The New FTC “Green Guides” The New FTC “Green Guides” -- Renewable Materials -- Renewable Energy & Carbon Offsets -- Certifications & Seals of Approval Joseph (“Jay”) Eckhardt April 21, 2011 Oregon State Bar University of Oregon School of Law Sustainable Future Section Green Business Initiative Antitrust and Trade Regulation Section
FTC Consumer Protection FTC Consumer Protection Regulatory Authority • Federal Trade Commission Act, Sec. 5 (15 U.S.C. § 45) • Prohibits “unfair or deceptive acts or practices” • Broad application, including consumer protection matters Enforcement Areas • Fraud and scams • Telemarketing • Consumer warranties • Auto sales, leasing and maintenance • Credit and loans • Health (supplements, diet programs) • Privacy, identity theft
Green Marketing Rules Green Marketing Rules Drivers of FTC Regulation in Environmental Marketing • Consumer demand for products that minimize environmental impact • “Explosion” of marketing focused on green attributes of products • Marketplace need for guidance on the definition of misleading and fraudulent environmental marketing claims • Emergence of “Greenwashing”
FTC Green Guides FTC Green Guides “Guides for the Use of Environmental Marketing Claims” • Prior versions: 1992, 1996, 1998 • Focus on claims concerning “environmental attributes” • Not enforceable regulations – but define “deceptive practices” actionable under the FTC Act • Outline of general principles • Guidance on certain types of claims • Illustrative examples
Specific FTC Guidance Specific FTC Guidance Claims Addressed in the Prior Guides • Compostable • Recyclable • Recycled Content • Refillable • Ozone Safe • Source Reduction • “Free of” and nontoxic • Degradable (photo and biodegradable claims)
Backing Green Claims Backing Green Claims • Competent and reliable scientific evidence “tests, analyses, research, studies conducted and evaluated in an objective manner using procedures generally accepted to yield accurate and reliable results.” • Current industry or regulatory standards • Laboratory testing, in-house or independent • Current testing results • Repeatable test results
Revision of the Guides Revision of the Guides • Three public workshop programs in 2008 • Perception survey of 3,777 consumers • Survey of 1,000 web pages making environmental marketing claims • New enforcement actions filed in 2009, first since 2000 • Release of Draft Guides and request for public comment, October 2010 • Public comment period through December 2010 • 340 public comments posted on FTC website Official release of Green Guides slated for 2011(?)
The New Guides The New Guides New Types of Claims Addressed by the Guides • Renewable Materials • Renewable Energy • Carbon Offsets • Seals and Certifications Claims Not Directly Addressed by the Guides • Organic • “Natural” • “Sustainable” • No ban on general benefit claims
Renewable Materials Renewable Materials Proposed Guidance – Source identification, renewability “It is deceptive to misrepresent . . . that a product or package is made with renewable materials.” “Unless marketers have substantiation for all their express and reasonably implied claims, they should clearly and prominently qualify their renewable materials claims by specifying the material used, how the material is sourced, and why the material is renewable.”
Renewable Materials Renewable Materials Proposed Guidance – need for clarification, quantification “Marketers . . . may intend to communicate that a product is made from a material that can be replenished at the same rate, or faster, than consumption. Consumers . . . likely believe the product has other specific environmental benefits. . . .” “[U]nless the entire product or package, excluding minor, incidental components, is made from renewable materials, marketers need to . . . specify the amount of renewable materials in a product or package.” USDA “BioPreferred” program – defines bio-based materials
Renewable Energy Claims Renewable Energy Claims Proposed Guidance – Simple Deception, Fossil Fuels “It is deceptive to misrepresent . . . that a product or package is made with renewable energy or that a service uses renewable energy.” “Marketers should not make unqualified renewable energy claims . . . if power derived from fossil fuels is used to manufacture any part of the advertised item or is used to power any part of the advertised service.”
Renewable Energy Claims Renewable Energy Claims Proposed Guidance – Energy Source “Unless marketers have substantiation for all their express and reasonably implied claims, they should clearly and prominently qualify their renewable energy claims by specifying the source of the renewable energy (e.g., wind or solar energy).” • “Renewable” is inherently vague – better to disclose actual source of energy • Companies can confidently identify Solar, Wind, Wave, and Biomass as renewable • Careful with claims about new or unconventional sources of renewable energy
Renewable Energy Claims Renewable Energy Claims Proposed Guidance – Manufacturing Process “It is deceptive to make an unqualified ‘made with renewable energy’ claim unless all or virtually all of the significant manufacturing processes involved . . . . are powered by renewable energy, or conventional energy offset by renewable energy certificates.” • “All or virtually all” standard allows for minor, incidental use of non-renewable energy, anything exceeding 1% is probably risky • Direct purchase or direct generation of renewable energy is not required – renewable energy certificates (“RECs”) are acceptable
Renewable Energy Claims Renewable Energy Claims Proposed Guidance – Renewable Energy Credits “If a marketer generates renewable electricity but sells renewable energy certificates for all of that electricity, it would be deceptive for the marketer to represent . . . that it uses renewable energy.” • If you sell the credit, you can’t claim the credit • Carefully account for any renewable energy certificates purchased or sold
Carbon Offset Claims Carbon Offset Claims Proposed Guidance – Reliable Science and Accounting “[S]ellers 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.” • Avoid double-counting of carbon offset certificates • Document scientific evidence supporting any carbon offset program (Do you capture measurable carbon emissions? How long will it take for trees to grow?)
Carbon Offset Claims Carbon Offset Claims Proposed Guidance – Simple Deception, Required Reductions “It is deceptive to misrepresent, directly or by implication, that a carbon offset represents emission reductions that have already occurred or will occur in the immediate future.” “It is deceptive to claim . . . that a carbon offset represents an emissions reduction if the reduction, or the activity that caused the reduction, was required by law.” • Don’t take credit for reductions in carbon emissions that were required by law
Carbon Offset Claims Carbon Offset Claims Proposed Guidance – Timing “[M]arketers should clearly and prominently disclose if the carbon offset represents emission reductions that will not occur for two years or longer.” • Make clear and prominent disclosures of when reductions will actually occur • Long term reduction measures, such as planting trees or building new facilities must be fully and prominently disclosed
Seals & Certifications Seals & Certifications • The new Green Guides identify several forms of misleading and deceptive use of seals and certifications • Unqualified seals or certification are likely to be deceptive • A self-awarded seal implying third-party certification is deceptive • Potentially deceptive to display a third party seal based solely on membership in an organization • Seals or certifications awarded by trade associations may be deceptive Use of seals or certifications is also governed by the FTC Endorsement Guides (16 C.F.R. Part 255)
Seals & Certifications Seals & Certifications Proceed with Caution • Any “self-certification” is risky without clear and prominent disclosure • Scrutinize certifications from “interested” organizations such as trade associations • Evaluate potential certification programs from the perspective of consumers and regulators • Before seeking certification from a valid organization, consider whether the certification is too weak, or too rigorous • Is a certification necessary? Consider alternative forms of disclosure and substantiation
Don’t Forget the Big Picture Don’t Forget the Big Picture Enforcement Goes Beyond FTC • Other Regulators - USDA, FDA, EPA - California - Maine, Minnesota, Rhode Island • Consumers - “Greenlist” case, Koh v. SC Johnson • Competitors - Lanham Act Claims - National Advertising Division • Self-appointed Regulators - Greenwashing Index - ForestEthics v. Sustainable Forestry Initiative
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