FTC Says Co. Never Made Donations to Non-Profit Environmental Groups
Benckiser Consumer Products, Inc. has agreed to settle Federal Trade Commission charges that it made false and misleading "cause-related marketing" claims in advertising its "EarthRite" line of household cleaning products. Benckiser claimed that a portion of EarthRite's proceeds would be donated to non-profit environmental groups, when in fact, according to the FTC, the company has not donated any money to such groups since it began selling EarthRite products in 1992. Benckiser has agreed to a proposed settlement that would prohibit the company from making similar misleading claims for any of its household cleaning products.
"Cause-related marketing is an increasingly popular method of promoting a company, championing a cause, and boosting sales," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "A recent study showed that, price and quality being equal, nearly two-thirds of consumers would switch to a brand associated with a cause they support. The FTC’s action against Benckiser makes clear that, because so many consumers rely on these claims, the companies making them must ensure that they are truthful and backed up by solid evidence.”
Benckiser, based in Danbury, Connecticut, manufactures and sells a large variety of household cleaning products throughout the United States. The EarthRite product line consists of nine products, among them a glass cleaner, a tub and tile cleaner, and a dishwashing liquid. According to the FTC's complaint, a promotional hangtag attached to each of the EarthRite products contained the following statement:
“One percent of EarthRite's proceeds are donated to non-profit organizations working to restore and preserve our natural resources.”
The company thereby represented that it donates at least some portion of its revenue from the sale of EarthRite products to non-profit environmental organizations, the FTC alleged. But Benckiser has never donated any portion of its revenue -- either sales or profits -- from the sale of EarthRite products to non-profit environmental organizations, and the use of the statement was false and misleading, the FTC charged.
A proposed consent agreement to settle the FTC's charges, announced today for a public comment period, would prohibit Benckiser, in connection with the sale, advertising, distribution or promotion of any household cleaning product, from misrepresenting that a portion of the revenue from the sale of the products is donated to any organization. If Benckiser chooses to represent that it donates some portion of its revenue to an organization, the proposed settlement would require it to clearly and prominently disclose the method of determining the amount of such a donation.
The FTC’s Bernstein suggested that companies making these kinds of claims consider using language -- such as 1 percent of “net profits” or “gross revenues” -- that is readily understood by consumers to convey their method of determining the amount of their donation.
The proposed settlement also contains a number of recordkeeping requirements designed to assist the FTC in monitoring Benckiser's compliance.
"Cause-related marketing" ties a company and its product to a popular issue or cause in an effort to improve sales while providing benefits to the cause. According to a 1994 Cone/ Roper Study, seven of 10 consumers believe that cause-related marketing helps solve social problems and nearly two-thirds of consumers think that it should be a standard corporate practice. In addition, the study indicates that when price and quality are equal, more than 65 percent of consumers would be likely to switch to a brand associated with a good cause, and more than half would pay more for a product if it were associated with a cause they care about.
The Commission vote to accept the proposed consent agreement for public comment was 5-0.
The proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.
Copies of the complaint, the proposed consent agreement and an analysis of the agreement to assist the public in commenting are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
(FTC File No. 932 3310)