"The Federal Trade Commission's
Green Guides: A Success Story"
Roscoe B. Starek, III
Federal Trade Commission
Alliance for Beverage Cartons
and the Environment Symposium
December 4, 1996
Thank you for the opportunity to speak to you today.(1) I want to discuss a success story -- the Federal Trade Commission's role in the area of environmental advertising and labeling claims, and specifically, the 1992 Guides for the Use of Environmental Marketing Claims (which are often called the "Green Guides") and the revisions we made in October. I also want to share with you how the Green Guides came about, and my impressions about how well they have worked.
The Commission is a national law enforcement agency charged with prosecuting violations of U.S. consumer protection laws and antitrust statutes. We enforce Section 5 of the FTC Act, which generally prohibits "unfair or deceptive acts or practices," including advertising or labeling that is false or misleading. False advertising may cause consumers to spend money for the wrong products or services, injuring both the consumer and more honest competitors.
Consumers easily can be fooled by deceptive claims about the environment. First, they usually cannot determine for themselves whether the products actually possess the advertised attributes. Second, the environmental benefits claimed may not be evident for five, ten, fifty or more years. Even then, the claimed benefits may occur in ways that consumers cannot verify or measure. These factors make it difficult, if not impossible, for a consumer to judge, for example, whether an aerosol spray he uses will deplete the ozone layer or contribute to smog.
The Commission's attention to deceptive environmental claims is nothing new. In the 1970s, the Commission negotiated an industry-wide agreement on phosphate and degradability claims for detergents.(2) During that decade, the Commission brought cases challenging deceptive environmental advertising claims in a variety of areas, including, for instance, gasoline air pollution claims.(3)
In the late 1980s, consumer concerns about the environment led to enormous interest in the environmental characteristics of products and packaging. The market responded to this increased consumer demand with a rapid proliferation of claims. Unfortunately, some of the claims were deceptive. The Commission initiated a number of investigations to determine whether Section 5 of the FTC Act was violated. These investigations led to the acceptance of several consent orders in which companies agreed to stop making the challenged claims and take other remedial action.(4)
The proliferation of environmental marketing claims and the resulting consumer deception led to multiple regulatory responses by other federal, state and local authorities in the U.S. with authority over environmental and marketing issues. Both the federal and several state governments began considering legislative remedies to eliminate deceptive claims and consumer confusion.
Not surprisingly, by the early 1990s, we began to hear reports of uncertainty by business and advertisers about the potential development of differing or inconsistent standards on a state-by-state basis. At the same time, state law enforcers and environmental groups continued to express concern about preventing deceptive claims. The result? Confusion about environmental claims simultaneously kept useful information from reaching consumers and left them distrustful about the information they did receive.
This was troubling since there was nearly universal agreement among consumers, industry and government regulators that environmental marketing was an area where more, not less, information was desirable. There was broad-based support for the view that truthful and reliable advertising had a critical role to play in encouraging the development of more environmentally sound products and packages. Business, industry and consumer groups urged the Commission to provide national industry-wide guidance in order to promote the use of truthful and substantiated environmental marketing claims. The Commission, working with the U.S. Environmental Protection Agency and the state Attorneys General, responded to these concerns by issuing the 1992 Guides for the Use of Environmental Marketing Claims.
I supported the Guides because it was clear that real benefits could be derived from a clearly articulated advertising policy in this area. By letting companies know what kind of evidence is needed to support environmental claims, the Commission had the opportunity to encourage advertisers to make genuine environmental improvements with the incentive of being able confidently to advertise those improvements to the public. This approach allows marketplace forces to identify the environmental attributes that consumers prefer. It encourages consumers to choose their preferred options with their purchases, based on accurate, non-misleading information provided by advertisers.
Even though the Green Guides help ensure that environmental claims are not deceptive and are adequately supported, they are not law. The Guides are administrative interpretations of the Commission's policies, laws, and cases. They are intended to help advertisers voluntarily comply with the law by indicating how the Commission intends to apply Section 5 of the FTC Act to environmental claims.
