What Cos. Can Expect From FTC's Green Guides Updates

In this article for Law360, partners Bruce Ratain, Olivia Adendorff, Ross Weisman and Abbey Raish provide background on the Federal Trade Commission's Green Guides, an overview of their adoption into state law and a discussion of recent federal district court decisions applying the Green Guides. 

Since 1992, the Federal Trade Commission's Green Guides have set forth standards for the use of certain environmental advertising terms and claims, in an effort to prevent false advertising, and specifically "greenwashing" — defined in the advertising context as misleading consumers regarding the environmental benefits or sustainability benefits of a product or service. 

Importantly, not only have the Green Guides influenced FTC complaints and enforcement actions,[1] but several federal district courts have viewed the Green Guides as a standard for evaluating false advertising more broadly. Some states have gone so far as to incorporate the Green Guides into state false advertising law. 

This article provides background on the Green Guides, an overview of their adoption into state law, and a discussion of recent federal district court decisions applying the Green Guides. 

Ultimately, the broad application of the Green Guides to various causes of action in different forums to date, as well as a potential expansion of the Green Guides scope in a forthcoming revision, suggest evaluating both traditional marketing claims and regulatory disclosures related to climate and other environmental matters — which are expected to increase if proposed U.S. Securities and Exchange Commission rules on climate and environmental, social and governance disclosures are finalized — against the Green Guides' recommendations, in order to assess and mitigate potential greenwashing risk. 

Background on the Green Guides

The FTC first released the Green Guides in 1992 to provide guidance on the marketing of environmental claims. Since then, they have been revised three times — in 1996, 1998 and 2012. 

The Green Guides detail what the FTC may consider deceptive green marketing practices under the FTC Act. While the guides themselves are not agency regulation, as discussed below, some states have codified them into state law. 

The Green Guides present both general principles pertaining to environmental marketing claims, and discussion of specific defined terms that may be used for marketing purposes. The terms defined to date include "carbon offsets," "certifications" and "seals of approval," "compostable," "degradable," "free-of" claims, "non-toxic" claims, "ozone-safe" and "ozone-friendly" claims, "recyclable," "recycled content," "renewable energy" claims and "renewable materials" claims.

The FTC announced its intent to update the Green Guides in 2022, 10 years after the last revision.[2] On Dec. 14, 2022, the FTC voted to proceed with a public comment period on potential updates to the guides.[3]

Among other issues, the FTC seeks comment on whether it should add additional defined terms, like "sustainable," to the Green Guides; whether additional or revised guidance should be provided on issues such as carbon offsets and climate change; and whether the FTC should consider a rulemaking under the FTC Act related to deceptive or unfair environmental claims.[4]

With the forthcoming updated Green Guides, there has been focus on recent FTC enforcement cases based on these standards. For example, in U.S. v. Kohl's Inc. and U.S. v. Walmart Inc., the FTC brought actions in 2022 in the U.S. District Court for the District of Columbia against Kohl's and Walmart, based on the two companies' advertisement of textile products made from rayon derived from bamboo.[5]

While the companies marketed the products as made using "eco-friendly" bamboo, the FTC found that, "in reality converting bamboo into rayon requires the use of toxic chemicals and results in hazardous pollutants."[6] The companies entered into consent orders with the FTC requiring them to stop making eco-friendly claims with respect to the products, and pay penalties of $2.5 and $3 million, respectively.[7]

Adoption of the Green Guides Into State Law

As noted above, several states have expressly codified the Green Guides into state law. California, for example, codified the guides in full in 2022.[8] It is now unlawful under California law "for a person to make an untruthful, deceptive, or misleading environmental marketing claim, whether explicit or implied," and "environmental marketing claim" is defined to include any claim in the Green Guides.[9] 

Maine, Rhode Island and Michigan are also among the states that have incorporated the Green Guides into state law, in varying degrees. Maine's law on advertising and marketing claims states that anyone who advertises a product in violation of the Green Guides violates Maine's Unfair Trade Practices Act.[10]

Rhode Island likewise has adopted the Green Guides as the uniform standards for environmental marketing claims in the state.[11] Michigan has adopted the Green Guides' standards for the terms "recycled, recyclable, degradable, [and] of a certain recycled content."[12]

Recent District Court Cases Applying the Green Guides

Mattero v. Costco Wholesale Corp., decided by the U.S. District Court for the Northern District of California in 2018, presents a recent example of the application of the Green Guides in California.[13] In that case, the plaintiff brought a class action claiming that Costco's Kirkland Signature Premium Laundry Detergent is falsely advertised as "environmentally responsible" and having a "biodegradable formula."[14]

The plaintiff alleged that since use of these terms would violate the Green Guides, it should be per se unlawful under California law.[15] The court denied Costco's motion to dismiss, finding the terms' meaning to a reasonable consumer could not be decided on the motion.[16] The parties subsequently settled the case.

