Anticipated Changes to FTC Green Guides Portend New Areas of Potential Litigation

Companies interested in the scope of environmental marketing claims and mitigating potential litigation risks should act fast as the window for comments is closing soon.

Latham & Watkins presents a blog series on the Federal Trade Commission’s Guides for the Use of Environmental Marketing Claims (Green Guides). This second post provides updates on anticipated revisions to the Green Guides to help companies mitigate litigation risk and stay abreast of regulatory changes.

Since their initial publication in 1992, the Federal Trade Commission’s (FTC) Guides for the Use of Environmental Marketing Claims (the Green Guides or the Guides) have been widely used to help drive corporate marketing, as well as litigation strategies for public and private litigants. The FTC is collecting public comments on how the Guides have operated and should operate in the marketplace moving forward and recently announced that it is extending the window for comments by 60 days to April 24, 2023. The questions posed in its December 2022 Federal Register Notice likely foreshadow the types of environmental marketing claims companies should keep a watchful eye on in the decade to come.

The Green Guides are just that — guides. As the Guides are currently written, they do not dictate what are or are not legally actionable as unfair or deceptive environmental marketing claims. Per the FTC, the Guides are meant to “explain the FTC’s thinking about how the FTC Act’s prohibition on unfair or deceptive practices applies to the kind of environmental claims consumers are likely to encounter in the marketplace.” At least, that is how the Guides appear at first blush. Litigants and courts have used the Green Guides frequently to plead, defend against, and support or dismiss deceptive environmental marketing claims. Several states have also incorporated or codified the Green Guides into their own state consumer protection acts, oftentimes called Baby FTC Acts. The FTC itself often relies on concepts from the Green Guides in bringing cases alleging unfair or deceptive environmental marketing claims under Section 5 of the FTC Act, 15 U.S.C. § 45. In its current request for comment, the FTC asked whether the Green Guides should become binding regulations at the federal level through a formal rulemaking process.

This potential formal rulemaking process for the Green Guides is consistent with other efforts by this FTC to implement rules that can be enforced, as rule violations are easier to prove and require less resources than case-by-case litigations. With the Supreme Court’s recent ruling in AMG Cap. Mgmt., LLC v. Fed. Trade Comm’n, 141 S. Ct. 1341 (2021) barring the FTC from obtaining equitable monetary relief under the FTC Act, the FTC under current Chair Lina Khan has focused its attention on “developing rules that allow the agency to recover redress for consumers.” Note that violations of FTC rules can still result in monetary penalties, whereas violations of the FTC Act itself cannot.

Taken together, the use of the FTC Green Guides in litigation at administrative, state, and federal court levels indicates that the Green Guides play an outsized role in green marketing. It also signals to companies and marketers alike the need to pay attention to the FTC’s potential alterations to the Green Guides, which will likely have a key role to play in green marketing claims in the foreseeable future.

How the Green Guides Are Used in Litigation

The current 2012 Green Guides span a variety of green marketing claims, although there are also some notable omissions from the 2012 Green Guides (e.g., “sustainable” and “net zero”). One area of particular focus for the FTC and for litigants is “recyclable” claims. Under the current Guides, recycling facilities must be available to a “substantial majority” of consumers, which is currently set at a 60% threshold. The FTC requested comments on both the 60% threshold number and how the FTC should consider market demand, budgetary constraints, or other factors that play into whether a certain product can be recycled when defining a product as “recyclable.” In light of these questions, the FTC’s guidelines for recyclability claims will likely change.

Alongside other claims (as discussed in the section below), “recyclable” claims have historically played a major role in litigation. For example, in a case filed in 2020 in the District of Massachusetts, the putative class of plaintiffs alleged the manufacturer improperly labeled its coffee pods as “recyclable.” The gravamen of the plaintiffs’ complaint was that the coffee pods were ultimately not “recyclable” because of their design: (1) they were too small for recycling facilities to economically sort and process, (2) their foil tops must be separated from the plastic pods to be recycled, (3) they had a tendency of getting crushed before reaching the recycling facility, and (4) the pods would get contaminated from coffee grounds. As such, the complaint alleged the manufacturer failed to satisfy the requirements of the Green Guides and therefore the “recyclable” marketing was false and deceptive. In a ruling denying the motion to dismiss, the court held that the plaintiff plausibly alleged deception where “most recycling centers do not accept Pods[,]” which would not have met the 60% “substantial majority” threshold established in the Green Guides, and where “only 30% . . . were recyclable at the facilities that accepted them,” which would not have met the Green Guides’ requirement that the entire package be “recyclable.”

