Is Your Green Marketing Deceptive? Look to the FTC Green Guides to Limit the Risk of an FTC Enforcement Action

The Federal Trade Commission’s (“FTC”) Guides for the Use of Environmental Marketing Claims (the “Green Guides”) set federal guidance for businesses to help navigate these issues.² Given the Biden administration’s focus on climate and sustainability, companies should revisit claims they make to consumers, and, when doing so, use the Green Guides as a critical benchmarking tool. On March 16, 2021, a group of environmental nongovernmental organizations (“ENGOs”) launched a public campaign alongside a formal complaint asking the FTC to apply its Green Guide guidance and take action against a fossil fuel company’s allegedly deceptive statements about its climate and environmental practices, suggesting that the FTC will face public pressure to increase its activity in this sphere.

Background

The Green Guides were first issued in 1992 and lay out general principles businesses should consider when making an environmental claim about a product. The Green Guides also include guidance on how businesses should expect consumers to interpret specific claims and, importantly, how businesses can appropriately limit or qualify their environmental marketing claims to avoid misleading consumers. The Green Guides are not FTC rules or regulations, rather, they serve to warn about the types of marketing claims the FTC might find deceptive and therefore be in violation of Section 5 of the FTC Act (“Section 5”).³ Accordingly, any business looking to avoid an FTC enforcement action over its environmental marketing should take care to review the Green Guides.

The FTC has periodically revised the Green Guides to provide guidance on new marketing claims and respond to trends it perceives in green advertising. In the most recent revisions, released in 2012, the FTC clarified its standards for biodegradable and compostable claims and introduced guidance on six new categories of environmental marketing: 1) green certifications and seals of approval, 2) carbon offsets, 3) free-of claims (e.g., “this product contains no [volatile organic compounds (“VOCs”)]”), 4) non-toxic claims, 5) made with renewable energy claims, and 6) made with renewable materials claims.⁴ Notably, the Green Guides do not specifically cover the use of “sustainable,” “natural,” or “organic” claims,⁵ though they do include principles and guidance applicable to environmental claims generally. And the lack of specific guidance has not stopped the FTC from bringing enforcement actions for such claims when it deemed them merited. For example, the FTC has brought enforcement actions against several companies for labeling their products as “all-natural,” “100% natural,” or “organic” where the products were in fact composed of synthetic materials.

Enforcement History

The FTC can bring an enforcement action if it believes that all reasonable interpretations of an environmental marketing claim are not truthful, are misleading, or are otherwise “not supported by a reasonable basis.”⁶ In the two years after the 2012 Green Guides revisions were released, the FTC brought over 20 enforcement actions related to environmental marketing claims.⁷ Since then, however, the number of enforcement actions brought per year dwindled and only a single case was brought between 2019 and 2020.

A total of 39 environmental marketing enforcement actions were brought between 2013 and 2020. Of these, about 60 percent involved claims highlighting the absence of VOCs in the product or otherwise relating to the product’s emissions, biodegradable claims, and claims of natural or organic product composition. Another 20 percent of the actions were brought against major retailers for selling Rayon products incorrectly marketed as bamboo. The remaining cases included actions over the use certifications, claims as to the amount of recycled materials in the product, and false energy efficiency and or emissions claims.

Except in a few outlier cases, such as the 2017 settlement involving Volkswagen’s emissions scandal, FTC enforcement actions in this area have requested limited or no monetary relief (usually in the six-figure range) and instead focus on injunctive relief (requiring the company to change its actions). In the typical enforcement action under Section 5, the FTC will seek to enjoin the allegedly deceptive or misleading marketing material. Ordinarily, the FTC will only demand monetary penalties if an existing order or agreement is breached. However, under certain circumstances, the FTC may seek monetary penalties. For example, in the Rayon-bamboo enforcement actions mentioned above, the FTC sought civil penalties authorized under the Textile Fiber Products Identification Act.⁸ The other type of case where the FTC sought monetary penalties prior to the breach of an existing order involved demonstrably false energy efficiency claims. The FTC requested monetary penalties under a theory of restitution and used the recovered funds to reimburse impacted consumers. The scope of the FTC’s power to demand such relief is currently before the Supreme Court in AMG Capital Management, LLC v. Federal Trade Commission, No. 19-508, but has not yet been decided.