Like Section 5 of the FTC Act, the scope of the Green Guides is broad. They apply to advertising, labeling, and all other forms of promotion for products and services sold in commerce. In addition, they apply both to the use of specific terms and symbols discussed in the Guides, as well as to statements or representations that carry the same implications.
Before I discuss more specifically the content of the Guides, I should point out that the Commission does not rely solely on the Guides to promote compliance with the law. We continue to investigate individual instances of deceptive claims under Section 5 of the FTC Act. Since the Guides were issued, the Commission has entered into 25 consent agreements with companies making environmental claims that the Commission charged were false or unsubstantiated.(5) The claims challenged included "recyclable," "degradable," "ozone friendly," "environmentally safe," "chlorine-free" and "non-toxic." Each company agreed to discontinue the advertising the Commission alleged was misleading and to be placed under a broad cease and desist order prohibiting future deceptive claims.
The FTC Act and our Green Guides require that all express and implied claims about objective product attributes be supported by competent and reliable evidence before they are made. Why? Because every time an advertiser makes an objective claim, the advertiser also implies that there is a reasonable basis -- what we call "substantiation" -- for the claim. The level of evidence that is necessary to substantiate a claim varies depending upon several factors, including the type of claim, the consequences of a true or false claim, and the amount of substantiation that experts in the field believe is reasonable. The Commission takes the approach that environmental claims often need to be supported by competent and reliable scientific evidence. This means that any supporting test, analysis, research, study, or other evidence based on the expertise of professionals in the relevant area must be conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.
In examining an advertisement, label, or other marketing material, the Commission focuses on what is conveyed to reasonable consumers. Any and all reasonable interpretations that are likely to affect consumers' conduct or decisions regarding a product or service must be substantiated, whether or not the advertiser intended to make those claims. Thus, in the environmental area, as in others, the issue often to be resolved first is identifying the claims the ad conveys to consumers. And the cases that we have investigated frequently involve claims that implied too much or exaggerated the environmental benefits to be obtained.
Also, it is a basic, and frequently misunderstood, part of FTC law that marketers are responsible both for what they expressly say and for what their claims imply. A claim that a product "kills the germs that cause colds" implies that the product reduces colds. Similarly, a claim of "recyclable" not only may imply that the product is technically capable of being recycled, but also likely implies that at least some consumers can actually recycle it in their communities.
Accordingly, the Green Guides focus on how consumers interpret or understand claims, not on what terms like "biodegradable" may mean scientifically. The Guides do not set product performance standards. If consumers expect certain environmental benefits from a product labeled as "photodegradable," the question is not whether the product meets a technical definition of "photodegradable," but whether the product performs as consumers expect it to perform..
While prohibiting deceptive claims, the Green Guides allow truthful qualified claims for a wide range of products. For example, the Guides permit marketers who do not meet the 100% requirement for an unqualified recycled content claim to advertise incremental improvements by simply qualifying the claim and stating, for example, that it contains 30% recycled content. Such a qualified claim gives the consumer truthful information and signals the limitation on the recycled content of the product.
The Green Guides are quite flexible. By not establishing technical definitions or standards, they allow for ready accommodation of new technology and products within their provisions. The Commission's recent revisions to the Guides illustrate this flexibility.
The Green Guides address four general concerns that apply to all environmental claims:
First, qualifications and disclosures should be sufficiently clear and prominent to prevent deception. In other words, a very small print disclosure or one that is hidden or inconspicuous is not going to be very helpful.
Second, claims should make clear whether they apply to the product, the package, or a component of either. For example, a "recycled paper" claim on the side of a box of coffee filters could mean that both the cardboard box and the coffee filters are made from recycled content. One of the settlements issued by the Commission after the Guides were in place dealt with just this situation. The Commission alleged that it was deceptive to fail to indicate whether the claim referred to the product or the package, because, although the box was recycled, the filters were not.(6)
Third, environmental claims should not be overstated. In fact, a new example added to the Guides during their recent revision aptly illustrates this point. It explains that a "chlorine-free process" claim for a product is likely to overstate the environmental benefit if the manufacturing process continues to release into the environment a significant, even if reduced, amount of the same harmful byproducts associated with chlorine bleaching. The new addition demonstrates one possible way to make a qualified, substantiated claim.
