Green Marketing - What Companies Need to Know

By:  Michael Chase, Corporate Counsel, ChromaScape, Inc.

As more and more companies promote the environmental benefits of their products with words such as “green, sustainable, degradable and carbon-neutral,” the Federal Trade Commission (FTC) has seen the need to get more involved with environmental claims in the marketplace.  The FTC has two fundamental missions – to protect consumers and to promote and safeguard economic competition. By making sure that companies don’t make unsubstantiated or false claims, they achieve both facets of their mission. They run the “Do Not Call” registry, so that makes them one of the "good" federal government agencies in my book.

The FTC has had in place a set of environmental marketing guides since 1992, limiting companies from making untrue or unsubstantiated environmental claims about their products.  These “green guide” rules have the force of law as long as the companies participate in interstate commerce.  (The term “interstate commerce” is usually interpreted very broadly, basically meaning “anywhere that anyone from any state can buy or sell.”)  Unfair or deceptive trade practices in commerce are prohibited by the law that created the FTC, called the FTC Act.  The FTC interprets the prohibition to mean that any omission, unsubstantiated claim, or misrepresentation is going to be found to be deceptive if it is likely to mislead a reasonable consumer.   When dealing with environmental claims, the FTC guides give some guidance as to what is considered an omission or an unsubstantiated claim, and some examples may be surprising.

A couple of the rules are clear and are important to know.   A company may not put a logo on a product and “certify” that it is somehow environmentally beneficial or healthy, unless that logo is from an independent entity that has expertise and knowledge in the area that it is certifying.  A company cannot mark that its product (or its packaging) is recyclable, unless there is a common, readily available network of recycling options available.  (The fact that a product is theoretically recyclable does not make it “legally recyclable” for advertising purposes.)  And you can’t just claim that your product is “greener” unless you clearly explain why, and have scientific evidence to back your claim.    

The FTC does not need to prove any intent to deceive consumers, nor does it need to find anyone who actually claims that the ads tricked them.  The fact that they might deceive somebody means that a company needs to make the ad or claim clear and specific, usually by adding details.  So claiming your products are “green” with no further comment will be seen by the FTC as being deceptive, because a reasonable consumer may think that your products are somehow more environmentally healthy than those of your competition, but you haven’t explained why and you haven’t given your competition a fair way to respond.   You need to say something specific like your products are made of 99.4% recycled pre-consumer product, or of 15% green fiber blend, or that they are 99.6% biodegradable in proper use in a two-year period (assuming, of course, that you test these numbers and they are the correct amounts).  

Many publications can be downloaded right from the FTC website, at http://www.ftc.gov/bcp/menus/business/adv.shtm. 

Another good resource is their small business guide, at http://www.ftc.gov/bcp/edu/pubs/business/adv/bus35.shtm

The FTC has guidelines to clarify what sort of substantiation is needed before a company can make claims about its products, but these are usually a little “fuzzy,” because there isn’t a lot of formal case law on these matters.  For any specific questions on your company’s advertising, contact an attorney in your state.