The worst blow is the one you don’t see coming. Just ask Chris Gubera, president of Adventure Medical Kits. Gubera told SNEWS® he felt blindsided when his company was among those that got tangled in the Federal Trade Commission’s renewed efforts to enforce its 17-year-old guidelines for environmentally friendly product claims.
On June 9, the FTC reported that AMK was violating FTC guidelines by labeling Fresh Bath Body Wipes as biodegradable, which is when the FTC also went after K-Mart Corp. and Dyna-E International.
Vern Schrum, regulatory manager for Tender Corp., AMK’s parent company, said Tender and AMK did not intend to mislead consumers.
“We weren’t trying to deceive anybody,” said Schrum. “We didn’t know we were doing anything wrong.”
Though AMK had determined that the Fresh Bath Body Wipes were indeed biodegradable, the FTC’s Guides for the Use of Environmental Marketing Claims (known as the “Green Guides”), require that the product packaging be biodegradable as well. (Click here to see the complete text of the Green Guides) Unfortunately for AMK, the packaging did not meet that standard, and neither Gubera nor Schrum were aware of the FTC requirement.
The FTC required AMK to remove the biodegradable claim from Fresh Bath packaging, which meant covering some labels with stickers, and also creating completely new packaging. In addition to this cost, AMK and Tender racked up $30,000 in legal fees to reach an administrative settlement with the FTC.
“We had more in legal fees than we made on the product,” said Gubera.
At the same time the FTC went after AMK, it also charged K-Mart Corp. and Dyna-E International (manufacturer of Lightload Towels) with violating the guidelines for biodegradable claims. This shocked the business community because the FTC has done little to enforce its Green Guides since they were created in 1992. In a June 6, 2009, article, USA Today wrote, “From 1992 to 2000, the FTC generally filed two or more complaints a year, but enforcement dropped off under President Bush.” The article also stated that, “Since May 2000, the FTC has taken legal action against only three companies for violating the guidelines.”
More aggressive policing
But the FTC seems to be getting more aggressive in response to the great influx of consumer products that claim to be environmentally friendly in some way.
“The FTC has been active in this area for a long time, but if you look at our casework, we’ve obviously become more active recently than in the preceding years,” said James Kohm, director of enforcement for the FTC’s Consumer Protection bureau.
The FTC is not only working harder to identify those that step outside the guidelines, but it has also sped up efforts to review and revise the current Green Guides. “It was coming up for a scheduled review, but we opened it a year early because of the large number of green claims,” Kohm told SNEWS.
In November of 2007, the FTC began the new review, and an important step was to get members of the public to offer comments on their perception of green marketing claims. However, Kohm said the FTC received hardly any feedback.
“The way the FTC law works is what’s important is how consumers perceive a particular claim, not what marketers intend by it, and we got very little response,” said Kohm. “So the commission decided to do its own research.”
In 2008, the FTC held a series of workshops in which the agency invited business leaders, scientists and legal experts to discuss how the Green Guides could best address emerging concerns, such as carbon offsets, product packaging claims for things supposedly recyclable, biodegradable, compostable, and sustainable, plus green claims about textiles, building products and buildings.
The FTC also hired a contractor to survey members of the public about their knowledge and perceptions of green marketing claims. “That is now in the field, and we expect it back in the next week or so,” Kohm told SNEWS. “We anticipate moving forward fairly expeditiously from there. We’ll take all the comments from November (of 2007), the three workshops and consumer perception evidence and see what updates are appropriate. But it’s a very big project, so it’s not a matter of weeks, but a matter of months after that.”
A growing problem
While manufacturers wait for the FTC to update the Green Guides, they face the difficult task of deciding exactly what they can and cannot claim on their packaging and tout in their marketing messages.
“It’s very easy to screw up environmental claims. It’s so technical these days,” said Valerie Davis, CEO of EnviroMedia Social Marketing, which participated in the FTC workshop concerning carbon offsets and renewable energy credits.
“There must have been 300 people in the room, the smartest scientists, engineers and attorneys in the country, and the only consensus was that the carbon market is far from being as defined as it should be,” said Davis. “They called it the Wild West. So, if these guys are worried about the accuracy of carbon offsets and renewable energy credits, how in the world can the advertising industry expect to make accurate environmental claims?”
The green market really is a new frontier, with a shifting landscape of new technologies, products and services. It’s logical to assume that companies will tread on dangerous ground if they navigate this landscape without clearly defined regulations.
Compounding the problem is the fact that the producers of green products and services face increased scrutiny not only from the FTC, but from consumers as well.
“We’re already starting to see an increase in lawsuits concerning greenwashing,” said Eric Lane, a patent attorney at Luce, Forward, Hamilton & Scripps in San Diego, and owner of the Green Patent Blog (www.greenpatentblog.com). “It’s a perfect storm of public awareness of the effects of climate change, consumer interest in and demand for energy efficient and environmentally friendly products and services, and the response to that demand by technology companies and product manufacturers.”