Fourth, comparative claims should be clear so that consumers know whether the comparison is to a previous version of the advertiser's product or to a competitor's product.
The Guides then go on to address eight specific types of environmental terms. The first is a GENERAL ENVIRONMENTAL BENEFIT claim like "environmentally safe" or "environmentally friendly." Then the Guides cover DEGRADABLE, BIODEGRADABLE, and PHOTODEGRADABLE claims; COMPOSTABLE claims; RECYCLABLE claims; RECYCLED CONTENT claims; SOURCE REDUCTION claims; REFILLABLE claims; and OZONE SAFE and OZONE FRIENDLY claims. Each section of the Guides describes the elements of the different claims and any qualifications that may be necessary to avoid consumer deception; then, the Guides provide examples illustrating those principles. These examples are not meant to be an exhaustive list of all the different claims that could be made, but rather are meant to provide some "safe harbors" and to identify some minefields in the environmental claims area.
One of the most persistent areas of concern is general environmental benefit claims, such as "environmentally safe" and "environmentally friendly." We have even heard of products labeled "environmentally lite." These broad claims obviously have the potential for communicating very extensive environmental benefits -- possibly even that the product poses "no risk" to the environment. Yet often they are based only on improvements to a single dimension of the product. Unless all express and implied claims can be substantiated, broad environmental claims, or the use of environmental symbols or logos by themselves, should be avoided or adequately qualified. General claims can be vague and confusing to consumers. Claims should be sufficiently qualified, therefore, to identify the specific environmental attribute or benefit being claimed for the product.
When the Commission issued the Guides in 1992, it established a three-year review in which public comment would be sought to determine whether and how the Guides should be modified in light of experience. The Commission wanted to make the Guides responsive to changes in consumer understanding and developments in environmental technology. Our perception going into the review process was that the Guides were working well, largely because industry has done a good job of voluntarily complying with them. The comments we received from industry, environmental groups, and federal and state authorities confirmed this perception, even though there were disagreements among some commenters about specific provisions in the Guides. It certainly appears that the most egregious claims have disappeared, and the total number of deceptive claims has also been reduced.
During our review of the Guides, the Commission focused on several general and specific areas: first, the effect of the Guides on green marketing; second, the state of consumer knowledge and perception of environmental claims; and third, whether additional terms should be included in the Guides.
Regarding the effect of the Guides in the marketplace, we received empirical data and comments that we found encouraging. For example, the University of Utah submitted a study of trends in the frequency, content, and format of green claims on supermarket product labels for the past several years.(7) The Utah study shows that the amount of environmental claims on products actually increased substantially between 1992 and 1994, indicating that the Guides have not discouraged manufacturers from making environmental claims. The first audit suggested that compliance with the Guides was not widespread, but later ones found a significant improvement in the presentation of several types of environmental claims. In their 1995 report, the authors concluded that environmental claims had improved in quality (that is, they had become more specific and more qualified) without any decrease in their frequency.
The second broad topic the Commission reviewed, and is still reviewing, is the state of consumer knowledge. Because the Guides focus on consumer understanding of environmental terms, the Commission has been interested in whether consumer perceptions have changed over time. Although we did not receive as much empirical evidence as we had hoped on how consumers actually interpret specific claims, the Commission took into account the available evidence in deciding whether to modify the Guides, and, in the case of recyclable and compostable claims, decided to delay making any modifications until ongoing consumer research is completed.
The final broad topic of interest considered by the Commission was whether the Guides should address new "green" claims, including "environmentally preferable," "please recycle," "non-toxic," and "chlorine-free." Several parties recommended that the Guides cover a wide variety of new claims, and, in a moment, I'll mention some of the new claims that were added to the Guides.
On October 4, 1996, the Commission announced that it had completed the first stage of its review, and we issued updated Guides. We also announced that we would await the results of ongoing consumer research to ascertain whether changes are necessary in the recyclable and compostable Guides, but that the 1992 Guides covering these claims would remain in effect in the interim. The Commission is seeking additional data on how consumers interpret recyclable and compostable claims, as well as additional comments and data on whether consumers perceive the reconditioning or reuse of product parts to be recycling.
