain amount of electricity was generated from an eligible
renewable energy resource.

Although the FTC said, in comments leading up to the workshops, that it
believes use of the term "carbon offsets" in advertising could be
inherently misleading if the ad does not specify the particular manner
in which reductions in carbon emissions have been obtained, adopting a
specific standard for such disclosures may be tricky.

As one participant in the workshops pointed out, there are currently
four proposed U.S. regional greenhouse gas cap-and-trade programs,2
nearly 30 mandatory state regional energy portfolio standards (and more
possibly on the way), and voluntary REC and carbon offset markets, all
with varying, and sometimes conflicting requirements. Thus, the
standards for what is a "carbon offset" and REC are not uniform, and
may not be for many years. Will it be sufficient for an advertiser to
include a disclosure referencing one of these evolving programs? For
now, this seems the only solution.

Extensive debate also continues to focus on the concept of proving
emissions offset "additionality." In other words, would the claimed
carbon offset or emission reduction have occurred even if the consumer
had not engaged in the transaction with the advertiser? The issues
surrounding measurement, verification and proof are highly complex, and
the FTC will need to consider a broad array of potential claims.

For example, can an energy company claim in advertising that it is
reducing or offsetting carbon emissions based on using more nuclear
energy instead of fossil fuels? Can a petroleum refiner make such
claims if it employs greenhouse gas sequestration technologies? Can an
electronics manufacturer make such claims if it fosters
demand-reduction programs by consumers? How does one even count the
pounds of carbon offset per transaction?

Debate also surrounds the use of reforestation efforts in order to
offset carbon emissions. While live trees remove carbon dioxide from
the air, decaying trees re-release that carbon to the atmosphere.
Furthermore, not all trees, and not all latitudes, provide equivalent
carbon removal. Must an advertiser specify the type and location of the
trees planted? Would such a disclosure have any meaningful impact on
the average, reasonable consumer?

The FTC also proposes to address claims of general environmental
benefit, such as "eco-friendly," "green" and logos that imply such
ideas. Under the existing Guides, such claims are permissible, so long
as they are accompanied by qualifying language limiting the
representation to the attribute or attributes for which the claim can
be substantiated. The FTC’s current standards here permit an advertiser
to tout the "eco-friendly" benefit of one aspect of the product, such
as its packaging, while never mentioning the overall environmental
impact of product production and use.

Some bottled water sellers promote the use of thinner plastic bottles
that use less plastic, thereby reducing the amount of plastic that gets
landfilled or recycled. The FTC is now considering whether they can
continue to emphasize this "environmental friendly" aspect in
marketing, while omitting any mention of the overall environmental
costs associated with the production, transportation and disposal of
plastic water bottles.

In light of these uncertainties, it seems likely that the FTC will
chart a careful course. Since the agency’s goal is to preserve and
support proper market functioning, it is unlikely to set prescriptive
performance requirements that would have the effect of constraining
emerging markets for renewable energy credits and carbon offsets. The
FTC will likely articulate general standards of substantiation and
clarity of disclosure and communication, while reserving the ability to
assess each claim on a case-by-case basis in the future.

For marketers, this means that the updated Green Guides will not
conclusively answer many important questions. Even after the Guides are
reissued, advertisers will have to make judgment calls about
substantiation for environmental claims, particularly in the evolving
areas of RECs and carbon offsets, lifecycle assessments, and
sustainability.

The National Advertising Division

The National Advertising Division (NAD) is an industry self-regulation
arbitration forum set up under the auspices of the Council of Better
Business Bureaus. The NAD’s staff of full time advertising attorneys
reviews and decides advertising challenges brought by industry
competitors, public interest groups, consumers, and NAD itself through
its self-monitoring program. Although the NAD process is voluntary and
the NAD cannot directly enforce compliance with its written
recommendations, advertisers comply over 95 percent of the time.

The NAD has heard a number of significant and interesting challenges
regarding green marketing claims in the last two years, which will have
an important impact on how such claims are made in the future.

The NAD’s watershed case involving environmental claims involved
advertising for household cleaning products. Seventh Generation,
Household Cleaning Products, NAD Case #4488 (05/08/2006). Among other
things, Seventh Generation claimed in ads that its products "don’t
create fumes or leave residues that may affect the health of your
family or your pets," the way "traditional counterparts can." Seventh
Generation’s ads also urged consumers to stop using chlorine bleach and
to buy Seventh Generation’s chlorine-free bleach alternative instead,
because chlorine bleach is "toxic."