Lane said he has primarily seen more cases where consumers are suing manufacturers for false advertising or misleading claims. Consumer appliances, household cleaners and automobiles have come under fire most often. On his blog, Lane wrote about an ongoing case in which the owner of a Honda Civic Hybrid has sued Honda over claims about the car’s fuel efficiency. Lane also commented on a case filed in August in which a man in Oakland, Calif., claimed that Toyota misrepresented the fuel efficiency of its Prius.
In March, S.C. Johnson & Son Inc. was sued for misleading consumers about the environmental claims made on bottles of Windex. The suit said the company’s “Greenlist” trademark was misleading because S.C. Johnson & Son owns this mark, and the Greenlist is not determined by a third-party endorsement.
While some companies intentionally deceive consumers, Kohm said that the FTC sees few of these cases in the green product market. Instead, violators are typically unaware of guidelines and violate them inadvertently.
“People step over the line for two reasons. One is they’re not clear where the line is. We definitely see that in the green area, and guidelines can help with that,” said Kohm. “Or, we see a herd mentality of people walking over the line, where they say that everyone is doing it and they need to keep up. Guidelines can help with that as well.”
AMK learns a hard lesson
With lawsuits on the rise and the FTC more aggressively pursuing violators of the Green Guides, companies must be sure to know their full responsibilities when it comes to green marketing.
Adventure Medical Kits learned the hard way that it must know the exact details of what can be said when claiming a product is biodegradable. But, the company also discovered another important thing that many people may not realize: You’re not only responsible for claims made on things that you produce, but also products that you distribute.
AMK did not actually manufacture the Fresh Bath Body Wipes. Rather, it distributed the product, which was manufactured by Micelle Laboratories.
“It was their claim that it was biodegradable, and we resold it in their packaging,” said Gubera. “We expected our partner to be aware of the regulations concerning its product.”
Gubera said that when the FTC informed AMK of the problem, “We told them we were just distributing the product, and that they needed to talk with the original manufacturers. But they said that everyone in the food chain is culpable.”
Gubera and Schrum of Tender have taken measures to avoid making mistakes in the future. “Now, I have a ‘green manual’ on my desk, and we’re more in tune with that regulation,” said Schrum. Gubera said a Green Guides manual sits atop his desk as well.
“Know the rules and try to avoid being outside them,” Gubera warns. “It’s not beneficial to your bottom line in these times to spend money where you don’t have to spend it.”
Consumers should do their homework as well
Even though the FTC is overhauling the Green Guides and training its sites on violators, it might not be enough to adequately inform or protect consumers, who are fairly mystified by green claims.
“Once the Green Guides are updated, will they have the bandwidth to keep up with all of them,” asks Davis of EnviroMedia Social Marketing. “I believe they will enforce a couple of big fish and set the tone, but it’s up to consumers to wise up and scrutinize those marketing claims.”
Research suggests that consumers lack the knowledge to judge the green marketing messages they see each day.
“Our company partnered with Green Seal in January to do a consumer study, and we found that 30 percent of American consumers say they have no idea of how to evaluate green claims in marketing and advertising,” said Davis. “Another 10 percent say they blindly trust green claims. That means 40 percent of Americans have no idea of how to scrutinize green claims.”
Third-party groups that evaluate and certify products can help. Certainly, consumers are becoming more aware of organizations such as the U.S. Green Building Council, which certifies energy-efficient buildings, and the government’s Energy Star program, which certifies appliances. But, as Davis said, this is still very much the Wild West. When shoppers see a Greenlist tag on a bottle of Windex, how are they to know that S.C. Johnson’s own people, and not an objective authority, determined that it’s good for the environment?
To give consumers a hand, EnviroMedia Social Marketing partnered with the University of Oregon to create the Greenwashing Index web site (www.greenwashingindex.com), which provides information to help people evaluate green product claims.
There’s little doubt that the green market will continue to swell, but consumers and company leaders should wade in carefully. It’s great that more people are riding the green wave, but if you don’t watch out, the wave will slap you in the face.
SNEWS® View: AMK’s dealings with the FTC should be a wake-up call to every company in the industry. AMK and Tender are veteran companies in the industry with good reputations. If this happened to some shady organization, it would be one thing, but these are well-meaning entities that still stumbled. Also, they are not novices when it comes to dealing with government regulations. Their compliance personnel regularly deal with the FDA and EPA concerning all sorts of health and safety products. But these companies were not completely up to speed on the FTC’s guidelines concerning green marketing, and we’re betting that many other companies aren’t either. If it can happen to them, it can happen to you. While the FTC tells us that it is not particularly interested in suing companies that accidentally step outside the guidelines, we’re sure the folks at Tender and AMK would beg to differ. The other issue is that the current Green Guides fail to address new and emerging technologies and services. The wheels of the government turn slowly, and there’s no telling how long it will take for the new guidelines to be released. Until then, and even afterward, this is a case of “Seller beware.” -SNEWS® Editors