Policing of Green Claims

Vol. 26 No. 4

Mary Ann Mullin and Daniel J. Deeb are partners at Shiff Hardin, LLP. The authors wish to thank Nate Engle for his assistance with this article.

Recent years have witnessed the proliferation of green marketing—claims touting a product’s environmental benefits or superiority. Unproven claims of energy efficiency, improved air emissions, “antimicrobial,” “recyclable,” and “sustainable” have left consumers confused and frustrated. In response, a variety of entities, ranging from government agencies, to courts, to private sector entities, have stepped forward to oversee and govern these claims. Although agencies, courts, and private sector retailers have each carved oversight and enforcement roles, they sometimes overlap. While a survey of recent developments on the policing of green claims by agencies and courts illustrates a landscape that is complex and unsettling, efforts by private retailers and group purchasing organizations are helping to clear the way to a common set of standards.

As a starting point, numerous federal agencies are involved in regulating green claims, including the Federal Trade Commission (FTC), the Environmental Protection Agency (EPA), the Food and Drug Administration (FDA), and the Department of Energy (DOE). Since 2008, and in their own unique approach, each of these agencies has begun enforcement initiatives aimed at reining in environmental marketing claims.

The FTC, tasked with regulating “unfair and deceptive” business conduct, is the traditional arbiter of false advertising through its administration of the Federal Trade Commission Act, 15 U.S.C. §§ 41–58 (the FTC Act), and the Energy Policy and Conservation Act, 42 U.S.C. §§ 6201–6422. In accordance with the FTC Act, the agency polices advertising claims to ensure they are true and not deceptive to “consumer[s] acting reasonably in the circumstances.” Federal Trade Commission Policy Statement on Deception, appended to Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984).

From 2008 to 2010, the FTC made a strong showing of regulating environmental marketing claims—it could be perceived to have reinvigorated its enforcement of its longstanding “Guides for the Use of Environmental Marketing Claims,” commonly known as the “Green Guides” and brought actions against manufacturers and retailers who allegedly used false or deceptive environmental claims. Examples included a wide array of products, manufacturers, and chain retailers and use of terms such as “eco-friendly,” “biodegradable,” and “environmentally friendly.” For a description of the initiative, s ee, e.g., Michelle Diffenderfer & Keri-Ann C. Baker, Greenwashing: What Your Client Should Know to Avoid Costly Litigation and Consumer Backlash, 25 Nat. Resources & Env’t, Winter 2011, at 21.

On the heels of its enforcement initiative in 2010, the FTC embarked on an effort to update the Green Guides that was originally developed in 1992. See “Proposed Revisions to Green Guides,” available at http://www.ftc.gov/os/fedreg/2010/october/101006greenguidesfrn.pdf. The proposed updates were designed to address changing science and consumer perception. But these efforts seem to have run aground as the agency grapples with the hundreds of unique comments it received on its proposed revisions. These comments highlighted the complexity of the science involved in determining whether a product is good for the environment. Even after the FTC completed an unprecedented survey of consumer perception of environmental claims, no clear standard has emerged, and the proposed guides remain under consideration.

The FTC’s primary role is to protect consumers; accordingly, it is focused on consumer perception of environmental benefit claims and not on environmental policy concerns. Even if a claim is true, even if a product is good for the environment, the FTC could find that claim actionable if a reasonable consumer could be misled in some way by the claim.

On the other hand, other federal agencies that regulate environmental benefit claims are less concerned with consumer perception and more concerned with driving a specific federal policy, whether it be the control of pesticides or enforcement of energy efficiency standards. These federal agencies are now spending more resources to examine the scientific and technical support of the product’s environmental benefits within their purview and to ensure that a product is properly registered or certified before an environmental benefit claim can be made.

For example, over the last several years, EPA has increasingly exercised its authority under the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et seq. (FIFRA) to target manufacturers and retailers that claim their consumer products are environmentally preferable because the products are antimicrobial or inhibit germs. EPA maintains that such a claim, even if true, cannot be made unless the product is registered as a pesticide under FIFRA. EPA has brought actions against manufacturers and retailers of computer products, clothing, light switches, faucets, cleaning products, and headphones.