Companies have also relied upon the Guides to defend against allegations that they have made deceptive green marketing claims. For example, a putative class of plaintiffs recently filed a claim alleging deceptive and unfair trade practices and false advertising because water bottle labels stated they were “100% Recyclable” when the labels themselves were not “recyclable.” The company successfully relied on its compliance with the Green Guides, which state that a product may be labeled as “recyclable” if “the entire package, excluding minor incidental components, is recyclable[,]” to avoid liability for the alleged deceptive environmental marketing claims.

Litigants are not the only actors that utilize the Green Guides. Some courts have also turned to the Guides to determine the merits of complaints alleging deceptive green advertising. For example, the Northern District of California looked to the Guides to conclude that a complaint adequately pled that a company engaged in greenwashing tactics when cleaning product bottles contained a label that looked like a third-party seal of approval. Other courts have refused to consider the Green Guides in making such determinations. For instance, despite Illinois state law requiring courts to consider FTC and federal court interpretations of Section 5(a) of the FTC Act, the Northern District of Illinois did not rely on the Guides in assessing whether a “recyclable” label on foam tableware was misleading. The court reasoned that “[p]eople buying red party cups at 7-Eleven are more likely to be thinking about beer pong than the FTC’s consumer guidelines.”

Trends in Citations to Green Guides in Court Cases and Administrative Hearings

Regardless of how the Guides are used, they have been cited more than 120 times in federal and state court cases and administrative hearings spanning a variety of marketing claims covered by the Guides.

Analysis of private party litigation as well as FTC cases involving the Green Guides provides four key takeaways:

1. As shown in Figure 1 below, “recyclable,” “compostable,” and “degradable” claims have been among the more heavily litigated substantive environmental marketing claims. This trend will likely continue as companies and marketers seek to promote their products as “green” based on these characteristics.
2. Figure 2 indicates that the number of environmental marketing cases brought by the FTC has tapered off in recent years. However, there was a significant uptick in environmental marketing cases brought by the FTC following the publication of the 2012 Green Guides, as shown in Figure 2. Hence, if the FTC moves forward either to revise and expand the Green Guides or to implement a regulation related to deceptive or unfair environmental claims, then this trend can be expected to reverse — possibly quite dramatically.
3. Furthermore, although a limited number of cases have been brought to date related to “renewable” or “carbon offset” claims, particularly in courts, that number could rise given the climate-focused tailwinds of the Biden Administration and the FTC’s focus on climate change-related claims in its request for comments.
4. Lastly, as Figure 2 shows, FTC enforcement was at its peak between 2013 and 2016 (under the Obama Administration) but has not reached those levels since. The broad scope of the FTC’s recent solicitation of comments, including its reference to claims that are not specifically addressed by the 2012 Green Guides and that are becoming more common as part of many companies’ ESG programs (e.g., “sustainable”), provide a solid indication that the FTC has turned its attention back to these environmental marketing claims, and, in turn, FTC enforcement against allegedly misleading environmental marketing claims will increase.

The FTC’s recent request for comments recognizes that the issues consumers (and litigants) care about have shifted since the Guides were last updated in 2012. Specifically, the FTC seeks to further develop and refine its guidelines, and potentially even initiate rulemaking, around certain existing environmental marketing claims like “recyclable,” “renewable,” and “carbon offset” claims as mentioned above, in addition to claims not previously addressed in the Green Guides, like “sustainability” claims, broader climate change-related claims, and certain “organic’ claims.

Giving the Green Guides the Force of Law

As noted above, the Green Guides, as they currently stand, are not binding on litigants under federal law. The FTC cannot bring a federal cause of action against a corporation for failure to comply with the Guides; rather, the FTC must invoke the FTC Act itself and use the Guides as one piece of evidence showing misleading or deceptive advertising. The FTC’s current request for comments indicates that may change given the questions posed as to whether the agency should initiate rulemaking related to deceptive or unfair environmental marketing claims. Among the FTC’s questions that center upon potential rulemaking, the FTC seeks comments on (1) which principles set out in the Green Guides should be incorporated into a rule; and (2) whether any additional principles related to environmental claims that are not covered by the current Guides should be incorporated into a rule.

