Now that Black Friday has passed and Cyber Monday is here, both traditionally known as the beginning of the holiday shopping season, we bring you the third update in the 2010 Perkins Coie Wrapping Paper series. The article highlights the recent proposed revisions to the Federal Trade Commission's (FTC) "Guides for the Use of Environmental Marketing Claims" (Guides). Knowing these guidelines can help keep the Grinch from ruining the "green" in your holiday season.

Consumers crave environmentally friendly products and services, so naturally advertisers weave "green" messages into advertising, using "eco-friendly" words, images, brand names, logos and certifications. But making false or misleading green claims can trigger legal challenges that result in a wide range of penalties and negative publicity. Advertisers need to stay on top of new legal developments regarding green advertising, including the FTC's newly proposed revisions to its Guides, which were first issued in 1992 and last updated in 1998.

The Guides provide a critical road map for crafting environmental claims that are true, not misleading and substantiated. They also indicate how the FTC will evaluate false and misleading environmental claims when it takes enforcement action against advertisers. Importantly, the proposed revisions to the Guides would meaningfully impact current green marketing practices that many advertisers use. For example, many advertisers currently make broad, open-ended "green" or "eco-friendly" benefit claims that are not limited, restricted or qualified. Under the proposed revisions, advertisers must carefully narrow such claims to specific, substantiated benefits and take other steps to prevent false or misleading claims triggered by overstating product and service benefits. In addition, many advertisers use environmental certifications and seals in promotional materials. The proposed revisions make it clear that improper use of certifications and seals can convey false or misleading claims. For these and other reasons, advertisers and retailers need to diligently track the proposed revisions to the Guides and make informed decisions when planning green advertising and branding campaigns. In addition, the FTC is seeking public comments (due by December 10, 2010) for those that want to help it analyze and finalize the revisions.

The FTC's Proposed Revisions

The FTC's proposed revisions are intended to clarify existing guidelines and to provide new guidelines for some previously unaddressed claims. Interestingly, the FTC has affirmatively declined to address some popular environmental claims at this time, including "sustainable," "organic," and "natural" claims. These claims are, however, subject to the general rules for advertising claims (express and implied)—they must be true, not misleading and properly substantiated. Many of the proposed revisions are introduced below.

Updates to Covered Claims

• General Environmental Benefit Claims(e.g., "green" and "eco-friendly") were previously allowed, without disclaimer or qualification, if substantiated. The proposed revisions state that advertisers should not make unqualified general environmental benefit claims because they are essentially impossible to substantiate. Rather, advertisers should limit the claims to a specific benefit; in doing so, qualifications must be clear and prominent and the advertising as a whole must not convey false or misleading claims.
• Certifications and Seals of Approval are covered more extensively in the FTC's proposed revisions than in the current Guides. The proposed revisions state that unqualified certifications and seals likely convey general environmental benefit claims and should not be used unless limited to specific, substantiated benefits and otherwise clearly and prominently qualified to prevent false and misleading claims. Even then, however, the certification or seal will not eliminate the advertiser's responsibility to have sufficient substantiation for all claims reasonably conveyed by its advertising. Importantly, the proposed revisions also state that certifications and seals are viewed as endorsements and are subject to the FTC's many endorsement guidelines, including the requirement to disclose material connections between the advertiser and endorser. Advertisers must also qualify a certification or seal if it indicates anything other than the endorser's evaluation of the product or service, such as membership in an industry group. 
• Degradable Claims must be limited or qualified under the current Guides, unless the degradable item will decompose within "a reasonably short period of time." The revisions define this time period as no longer than one year for solid items. For products and packaging requiring more than one year to degrade, advertisers must clearly and prominently disclose the longer time period if claiming degradability. Further, it would be deceptive to make an unqualified degradable claim if the item is customarily disposed of in landfills or incinerators as items do not completely decompose within one year in those facilities. 
• Compostable Claims require qualification unless the claimed matter will break down into usable compost in a "safe and timely manner." Under the revisions, "timely manner" has been clarified: in order to make an unqualified compostable claim, the product or package must break down "in approximately the same time as the [other] materials with which it is composted." 
• Recyclable Claims will be subject to disclosure requirements under a multi-step analysis used to determine the appropriate disclosure. More specifically, advertisers should disclose the availability of recycling programs if less than a "substantial majority" of consumers (informally defined as at least 60%) have access to recycling facilities where the product is sold. Stronger qualifications are required where less than a "significant percentage" of consumers or communities have access to recycling facilities. 
• Free-of & Non-Toxic Claims get their own section under the proposed revisions, which clarify that free-of and similar claims can be deceptive if the product, package or service contains a substance possessing the same or similar risk as the excluded substance, or if an excluded substance has never been associated with the product category. Non-toxic claims would require qualification if the product, package or service is toxic for humans or the environment. 

New Claims

• Renewable Materials Claims should be clearly and prominently qualified to provide specific information about the renewable materials used, including the type of material, how the material is sourced, and why the material is renewable. In addition, advertisers should qualify renewable material claims if the item is not made entirely (with the exception of minor, incidental components) of renewable materials.
• Renewable Energy Claims would require qualification if any power used to manufacture the product or package is derived from fossil fuels or, for services, if fossil fuels are used to power part of the service. Advertisers should also qualify renewable energy claims to specify the source of the energy (e.g., solar or wind), and to disclose if less than "virtually all" the significant manufacturing processes involved in making the product or package are powered with renewable energy or, alternatively, by conventional energy (e.g., fossil fuels or nuclear energy) offset by renewable energy certificates (RECs). In addition, if a business generates renewable electricity, but sells RECs for all that electricity, it would be deceptive for the business to claim that it uses renewable energy because selling RECs "transfer[s] the right to characterize [the] electricity as renewable."
• Carbon Offsets Claims would require qualification if the offsets will not occur for two years or more, and such claims should not be made at all if the reduction, or the activity that caused the reduction, is required by law. The revisions emphasize that advertisers should "employ competent and reliable scientific and accounting methods to properly quantify claimed emission reductions and to ensure that they do not sell the same reduction more than one time."

Looking Forward  

The FTC is seeking public comments on the proposed revisions until December 10, 2010, after which it will begin to finalize the Guides. We will continue to monitor the progress of the Guides. In the meantime, please contact us if you have questions regarding your environmental advertising and branding campaigns, including questions on the potential impact of the FTC's proposed revisions on your campaigns.

© 2010 Perkins Coie LLP