Specifically in 2011, EPA fined a distributor/retailer in Hawaii $222,030 for improperly selling kitchen and bathroom cleaners, detergents, and other home care products that claimed to kill insects, germs, or bacteria, but were not registered with EPA as pesticides. In discussing the settlement, an EPA official stated, “Retailers need to ensure the products they sell have the required labeling to limit risks to public health and the environment.” EPA News Releases, Large fine for Marukai Corporation (Feb. 14, 2011), available at http://yosemite.epa.gov/opa/admpress.nsf/d0cf6618525a9efb85257359003fb69d/1a693e4215de143d8525783700647cc8!OpenDocument. Similarly, the shoe manufacturer and retailer, Crocs, Inc., agreed to pay $230,000 in December 2010 to resolve FIFRA violations alleged by EPA with respect to marketing claims that its shoe products had anti-microbial properties. See EPA News Releases, EPA and Crocs settle case over antimicrobial claims (Dec. 30, 2010), available at http://yosemite.epa.gov/opa/admpress.nsf/ab2d81eb088f4a7e85257359003f5339/3690293dd7b8bdc08525780900650721!OpenDocument.

Like EPA, the FDA is now targeting marketers of hand sanitizers who claim that their sanitizer products are antimicrobial. In 2011, the FDA issued warning letters to companies that manufacture over-the-counter hand sanitizers under their own private label for failing to register the product as a drug. Hand sanitizers and similar products that purport to have antimicrobial properties and are intended to be used on humans are considered to be drugs and are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq (the FDCA). The FDCA prohibits the introduction of any drug into interstate commerce if the drug has not been approved by the FDA.

Furthermore, in 2009, the DOE began a crackdown on manufacturers of appliances and plumbing fixtures for failure to meet DOE energy-efficiency or water-conservation standards. While many of these standards, promulgated under the Energy Policy and Conservation Act of 1975, 42 U.S.C. § 6201, had been on the books since the late 1990s, the DOE had not enforced them. In 2009, the DOE created new rules to empower its Office of General Counsel to initiate enforcement actions under these standards, hired a team of enforcement attorneys, and began examining energy-efficiency and water-conservation certifications submitted by manufacturers. Over the last two years the DOE has brought a steady stream of enforcement actions under this initiative.

Government Agency Certification Programs

Governmental enforcement activity aside, some federal agencies (e.g., EPA and DOE) have become significantly involved with voluntary green certifications akin to those developed by private sector entities (e.g., the Fair Trade Certification used for coffee and other products) to help consumers discern whether a product is green. EPA now has at least three sets of such voluntary standards: Energy Star, Water Sense, and the Design for Living’s Environmentally Preferred Purchasing Program.

The standard under the EPA Energy Star program began in the 1990s and has evolved into a new norm. Unlike meeting the DOE’s energy-efficiency standards, obtaining an EPA Energy Star designation is voluntary. Manufacturers may choose to obtain an EPA Energy Star label for their appliances if they meet EPA’s more stringent, higher energy efficiency standard. Despite the noncompulsory nature of the Energy Star label, many appliance manufacturers find that having such a label on their products is a requirement for marketplace entry. See, e.g., U.S. Gov’t Accountability Office, GAO-11-888, Providing Opportunities for Additional Review of EPA’s Decisions Could Strengthen the Program (Sept. 29 2011), available at http://www.gao.gov/assets/590/585547.pdf.

In 2011, EPA introduced a new website for Environmentally Preferred Purchasing. The goal of the website is to help consumers, retailers, manufacturers, and institutional purchasers identify “greener” products. Available at http://www.epa.gov/greenerproducts. Organized based on product categories, the website identifies EPA programs that can aid the user in selecting products that are “less damaging to human health and the environment when compared with competing products or services that serve the same purpose.” EPA Environmentally Preferred Purchasing, Basic Information, available at http://www.epa.gov/ooaujeag/basic-info/index.html. The website also provides links to information regarding the verification of environmental claims and conducting life-cycle analyses/assessments of the environmental sustainability of products.