Since the Guides have been working so well, the modifications made to them thus far are relatively minor -- they reflect changing consumer perceptions about what various claims mean and include some new claims that have emerged since the Guides were first issued. For instance, the recycled section now contains an example addressing the use of the chasing arrows symbol by itself. The consumer research we received showed that consumers perceive the symbol to mean that the product is both recycled and recyclable. Thus, most of the time qualification will be necessary with use of the chasing arrows symbol.
Another example of how the Guides can accommodate new evidence of consumer perceptions is the change to the Ozone Safe/Ozone Friendly Guide, which now provides that it is deceptive to misrepresent that a product is safe or "friendly" to the atmosphere. Consumer perception data obtained by the Commission showed that consumers interpreted an "ozone friendly" claim to mean that a product does not contribute to smog or air pollution generally and is safe for the atmosphere as a whole. Accordingly, a new example illustrates that an "ozone friendly" claim is deceptive for products that contain volatile organic compounds that can contribute to smog.
The Commission also added two new examples addressing claims that we had already alleged to be misleading in the context of specific cases -- "non-toxic" and "chlorine free."(8) The Commission determined that "non-toxic," "essentially non-toxic," or "practically non-toxic" claims for products like pesticides or automobile antifreeze are likely to be interpreted by consumers to mean that the product does not pose any risk to humans or the environment. Thus, these claims would be deceptive if the product posed a significant risk to either.
The revised Green Guides also address new variations of general environmental claims that have begun to appear in the marketplace, such as environmental seals-of-approval and "environmentally preferable" claims. The Guides state that either an unqualified or inadequately qualified environmental seal (for instance, a green globe logo on a package with the words "Earth Smart" around it) or a claim that a product is "environmentally preferable" implies to consumers that a product is generally environmentally superior to others. Since this broad claim would be very difficult to substantiate, the Guides caution that such claims should be accompanied by language limiting the superiority claim to the particular attribute or attributes for which the claim can be substantiated.
As for environmental seals of approval, the Green Guides state that these should be accompanied by information on product labels explaining the basis for the award. The Commission analyzes third-party certification claims just as it does other advertising claims, to ensure that they are substantiated and not deceptive. Third-party certification does not insulate an advertiser from Commission scrutiny. Nor does it eliminate an advertiser's obligation to ensure for itself that the claims communicated by the certification are substantiated and not deceptive.
The last issue I want to discuss is how the Green Guides have fared in relation to state laws and the international community. First, several states in the U.S., including many states that originally had environmental marketing laws that differed from the Commission's Green Guides, have adopted the Guides into their own laws or regulations governing environmental marketing claims. States that had not adopted their own laws or guides appear to be following the Commission's approach. Therefore, the goal of creating a national, rather than state-by-state, approach to environmental marketing regulation appears to have been largely achieved without the need for federal legislation.
On the international level, the International Standards Organization ("ISO") draft standard on "Self-Declaration Environmental Claims" (Type II claims) is quite consistent with the Commission's Green Guides; in fact, it adopts many of the same principles almost verbatim. For instance, the ISO draft standard provides that even literally true environmental claims may still be deceptive if they mislead consumers because of what they imply or fail to say. However, the ISO draft standard covers several additional claims that are not covered specifically by the Guides. Generally, we are pleased that the ISO looked to our Green Guides as a model. The more consistency there is among regulatory bodies, the less consumer confusion and business uncertainty there will be about claims made in the global marketplace.
In addition to the ISO's self-regulation, we are aware that many countries have developed their own regulatory schemes for environmental marketing claims. Some of these systems are similar to ours; others are quite different. Some of the differences result from different statutory mandates. For example, some regulatory systems are designed both to prevent misleading and unsubstantiated claims and actively to set environmental policy. In contrast, the Commission's jurisdiction extends only to advertising and marketing of claims to consumers. The Commission does not have jurisdiction to set environmental policy (although we hope, of course, that through the promotion of truthful advertising, we will make it possible for consumers to make informed choices in the marketplace that will in turn encourage companies to develop more environmentally-sound products and packages).