A number of states have beat the FTC to the punch, codifying the Green Guides within their laws and regulations and imbuing them with the force of law for state law-based claims of unfair and deceptive advertising. Some states simply reference FTC regulations in general (e.g., Illinois, Massachusetts, and New York), while others explicitly incorporate the Green Guides in part (e.g., Alabama, Indiana, Maryland, and Michigan), or in whole (e.g., Maine, Minnesota, and Rhode Island). Some states both incorporate and impose restrictions beyond the Green Guides (e.g., California). Broadly, we would categorize the state laws as follows:

• Reference FTC regulations in general: The state law does not specifically reference the Green Guides, but rather the FTC rules, regulations, or law in general. For example, New York’s law notes that engaging in deceptive acts creates civil liability, but it is a defense if the act complies with “the rules and regulations of, and the statutes administered by the [FTC] or any official department, division, commission or agency of the state of New York.”
• Explicitly incorporated in part: A violation of a specific part of the Green Guides is a violation of state law. For example, Alabama’s law states that no plastic container can be labeled “degradable,” “biodegradable,” “compostable” or any other similar word unless it meets the requirements set forth in the Green Guides.
• Explicitly incorporated in whole: A violation of any part of the Green Guides is a violation of state law. For example, Minnesota’s law states, “[e]nvironmental marketing claims . . . must conform to the standards or be consistent with the examples contained in . . . ‘Guides for the Use of Environmental Marketing Claims.’”
• Explicitly incorporated in whole with additional requirements: A violation of the Green Guides is a violation of state law, and additional requirements are imposed by state law. For example, California’s law states that making a misleading environmental marketing claim is unlawful, and that “misleading environmental marketing claim” includes any claim addressed in the Green Guides. In addition, California imposes additional requirements that go beyond the Green Guides, such as documentation required to support an environmental claim and when the recycling symbol can be used.

Depending on which state law the case is brought under, litigants can either use the Green Guides as a sword (i.e., lodging a complaint under state law and pleading variances from the Guides), or as a shield (i.e., showing compliance with the Guides to defend against a complaint). These litigation tactics have given the Guides some teeth in courts. They also make the FTC’s upcoming revision of the Green Guides (and potential rulemaking) consequential for companies that sell their products online or across different jurisdictions, regardless of whether the FTC codifies the Guides into federal law. Although this post does not explore the international law implications of cross-border marketing, Latham & Watkins is tracking that area as well. Companies that market products over the internet should be especially wary, as they could not only be subject to the Green Guides in the United States, but also other foreign regulatory schemes that may, in certain instances, be viewed as even more restrictive, such as the UK’s Advertising Standards Authority.

Preparing for the Future

With ESG litigation on the rise and greenwashing claims playing an increasingly important role in plaintiff and regulatory lawsuit strategies, marketers seeking to tout their environmental bona fides should choose their words carefully. The FTC already plays a key role in assessing deceptive environmental marketing claims through its 2012 Green Guides and could take on an elevated role if it decides to initiate rulemaking on the topic.

The Green Guides’ prominent role in greenwashing litigation may even be expanded depending on the volume and substance of comments received. In addition to the areas the Guides already cover, the FTC is evaluating whether to widen the net to capture claims not addressed by the 2012 Green Guides. Such claims include climate change-related claims, energy use or efficiency claims for various products, the use of “organic” for non-agricultural products, and the use of the term “sustainable.”

Latham & Watkins will continue to track the FTC’s process to consider whether to revise and expand the Green Guides, or alternatively, to pursue regulation. We will provide updates with the aim to help companies mitigate litigation risk and stay abreast of regulatory changes.

Endnotes

Lesley Fair, FTC Environmental Marketing Guides: Is It Time For a Change of Green-ery?, Fed. Trade Comm’n (Dec. 28, 2022), https://www.ftc.gov/business-guidance/blog/2022/12/ftc-environmental-marketing-guides-it-time-change-green-ery.

See, e.g., Downing v. Keurig Green Mountain, Inc., No. 1:20-cv-11673-IT (D. Mass. Sep. 9, 2020); Duchimaza v. Niagara Bottling, LLC, — F. Supp. 3d. —, 2022 WL 3139898 (S.D.N.Y. Aug. 5, 2022); Koh v. S.C. Johnson & Son, Inc., No. C-09-00927 RMW, 2010 WL 94265 (N.D. Cal. Jan. 6, 2010).

See, e.g., Cal. Bus. & Prof. Code § 17580.5; Minn. Stat. § 325E.41.

See Complaint at 14, Fed. Trade Comm’n v. Volkswagen Grp. of Am., No. 3:16-CV-01534 (N.D. Cal. Mar. 29, 2016); Guides for the Use of Environmental Marketing Claims, 87 Fed. Reg. 77766, § III(A) (proposed Dec. 20, 2022) (to be codified at 16 C.F.R. pt. 260).