Judicial Enforcement

In addition to stepped-up federal agency activity, consumers are increasingly bringing their claims to courts. As courts begin to weigh in, an uneven jurisprudence is developing. A recent example of consumer class-action greenwashing claims is Hill v. Roll International Corp., 195 Cal. App. 4th 1295 (Ct. App. 2011), in which an individual consumer plaintiff claimed that certain Fiji bottled water products were marketed with broad misleading and unsubstantiated claims of environmental benefits. That is, the plaintiff in Hill claimed that certain Fiji products were misleadingly labeled and marketed as environmentally superior through (1) the use of a green water drop symbol on the product label meant to give the appearance of a third-party seal of approval; (2) the words “every drop is green” and “Fiji Green”; and (3) references to a website, fijigreen.com. None of the symbols or phrases in question were shown to be trademarked or to belong to a third-party organization. In fact, the green water drop and associated text were not associated with any third-party organization and were instead created by or for Fiji’s own use.

To support her claim, the plaintiff referenced an example scenario presented in the Green Guides. More specifically, the plaintiff compared the Fiji green water drop symbol to the fifth scenario of the Green Guides on environmental marketing claims, which states as follows:

A product label contains an environmental seal, either in the form of a globe icon, or a globe icon with only the text “Earth Smart” around it. Either label is likely to convey to consumers that the product is environmentally superior to other products. If the manufacturer cannot substantiate this broad claim, the claim would be deceptive. The claims would not be deceptive if they were accompanied by clear and prominent qualifying language limiting the environmental superiority representation to the particular product attribute or attributes for which they could be substantiated, provided that no other deceptive implications were created by the context.

16 CFR § 260.7(a), Example 5 (Green Guides Example 5).

In considering a motion to dismiss the plaintiff’s greenwashing claims, the court distinguished the Fiji green water drop from the above-referenced globe icon example by finding that a globe is more suggestive of a seal of an environmental organization. The green water drop symbol, in contrast, was the most logical symbol for the water product at issue. Id. at 1304. Further, the court found:

And for context, a green drop on the back of every bottle appears right next to the Web site name, “fijigreen.com,” further confirming to a reasonable consumer that the green drop symbol is by Fiji Water, not an independent third party organization—and, of course, inviting consumers to visit the Web site for product information, which includes Fiji Water’s explanation of its environmental efforts.

Id. at 1305.

In other words, the court concluded that unlike Green Guides Example 5, Fiji’s green water drop symbol (in context) was not likely to be perceived by a reasonable consumer as a third-party seal of approval. Consequently, the court granted the defense motion to dismiss.

The Hill decision presents an interesting comparison to an unpublished 2010 decision by a California federal district court in a similar class-action context, Koh v. S.C. Johnson & Son, Inc., No. C-09-00927 RMW, 2010 WL 94265 (N.D. Cal. Jan. 6, 2010). In Koh, the court considered cleaning products labeled with a green stem symbol with leaves with the trademarked term “Greenlist Ingredients” underneath. Also visible on the product’s packaging was the text “Greenlist™ is a rating system that promotes the use of environmentally responsible ingredients. For additional information, visit www.scjohnson.com.” Like the green water drop symbol at issue in the Hill case, the symbol and text at issue in Koh were not associated with any third-party organization. Unlike the court in Hill, however, the court in Koh denied the defense motion to dismiss, referencing Green Guides Example 5 and finding that “it is plausible that a reasonable consumer would interpret the Greenlist label as being from a third party.” Id. at *2. The Hill court acknowledged the recent unpublished Koh decision, noted that it had no precedential value, and distinguished it by pointing out that the Greenlist label made express representations of environmental superiority, entailed a trademark and a name “not immediately apt to be associated” with the product, 195 Cal. App. 4th at 1306, and identified itself as a rating system, which suggested an independent source that rated others’ products as well.

Retailer and Purchasing Standards

While agencies and courts continue to consider when environmental marketing claims are actionable, large purchasing entities, including chain retailers, group purchasing organizations, and executive branch procurement offices, such as the General Services Administration, are setting their own standards for “green” products and giving preferential treatment for the purchase of those products. These retail and purchasing standards, while lacking consistency across the organizations, establish more specific, and perhaps more transparent, criteria to determine when a product is green.

Of the numerous chain retailers that have begun setting their own standards for green products, Wal-Mart’s Sustainability Index is perhaps the most notable. See http://walmartstores.com/sustainability/9292.aspx. The ambitious goals of the Sustainability Index are to help create a more transparent supply chain, accelerate the adoption of best practices, drive product innovation, and ultimately provide customers with information they need to assess a product’s sustainability. As a first step in the initiative, Wal-Mart asked its top 100,000 global suppliers to complete a Supplier Sustainability Assessment Survey. The survey targeted supply chain issues such as product content, corporate greenhouse gas emissions, and total solid waste generated, including information about all facilities through which the product travelled, even if the facilities are not owned by the supplier. To assess product content, the survey focused on identifying approved third-party certifications. While a supplier may argue with these criteria, they at least offer more detailed guidance on when a product can be claimed green.

