New 'Green' Ad Claim Regulations Coming Next Year

ftc logo In recent years, the Federal Trade Commission has pursued few cases alleging that companies have engaged in deceptive advertising in regard to claims about their "green" practices. But that could change to some extent next year.

The FTC is re-examining its "Green Guides," the primary tool in federal regulation of green advertising claims, originally released in 1992.

The U.S. business community is hoping that the updating will clarify gray areas, and therefore make it easier for companies to understand and adhere to green-related advertising regulations.

However, it's also likely that once the new standards are in place, the FTC will seek to establish legal precedents by going after companies that appear to have been using deceptive green advertising claims, according to David Young, partner in the legal firm Goodwin Procter LLP and a specialist in counseling corporations and organizations in environmental and other regulatory matters.

The FTC brought 37 cases involving environmental marketing claims between 1990 and 2000--but it has brought no cases specifically coming out of the Green Guides' guidelines since 2000, Young notes.

In a speech in June, an FTC commissioner, J. Thomas Rosch, stressed that the Guides have proven to be "an extremely helpful framework to enforce truthful and accurate advertising." Speaking only for himself, he said, he believes that no FTC Green Guides cases have been brought in recent years for at least two reasons. One is that the commission has taken into account the need for companies to absorb the Guides' "teaching"; another is that alternatives to FTC legal enforcement exist. These include self-regulation and private enforcement that "far surpass anything we saw in the early '70s," he said.

The National Advertising Division (NAD) of the Council of Better Business Bureaus, the investigative arm of the U.S. advertising industry's self-regulatory process, reports that it has issued nearly 30 decisions involving environmental marketing claims--many of which have called for modifying claims. Compliance with NAD decisions is voluntary, but the NAD reports high compliance rates. Advertisers that refuse to participate in the self-regulatory process or do not implement the NAD's recommendations are referred to the government.

The FTC has been accepting comments on the Guides and has held workshops in three areas of environmental marketing issues: carbon offsets/renewable energy certificates; green packaging; and green buildings and textiles.

Once the Guides have been updated to better reflect current technologies, issues and consumer perceptions of green claims--which is likely to happen sometime early in 2009--the FTC is expected to bring cases against some companies whose green claims have been under investigation, says Young. Rosch confirmed in his speech that FTC staffers are "currently investigating a variety of environmental product claims."

Essentially, the FTC takes the same approach to evaluating green claims that it does with all marketing claims/trade practices, Young points out. The FTC states that advertising is deemed deceptive if "there is a misrepresentation, omission, or other practice that misleads the consumer acting reasonably in the circumstances." The Green Guides also emphasize that claims must have a "reasonable basis" that will often consist of scientific research and studies performed by objective experts (called the "substantiation" requirement).

The Guides also present four general principles for green claims, which include: That when qualifications/disclosures are needed to prevent a claim from being deceptive, these must be sufficiently clear; that marketers must be clear as to whether a claim applies to a product, its packaging or to a service; that claims cannot overstate an environmental benefit; and that an ad that compares a product to another must be clear about the baseline for comparison.

Young says regulatory watchers are particularly interested in seeing how the FTC deals with difficult-to-define terms such as "sustainability" and "renewability." Regulatory bodies in the UK and elsewhere have made these terms very difficult to use. However, given the FTC's cognizance of First Amendment protections, it might well decide to provide advertisers with the ability to employ such claims as long as they are substantiated with appropriate, objective research, Young points out.

The same could prove true in the area of carbon emissions, where a variety of metrics systems/standards exist, Young says. He adds that he believes that "it will not be sufficient to just have a third-party certification on file"--that companies will be required to disclose and be able to document their adherence to the specific third-party standards/metrics underlying their claims.

Whatever specific revisions are made to the Green Guides, Young says that companies will need to exercise continued vigilance in an area where mistakes are often made: That is, making exaggerated claims about the environmental benefits of a particular practice when a business as a whole may still pose significant detriments to the environment.

For instance, a company that reduces its carbon emissions by implementing a new practice but still has a large carbon footprint by objective standards could be exposing itself to action if its advertising could reasonably be perceived to imply that the company as a whole is carbon-neutral.

A free guide outlining the status of the Green Guides and background on federal and state regulations affecting green marketing claims can be downloaded from the Goodwin Procter site.

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