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Green Means “GO!”:The Latest Word on Green Marketing from the FTC and NAD

March 16, 2011

“Green,” or environmentally-friendly, marketing claims remain hot, as green and eco-conscious products seem to be selling faster than ever. Understandably then, many marketers want to advertise the environmental benefits of their products or services – in fact, a major nationwide study by one environmental marketing firm indicates that in the U.S., environmental marketing claims increased by 73% in 2010 over the previous year. But while these claims can undoubtedly be great marketing tools, advertisers and brand owners are still advised to proceed with caution – the Federal Trade Commission (“FTC”) is not waiting to enforce its proposed revised “Green Guides” announced in 2010, while the National Advertising Division (“NAD”) of the Council of Better Business Bureaus continues to carefully monitor environmental marketing claims.

FTC Not Waiting to Enforce New Green Guides

In October 2010, and after much anticipation, the FTC published and sought public comment on proposed revisions to its Guides for the Use of Environmental Marketing Claims, or “Green Guides.” Although the Guides have been around for years, they were last updated in 1998. Thus the FTC’s latest proposed revisions were intended to bring the Guides into the 21st century and address the realities of the modern marketplace. Updates include revised guidance on proper use of general environmental benefit claims; “degradable,” “compostable” and “recyclable” claims; and claims that a product is “ozone friendly” or “non-toxic.” In addition, the FTC proposed new guidelines for certain claims that were not addressed at all by the old Guides, including “renewable materials,” “renewable energy,” and carbon offsets.

Whereas the old Green Guides addressed environmental seals of approval (“eco-seals”) in only a limited fashion, the proposed revisions include an entire section on eco-seals, seals of approval and third-party certifications. Notably, the revised Green Guides state that using the name, logo, or seal of approval of a third-party certifier is an “endorsement” subject to the FTC’s revised Endorsement Guides, which were adopted in October 2009, meaning any material (i.e., financial) connections between the marketer and third-party endorser must be disclosed. As well, the revised Green Guides provide guidance to marketers about appropriate qualifiers for eco-seals.

Although the comment period just ended in December 2010, and the proposed revisions have not yet been formally adopted, the FTC is already taking action under the revised Green Guides. On March 1, 2011, the FTC announced that it had approved a final order resolving allegations that a Washington, D.C.-based firm, Tested Green, facilitated greenwashing by selling worthless environmental certifications to other businesses. The final order follows FTC’s announcement earlier this year that it had reached a settlement agreement with Tested Green and its owners/officers, barring them from continuing to sell the phony certifications. In the Complaint, the FTC alleged that between February 2009 and April 2010, Tested Green marketed and sold environmental certifications to anyone willing to pay a fee for them. No actual testing or examination of either the company or products was ever conducted. Upon payment, Tested Green gave customers rights to use its logo and a link to a “certification verification page.”

The company also cited endorsements from the “National Green Business Association (NGBA)” and the “National Association of Government Contractors (NAGC)”—both of which were sham organizations owned and operated by the owners of Tested Green. The FTC charged Tested Green with three counts of violating the FTC Act, specifically: (1) providing other companies with the “means and instrumentalities” for deceptive advertising practices (i.e., providing the false eco-seal); (2) deceptively using endorsements from NGBA and NAGC; and (3) failing to disclose material connections between Tested Green and the NGBA and NAGC.

Interestingly, the FTC did not allege that the Tested Green eco-seal itself conveyed general environmental benefit claims, instead focusing on the false endorsements. To this end, the Agreement and Consent Order provides further guidance to other marketers who may be considering using eco-seals, seals of approval and third-party certifications to tout environmental benefits. In the Consent Order, the FTC defines the “certification” as “any seal, logo, emblem, shield or other insignia that expresses or implies approval or endorsement of any product, package, service, practice, or program, or any attribute thereof.” “Environmental certification” in turn is defined as “any certification that expresses or implies that a product, package, service, practice, or program is environmentally friendly, environmentally superior, or environmentally preferable to other products, packages, services, practices, or programs; or expresses or implies other environmental attributes or benefits.”

NAD Green Marketing Guidance

In 2011, NAD continues to police various “green” claims. In fact, in the last six months (since one of the authors of this alert last reported on NAD’s recent “green” cases), NAD has recommended that multiple advertisers discontinue, modify or clarify certain challenged environmental marketing claims:

  • With reference to the FTC’s revised Green Guides, NAD concluded that an advertiser had insufficient evidence to support “biodegradable” claims made in connection with its packaging peanuts, and recommended that the advertiser discontinue the claims. (FP International, Case #5256 (12/03/10).)
  • Following challenge by a competitor, NAD recommended that a paint manufacturer modify or discontinue claims that its paint products are “no-VOC” or “Zero-VOC.” (The Sherwin-Williams Company, Case #5257 (11/30/10).)
  • NAD recommended that a third advertiser discontinue claims that its products were “approved” or “registered” by the U.S. Environmental Protection Agency; NAD also recommended that the advertiser discontinue claims that a competitor’s products were not “recyclable.” (Applied Textiles, Inc. & Nano-Tex, Inc., Case #5279 (01/18/11).)
  • NAD noted that an advertiser’s decision to permanently discontinue claims that its product was “made with solar power” was necessary and proper, “because a consumer could reasonably take away the message that all [of the advertiser’s products] were made in factories that were one hundred percent solar-powered, a claim that was not accurate.” (Frito-Lay North America, Inc., Case. #5237 (Closed 10/19/10).)
  • NAD recommended that an advertiser provide clearer information about its use of “renewable” wind energy to manufacture its products. (S.C. Johnson & Son, Inc., Case #5225 (09/27/10)).
The hiring of a lawyer is an important decision that should not be based solely on advertisements. Prior results do not guarantee a similar outcome.