Group purchasing organizations (GPOs) have also begun to exercise their purchasing power to favor green products. Standards are emerging and will likely vary from industry to industry. One interesting example is an initiative by GPOs that buy supplies for hospitals. Key GPOs in this industry have agreed to ask several screening questions to determine if a wide variety of products, from electronic equipment to cleaning products, are environmentally safe. These questions include whether phthalates, BPA, or polyvinyl chloride have been added to the products, what percentage of a product consists of recycled content, and whether the product contains a carcinogen or reproductive toxicant regulated under Proposition 65. However, this screening tool is limited in comparison to the more comprehensive standards being developed by federal procurement offices.

Federal procurement offices are in the midst of adopting a more comprehensive standard for identifying sustainable products, in particular pursuant to an Obama Administration initiative, Executive Order No. 13514. Section 13 of this Executive Order (Section 13) requires the General Services Administration, in coordination with the Department of Defense, EPA, and other agencies, to make recommendations to ensure that federal government purchasing favors products that mitigate greenhouse gas emissions and encourage sustainable practices. Executive Order No. 13514, “Federal Leadership in Environmental, Energy, and Economic Performance,” 74 Fed. Reg. 52,117 (Oct. 8, 2009). Among other initiatives, an interagency subgroup was formed to ensure that product-related acquisitions comply with the goals of Section 13.

On May 31, 2011, the Department of Defense, the General Services Administration, and NASA published certain significant interim regulations codifying the sustainability goals applicable to government procurement actions set out in Section 13. 76 Fed. Reg. 31,399 (to be codified at 48 CFR Part 23.1). These regulations will affect the procurement practices not only of federal agencies but also, in many cases, of private companies that do business, directly or indirectly, with the U.S. government.

Among other things, the interim regulations require that federal agencies advance the cause of sustainable acquisition by ensuring that 95 percent of new contract actions qualify as sustainable. “Contract action” is defined in the regulations to mean “any oral or written action that results in the purchase, rent, or lease of supplies or equipment, services, or construction . . .” Sustainable Acquisition Policy, 76 Fed. Reg. 31,399 (May 31, 2011) (to be codified at 48 CFR Part 23.101). The requirements cover not only products to be delivered to the government but also products acquired by the contractor for use in performing services at a federally controlled facility.

Consistent with federal policy, sustainable purchases must meet one or more of the following requirements:

  • energy efficient (i.e., for the types of products eligible for Energy Star designation or Federal Energy Management Program designation)
  • water efficient
  • bio-based
  • environmentally preferable (e.g., Electronic Product Environmental Assessment Tool registered or nontoxic or consisting of less toxic alternatives)
  • non-ozone-depleting
  • made with recovered materials

The new rules will need to be taken into account by many private companies that directly contract with the U.S. government or that do business with government contractors. This is because for 95 percent of their contracts to meet the sustainability requirements, federal agencies can be expected to impose these requirements on contractors by inserting a Federal Acquisition Regulation (FAR) contracting clause in a contract—whether by setting forth the requirement in full or, as is commonly done but not always recognized by private companies, incorporating an FAR clause by reference into a contract. Prime contractors and higher-tier contractors in turn often “flow down” these types of requirements to subcontractors and other companies in the stream of commerce by including or incorporating the requirements by reference into purchase orders or other agreements with suppliers and service providers.

Conclusion

Marketing the environmental benefits of a product has become a popular but tricky business. Retailers and consumers have been left confused and unsatisfied with product claims that may not live up to expectations. While efforts by the government to police and control these claims have increased, the proliferation and complexities of green claims, coupled with limited agency resources, will likely allow for continued dissatisfaction and confusion. Conflicting court decisions are unavailing. Greater consistency and certainty may, however, arise through retailers, GPOs, and certification entities that are imposing standards for suppliers regarding the environmental benefits of various products. While many of those standards are voluntary, they can nonetheless have significant practical effect in the marketplace.

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