The cases since the 2012 revisions are summarized below:

ENGO Complaint to the FTC

The FTC allows private groups or individuals to report fraud to the agency. The agency then reviews these reports, and determines whether to pursue an enforcement action based on the allegations. On March 16, 2021, a group of ENGOs filed a complaint with the FTC asserting that Chevron had engaged in unlawfully deceptive practices using advertisements which overstate investment in renewable energy and its commitment to reducing fossil fuel pollution. According to a press release put out by the groups, “[t]he complaint claims that Chevron is consistently misrepresenting its image to appear climate-friendly and racial justice-oriented, while its business operations overwhelmingly rely on climate-polluting fossil fuels, which disproportionately harm communities of color.” The groups also claim that their complaint represents the “first to petition the FTC to use its Green Guides against a fossil fuel company for misleading consumers on the climate and environmental impact of its operations.” The groups allege that Chevron violated the Green Guides by implying that Chevron’s business operations do not harm (and even help) the environment and that it produces clean energy, despite spending less than 0.2% of its capital expenditure on renewables; misrepresenting the benefits of biomethane; and using “deceptive jargon.” The ENGOs are requesting that Chevron remove its allegedly misleading claims and issue corrective statements.

This early action is particularly noteworthy given the Biden administration’s desire to incorporate a climate change focus across the government widely. While the FTC acts independently of the White House — under the direction of five Commissioners — President Biden used his authority shortly after being inaugurated to appoint a new FTC Chair from the sitting incumbents. Thus, this complaint may serve as an early test of whether the FTC will become a new critical player that de facto seeks to regulate certain climate-related statements. It also confirms that companies making green claims will be under increased scrutiny from environmental groups, and may face similar complaints, and the associated negative press, if their claims cannot be readily supported or fulfilled. And if the ENGOs’ complaint does result in an FTC enforcement action being brought against Chevron, other environmental groups may consider using similar tactics in future.

Take-Aways

Although has been five years since the agency last brought an action regarding a product marketed as biodegradable or produced with recycled and renewable materials, and the FTC has yet to bring an enforcement action over a claim of carbon offsets or for the use of renewable energy, we may see increased enforcement action, particularly around claims viewed as inconsistent with the Green Guides, in the near future. The FTC’s relatively low activity level related to environmental marketing enforcement actions could also reverse under the new presidential administration, because of both President Biden’s prioritization of sustainability, renewable energy, and climate change, and increased pressure from outside groups to bring such cases. With the growing calls for engaging in sustainable or green practices, many companies will no doubt want to tout their own efforts in these areas. However, businesses should continue to review the FTC Green Guides before making consumer-directed environmental marketing claims to limit their risk of facing similar ENGO complaints or FTC enforcement actions. Companies can also keep up with FTC environmental marketing press releases, enforcement actions, and other activities at the FTC Green Guides web page.⁹

¹ It’s Too Easy Being Green: Defining Fair Green Marketing Principle, Statement before the Subcomm. on Commerce, Trade, and Consumer Protection of theH. Comm. on Energy and Commerce, 111 Cong. 1 (2009) (Prepared Statement of Federal Trade Comm’n), available at: https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-commission-its-too-easy-being-green-defining-fair-green-marketing/p954501greenmarketing.pdf.

² The complete Green Guides, 16 C.F.R. pt. 260, are available at: https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-issues-revised-green-guides/greenguides.pdf.

³ 15 U.S.C. § 45. Section 5 gives the FTC the authority to prevent “unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45(a).

⁴ The FTC published a helpful Summary of the Green Guides alongside the 2012 revisions. Available at: https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-issues-revised-green-guides/greenguidessummary.pdf.

⁵ Organic claims for textiles and other agriculture products are covered by the U.S. Department of Agriculture’s Organic Program.

⁶ 16 C.F.R. § 260.2. General guidance on the substantiation of claims is available in the Green Guides and in the FTC Policy Statement Regarding Advertising Substantiation(appended to In re Thompson Med. Co., Inc., 104 F.T.C. 648, 839 (1984), aff’d, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987).

⁷ Data presented in the text and figures of this section were collected from cases available on the FTC’s website. Fed. Trade Comm., Cases Tagged with Environmental Marketing (last visited Mar. 3, 2021), available at: https://www.ftc.gov/enforcement/cases-proceedings/terms/232.

⁸ 15 U.S.C. 70 et seq.

⁹ Green Guides: Environmentally Friendly Products: FTC’S Green Guides, Fed. Trade Comm., Truth In Advertising (last visited Mar. 22, 2021), https://www.ftc.gov/news-events/media-resources/truth-advertising/green-guides.