Statement of Regulatory Priorities, Fed. Trade Comm’n, at 1 (Dec. 10, 2021), https://www.reginfo.gov/public/jsp/eAgenda/StaticContent/202110/Statement_3084_FTC.pdf.

Id. (citing AMD Cap. Mgmt., 141 S. Ct. at 1352).

Guides for the Use of Environmental Marketing Claims, 87 Fed. Reg. 77766, 77769 (proposed Dec. 20, 2022) (to be codified at 16 C.F.R. pt. 260).

Complaint at 2, Downing v. Keurig Green Mountain, Inc., No. 1:20-cv-11673-IT (D. Mass. Sep. 9, 2020), ECF. No. 1.

Id.

Id. (citing 16 C.F.R. § 260.12).

16 C.F.R. § 260.12(b)(1), (c). Note that according to the Green Guides, the entire package may still be considered “recyclable” if only minor incidental components cannot be recycled.

See Duchimaza v. Niagara Bottling, LLC, — F. Supp. 3d. —, 2022 WL 3139898 (S.D.N.Y. Aug. 5, 2022).

16 C.F.R. § 260.12(c); 16 C.F.R. § 160.3(b) (explaining that a bottle cap is a minor, incidental component, and thus the bottle can be considered recyclable even if the cap is not).

See, e.g., Koh v. S.C. Johnson & Son, Inc., No. C-09-00927 RMW, 2010 WL 94265, at *2 (N.D. Cal. Jan. 6, 2010).

815 Ill. Comp. Stat. 505/2.

Curtis v. 7-Eleven, Inc., No. 21-cv-6079, 2022 WL 4182384, at *16 (N.D. Ill. Sep. 13, 2022).

Cases and administrative hearings were identified through case citation references on Westlaw for each section of the Green Guides as well as a review of environmental marketing cases identified in the FTC Legal Library. Legal Library: Browse, Fed. Trade Comm’n, https://www.ftc.gov/legal-library/browse (last visited Jan. 26, 2023).

See Guides for the Use of Environmental Marketing Claims, 87 Fed. Reg. 77766, § III(A)(19) (proposed Dec. 20, 2022) (to be codified at 16 C.F.R. pt. 260).

The FTC is an independent agency, with five Commissioners chosen by the president and confirmed by the Senate. Commissioners, Fed. Trade Comm’n, https://www.ftc.gov/about-ftc/commissioners-staff/commissioners (last visited Jan. 27, 2023). A maximum of three Commissioners can be from one political party, and currently the FTC has three Democratic Party-identifying Commissioners, one Republican Party-identifying Commissioner, and one vacancy. See also Guides for the Use of Environmental Marketing Claims, 87 Fed. Reg. 77766, § III(B)(1) (proposed Dec. 20, 2022) (to be codified at 16 C.F.R. pt. 260).

See Fair, supra note 1. Note that the FTC Act does not give plaintiffs a private right of action. Moore v. N.Y. Cotton Exch., 270 U.S. 593, 603 (1926); Carlson v. Coca-Cola Co., 483 F.2d 279, 280–81 (9th Cir. 1973); The Enforcers, Fed. Trade Comm’n, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/enforcers (last visited Jan. 30, 2020) (“Individuals and businesses cannot sue under the FTC Act.”). Plaintiffs often instead invoke state laws to pursue deceptive marketing claims.

Guides for the Use of Environmental Marketing Claims, 87 Fed. Reg. 77766, § III(A) (proposed Dec. 20, 2022) (to be codified at 16 C.F.R. pt. 260).

Id.

See, e.g., Illinois (815 Ill. Comp. Stat. 505/2); Massachusetts (Mass. Gen. Laws ch. 93A, § 2); New York (N.Y. Gen. Bus. Law § 350-d).

See, e.g., Alabama (Ala. Code § 22-27A-1); Indiana (Ind. Code § 24-5-17-2); Maryland (Md. Code Ann., Env’t § 9-2102((b)(1)(ii)); Michigan (Mich. Comp. Laws § 445.903(dd))

See, e.g., California (Cal. Bus. & Prof. Code § 17580.5); Maine (Me. Stat. tit. 38, § 2142); Minnesota (Minn. Stat. § 325E.41); Rhode Island (6 R.I. Gen. Laws § 6-13.3-1)

N.Y. Gen. Bus. Law § 350-d.

Ala. Code § 22-27A-1.

Minn. Stat. § 325E.41.

Cal. Bus. & Prof. Code § 17580.

Advertising Standards Authority, https://www.asa.org.uk/ (last visited Jan. 30, 2023).