Other differences, however, can be attributed to differences in the approach to advertising regulation. For example, some countries prefer general eco-labels which differ from the Green Guides' reliance on specific disclosures of information on which consumers may base their product choices. A market-based approach that allows consumers to identify the environmental attributes they prefer is quite different from one in which the government grants eco-labels to products it deems environmentally preferable. It is important to recognize and respect these differences in approach. At the same time, it also is important to recognize that as the global marketplace evolves, different or inconsistent standards for the use of environmental marketing claims can increase consumer confusion rather than foster informed decisionmaking.
Now that the economies of the world are becoming intertwined, we must be prepared to explore whether some market policies and laws affecting transnational transactions can be harmonized. The increasing globalization of markets and firms provides the opportunity for cooperation and for the coordination of market-oriented approaches to maximize access to the global marketplace and increase the welfare of consumers worldwide.
1. The views expressed today are my own and do not necessarily reflect the views of the Federal Trade Commission or any other Commissioner.
2. FTC News Release, August 6, 1973, "Detergent Manufacturers to Adopt Uniform Labeling for Phosphorous Content and Biodegradable Statements."
3. FTC v. Standard Oil Co. of California, 84 F.T.C. 1401 (1974), modified, 577 F.2d 653 (9th Cir. 1978).
4. See, e.g., RMED Int'l, Inc., 115 F.T.C. 572 (1992); Tech Spray, Inc., 115 F.T.C. 433 (1992); American Enviro Products, Inc., 115 F.T.C. 399 (1992); First Brands Corp., 115 F.T.C. 1 (1992); Jerome Russell Cosmetics, U.S.A., Inc., 114 F.T.C. 514 (1991); Zipatone, Inc., 114 F.T.C. 376 (July 9, 1991); The Vons Companies, Inc., 113 F.T.C. 779 (1990).
5. Benckiser Consumer Products, Inc., Docket No. C-3659 (May 22, 1996); Amoco Oil Company, Docket No. C-3655 (May 7, 1996); Safe Brands Corp., Docket No. C-3647 (March 26, 1996); Mattel, Inc., Docket No. C-3591 (June 23, 1995); Creative Aerosol Corp., Docket No. C-3548 (January 13, 1995); Chemopharm Laboratory Inc. d/b/a CP Industries, Docket No. C-3545 (December 6, 1994); BPI Environmental, Inc., Docket No. C-3535 (October 17, 1994); North American Plastics Corp., Docket No. C-3526 (September 7, 1994); Amoco Foam Products Co., Docket No. C-3514 (August 9, 1994); Keyes Fibre Co., Docket No. C-3512 (August 2, 1994); AJM Packaging Corp., Docket No. C-3508 (July 20, 1994); LePage's, Inc., Docket No. C-3506 (July 19, 1994); Oak Hill Industries Corp., Docket No. C-3507 (July 19, 1994); American's Favorite Chicken Co., Docket No. C-3504 (July 5, 1994); Orkin Exterminating Co., Inc., Docket No. C-3495 (May 25, 1994); Archer Daniels Midland Co., Docket No. C-3492 (April 12, 1994); Mr. Coffee, Inc., Docket No. C-3486 (March 25, 1994); Redmond Products, Inc., Docket No. C-3479 (February 10, 1994); White Castle Systems, Inc., Docket No. C-3477 (January 13, 1994); G.C. Thorsen, Inc., 116 F.T.C. 1179 (1993); Texwipe Co., 116 F.T.C. 1169 (1993); Nationwide Industries, Inc., 116 F.T.C. 853 (1993); DeMert & Dougherty, Inc., 116 F.T.C. 841 (1993); PerfectData Corp., 116 F.T.C. 769 (1993); Mobil Oil Corp., 116 F.T.C. 113 (1993).
6. Mr. Coffee, Inc., Docket No. C-3486 (March 29, 1994).
7. R.N. Mayer, B. Cude, J. Gray-Lee & D.L. Scammon, Trends in Environmental Marketing Claims since the FTC Guides: Technical Report, May 1, 1995.
8. See Safe Brands Corp., Docket No. C-3647 (March 26, 1996); Orkin Exterminating Co., Inc., Docket No. C-3495 (May 25, 1994); Mr. Coffee, Inc., Docket No. C-3486 (March 25, 1994).