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Regulation of Greenwashing by the Federal Trade Commission

Posted Jul 03 2008 1:13pm

ByWeBuyItGreen: promoting green living and fair trade



In addition togreen certificationprograms, government regulation provides the consumer some degree of protection againstgreenwashing.  In the U.S., theFederal Trade Commissionis the primary source for consumer protection against deceptive advertising and provides guides for environmental marketing claims.  The FTC is authorized to “bring law enforcement actions against false or misleading marketing claims.”1  Although the Green Guides are intended as guidelines for voluntary compliance and do not themselves have “the force and effect of law,” the FTC can bring action against a company if the Commission believes it has violated prohibitions against unfair or deceptive practices.2  The process forfiling a complaintagainst a company is fairly simple and straightforward.  The Commission provides a form to complete and submit, which takes about five minutes.

However, the degree of protection afforded by FTC regulation is limited in two respects.  First, regulatory guidelines provided by the Commission have not been used to prevent the more subtle and common forms of greenwashing.  Secondly, FTC actions against greenwashing have been rare compared to the number of cases that occur.  The FTC has been reviewing its Green Guides for the Use of Environmental Marketing claims over the past several months and promises a revised version of the green guides better equipped to protect growing consumer interest in buying green products.

FTC Criteria for Deception

The current Green Guides are based on the following three criteria for determining what distinguishes a legitimate advertising claim from one that is unfair or deceptive.

Substantiation:  Objective assertions made about a product must be based upon reliable evidence to support it, such as objective tests performed by professionals who are expert in the relevant field.

Specificity and Clarity:  Broad environmental claims and terms, such as “eco-friendly” or “environmentally friendly” should be avoided unless their specific meaning is made clear.  An advertisement of an “environmentally friendly” wrapper does not meet this test unless the benefits it brings to the environment are made clear.  However, an ad that explains that the wrapper is processed without the use of chlorine or other harmful substances does.  Comparative ads must specify what their product is being compared to.  An ad that claims their bottle uses 50% less plastic fails the specificity test, but one that claims their product uses 50% less plastic than their previous product passes.  Claims that products are recyclable must specify whether this pertains to the packaging, the products, or both.  Ads maintaining that products are made from recycled material must specify how much of the material is recycled unless it is all recycled.  If a product is only compostable when an appropriate composing service is used (rather than a home-based composting pile or device), the advertiser must make this clear. 

No Overstatements:  Companies are not allowed to overstate the environmental benefits of their products.  For example, consider a claim that environmentally beneficial coffee filters are produced through a chlorine-free bleaching process.  If the alternative process used by the company making this claim also does significant environmental damage, even if it is less detrimental to the environment than chlorine bleaching, the company must reveal the harm caused by the alternative process they are using.

Limitations of FTC Regulation

The Green Guides as they currently stand do not appear to offer much protection against the most common form of greenwashing, which is the "Sin of the Hidden Tradeoff."  One might think that the “no overstatements” criterion could apply here.  For example, corn ethanol illustrates a hidden tradeoff because the use of corn for ethanol leads to loss of food production, which in turn leads to new forests being cleared to compensate for this loss, creating a negative net impact on the environment.  Advertising corn ethanol as environmentally friendly could be viewed as a violation of the “no overstatement” criterion because once the hidden trade-off is revealed, we realize that the environmental benefits of corn ethanol have been overstated. 

However, the examples cited in the FTC Green Guides do not appear to apply to broad trade-offs of this nature.  One example they cite applies to simple misleading exaggeration, claiming that a package uses 50% more recycled content when that only amounts to an increase from 2% to 3% of the total packaging and is therefore negligible.3  Another example cited by the FTC is mentioned above, using an alternative to chlorine-free bleaching.  This example involves trade-offs, but only with respect to a single aspect of the product or production process. 

It is not likely that the FTC will require advertisers to considerlife cycle assessmentof the overall environmental impact of a product from its inception to its disposal.  This means that regulation will not protect the consumer from advertising which focuses on one aspect of a product (for example, it is recyclable) while ignoring others (for example, it was manufactured in a factory that has taken no steps to reduce harmful emissions).  If this is the case, then by playing a sophisticated trade-off game, a company can avoid the FTC’s interpretation of “deception” while still leaving the consumer with themisleading impressionthat buying their product will be better for the environment than buying from a competitor.

The second limitation of FTC regulation as a remedy for greenwashing is that guidelines are different from enforcement.  Given the rapid growth of consumer interest in the environment and corresponding expansion of advertising touting environmental benefits, it is doubtful that FTC action will keep pace with greenwashing.  A quickreview of FTC recordsfrom January to June 2008 indicates that only two actions were taken during this period against companies for advertising that is related to greenwashing, and these both involved misleading health claims.  The Commission fired a shot across the bow of myriad online advertisers promoting the “natural” alternatives to Hormone Replacement Therapy by filing an action against Herbs Nutrition Corporation for failing to substantiate claims about the benefits of their product.  They also filed an action against Centro Natural Services for unsubstantiated claims about their pills and soap leading to weight loss.  Based on these efforts, it appears unlikely that FTC regulation will be sufficient to protect the consumer against the bulk of more common and subtle forms of greenwashing.       



1Federal Trade Commission,Complying with the Environmental Marketing Guides, 1. Retrieved June 24, 2008.



2
ibid.



3Federal Trade Commission,Guides for the Use of Environmental Marketing Claims, 3. Retrieved June 23, 2008.
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