The ads were challenged by Clorox, which argued that the claims were
overbroad and unsupported, citing extensive evidence that sodium
hypochlorite bleach, as formulated for home use, is not known to cause
adverse health effects. Clorox provided evidence that the vapors of
chlorine bleach, and even drinking bleach, are not as harmful as may
commonly be believed. As Clorox argued, the LD50 (a measure of acute
toxicity) for sodium hypochlorite is equivalent to that for Seventh
Generation’s competing product.

In its decision, the NAD adopted an approach that characterizes all of
its subsequent decisions on environmental claims. The issue, in NAD’s
view, was less about the benefits of an environmentally friendly
product, than about the advertiser’s broad and denigrating comparative
claims. The NAD ultimately held that Seventh Generation’s claims
overstated the risks from using sodium hypochlorite bleach, and
recommended that the advertiser discontinue express and implied claims
that traditional bleaches are hazardous or cause health risks.

A second, more complicated environmental dispute played out in the NAD
forum just a few months later. In Born Free, LLC, BornFree Baby
Bottles, NAD Case #4626 (2/1/2007), the American Chemistry Council
challenged advertising claims for a brand of baby bottles that had been
manufactured without bisphenol A (BPA), a chemical that has been
alleged to cause endocrine disruption.

The advertiser, citing emerging data regarding the health risks of BPA
at low doses, made a variety of claims designed to convince parents
that its BPA-free bottles were a "safer," "healthier" and less
hazardous choice for babies than bottles made with BPA. The challenger
attacked these claims as overbroad, unqualified and unsubstantiated,
and argued that the claims were supported merely by the "Precautionary
Principle" and not concrete clinical evidence.

In resolving the case, the NAD was faced with a wealth of contradictory
data and argument regarding the health risks of BPA. Rather than
attempting to resolve in the first instance the broad and difficult
question of whether BPA is really harmful to babies, the NAD charted a
narrower course.

It found that there was adequate evidence that BPA, as a stand-alone
ingredient or chemical, could be reasonably characterized as an
endocrine disruptor (based on studies of BPA effects in animals and
humans). However, it also concluded that the advertiser had inadequate
evidence that BPA could leach from baby bottles at levels found in the
published literature to cause this type of harm. It therefore
recommended that the advertiser discontinue claims suggesting that
polycarbonate bottles containing BPA are comparatively riskier to
babies, absent direct, comparative clinical evidence of health outcomes.

Clorox itself more recently became the defendant in an NAD advertising
challenge lodged by S.C. Johnson & Son. In that case, SCJ
challenged claims for Clorox’s new GreenWorks(tm) line of cleaning
products in which Clorox advertised in various ways (both in words and
through visuals) that "GreenWorks cleaning products work just as well
as traditional cleaners." At issue in the case was not the
environmental benefit of using the GreenWorks product, which has been
endorsed by the Sierra Club in an unusual partnership, but rather the
more pedestrian issue of whether the GreenWorks products in fact
cleaned as well as ordinary cleaners.

After reviewing reams of competing tests on soil and grease removal,
NAD concluded that Clorox could indeed continue to claim parity of
cleaning in all but one respect – antibacterial effect. With respect to
germ-killing benefit, NAD recommended that, since most consumers have
come to expect their hard surface cleaners to kill germs, Clorox should
make clear that its product does not necessarily kill germs as well as
the more traditional alternatives.

These initial NAD cases suggest that, absent more precise guidance, the
NAD does not seem inclined at present to set specific standards
governing environmental claims. NAD remains focused on the truthfulness
of the product efficacy claims, and seems unwilling to create new or
different rules for green marketing.

Lanham Act Litigation

Environmental advertising claims have also been challenged in private
false advertising litigation, brought under §43(a) of the Lanham Act. 15 U.S.C. §1125(a).

In one recent notable case, Lexmark, a company that manufactures and
remanufactures computer printer toner cartridges, was accused of
falsely advertising to consumers that all or most of the printer ink
cartridges that they return to Lexmark will be remanufactured or
recycled. Static Control Components Inc. v. Lexmark International Inc., 487 F. Supp.2d 861 (E.D. Ky. 2007).

Evidence showed that consumers believed that the program was created to
encourage recycling and improve the environment. Yet discovery
demonstrated that a great many of the returned cartridges were actually
incinerated, and not recycled in the ordinary sense of the word.

The court nevertheless denied a plaintiff’s motion for summary judgment
against Lexmark, finding that there was a factual dispute to be
resolved at trial regarding whether incineration could be properly
characterized as "thermal recycling." The court also left for jury
decision the issue of whether the "environmentally friendly" message of
the cartridge return program was literally or implicitly false.

In a pitched battle of bottled water producers, Vermont Pure sued
Nestle, which produces Poland Spring brand bottled water, for allegedly
misrepresenting in advertising the purity and source of Poland Spring
waters. Vermont Pure Holdings, Ltd. v. Nestle Waters North America Inc.,
2006 U.S. Dist. LEXIS 13683 (D.Mass. 2006). Vermont Pure alleged that
Poland Spring water had never been extracted from the actual "Poland
Spring" in Maine, nor did it derive from "some of the most pristine and
protected sources deep in the woods of Maine," as advertised.

Rather, alleged Vermont Pure, the water used in bottling Poland Spring
was actually obtained from a series of gravel packed wells from four
different places, and also trucked in from undisclosed out-of-state
sources. Moreover, the plaintiff alleged, the method of water
extraction used by Nestle actually contaminated ground and well water.

Finally, plaintiff also alleged that the bottled water was not "pure"
as advertised, but had been found to contain various contaminants,
including fecal coliform bacteria.

The court denied Nestle’s motions to dismiss these claims on grounds of
FDA preemption. The case later settled, with Nestle continuing to deny
liability, but paying to Vermont Pure the amount of $750,000.

Another prominent recent litigation involved Merisant’s allegations
that McNeil Nutritionals, the makers of Splenda(r) brand sucralose
sweetener, had misled consumers with its longstanding claim that
Splenda was "Made from sugar so it tastes like sugar." Looming large in
the dispute was the core allegation that Splenda had been positioned as
an "all-natural" sweetener, when in fact it was created through a
process involving chlorination of the sugar molecule. Merisant and
McNeil settled their case for undisclosed terms, but a separate lawsuit
against McNeil, brought by the Sugar Association, is still pending.

Future Trends

Because green marketing claims are appealing to consumers, their use by marketers is likely to increase even further.

Once the FTC reissues the Green Guides, or perhaps even before that
time, the FTC will likely begin a series of targeted enforcement
actions designed to send a message to marketers that the more egregious
falsehoods should be stopped. If past history is any guide, enforcement
actions will likely be targeted at a few brand name companies that will
draw greater attention to the issue. At the same time, private
litigants will continue to police each others’ claims through the
mechanisms of the NAD and Lanham Act litigation.

Thus, while standards applicable to the currently "hot" environmental
claims are still in development, marketers would be well advised to
ensure that, as with all advertising claims, they have a reasonable
basis for the eco-friendly benefits they tout.

In particular, to the extent that green marketing claims are made for a
product, marketers should be careful to indicate, which if any
components of the product the benefits relate to and marketers should
avoid exaggerating the overall environmental benefits of their products
based on the presence of a specific eco-friendly attribute. These are
the kinds of claims that have gotten marketers in trouble in the past
and are likely to continue to attract scrutiny while more
particularized standards are being developed.

Christopher A. Cole and Linda A. Goldstein are
partners at Manatt, Phelps & Phillips. Mr. Cole, from the
Washington, D.C. office, is a litigator specializing in advertising
issues. Ms. Goldstein, from Manatt’s New York office, is the chair of
the firm’s advertising, marketing and media group.

Endnotes:

1. Due to space limitations, we do not address numerous class action
complaints regarding allegedly false green marketing claims. There is
every reason to believe that these consumer fraud class actions will
continue to proliferate.

2. The whole concept of trading credits for greenhouse gases and other
pollutants may itself be in turmoil in light of the D.C. Circuit’s
blockbuster decision in North Carolina v. EPA,
No. 05-1244 (July 11, 2008), which vacated and remanded EPA’s proposed
Clean Air Interstate Rule (CAIR), which would have created a trading
program for sources contributing to particulate and ozone pollution.

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