Even states that have not codified the Green Guides still see their application. In Rosenberg v. S.C. Johnson & Son Inc., decided by the U.S. District Court for the Eastern District of Wisconsin in 2021, the plaintiff filed a class action against S.C. Johnson alleging it violated Wisconsin's Deceptive Trade Practices Act by marketing Windex products as "non-toxic."[17]

The court recognized the Green Guides' discussion of non-toxic claims as a relevant standard, while for other reasons granting S.C. Johnson's motion to dismiss without prejudice for a lack of particularity.[18]

In Downing v. Keurig Green Mountain Inc., decided by the U.S. District Court for the District of Massachusetts in 2021, the plaintiff challenged Keurig's advertising of its coffee pods as "recyclable."[19] The plaintiff relied on the Green Guides to show the deceptive nature of the marketing, and the court adopted the guides' standard for recyclability in finding that the plaintiff plausibly alleged that "recyclable" was a deceptive statement.[20] 

Courts have also applied the Green Guides where the term at issue is not defined in them. In an ongoing case in the U.S. District Court for the Northern District of California filed in 2021, White v. Kroger Co., the plaintiff brought a class action based on Kroger's sale of sunscreen that is labelled as "reef-friendly."[21]

Although "reef friendly" is not a term addressed in the Green Guides, the court recognized that the California statute adopted the guides, and that the FTC's guidelines "expressly extend to 'ecologically friendly,' 'earth friendly,' 'environmentally friendly,' ... or any other like term," which the court relied on in holding the claim could not be dismissed as mere puffery.[22]

Similarly, in Rawson v. Aldi Inc., filed in the U.S. District Court for the Northern District of Illinois in 2021, the plaintiff alleged that Aldi falsely advertises its salmon products as "sustainable," referring to their sourcing being sustainable.[23] Although "sustainable" is not expressly defined in the Green Guides, the court nevertheless referenced the guides' admonition related to "unqualified general environmental benefit claims" for guidance in evaluating the claim.

Specifically, the court noted the FTC's statement in the Green Guides that while it has not yet defined the term sustainable, "marketers still are responsible for substantiating consumers' reasonable understanding of these claims."[24] The court viewed this statement as support for the conclusion that the claims at issue were not mere puffery and required substantiation.[25] 

Of course, particularly in states where the Green Guides have not been adopted into state law, courts may choose not to adopt the guides' recommendations. For example, in Curtis v. 7-Eleven Inc., filed in the Northern District of Illinois in 2021, the plaintiff alleged that 7-Eleven's advertising of certain products as "recyclable" was deceptive, due to the unavailability of recycling facilities.[26]

The plaintiff relied on the Green Guides' recommendation that such claims incorporate a disclaimer if the product is not recyclable by a "substantial majority of consumers or communities where the item is sold."[27] While the court acknowledged the guides' recommendation, it declined to apply it, concluding that convenience store customers would not likely be considering the FTC's policy statements in their purchasing decisions.[28]

The court thus granted the defendant's motion to dismiss with respect to the plaintiff's allegations regarding recycling availability — i.e., the allegations relying on the Green Guides. 

Looking Forward

As illustrated by the discussion above, although these district court cases remain fact-specific determinations, and while the Green Guides are not followed in every case, the guides have seen broad application, invoked in numerous district court cases beyond enforcement actions, in both states that have codified the guides into state law and states that have not, and to marketing terms beyond those expressly addressed in the guides.

Anticipated developments from the FTC and the SEC could increase the utility of the Green Guides to minimizing legal risk for companies, with expansion in the guides' scope at the same time that companies face increased disclosure obligations. As an initial note, rising consumer interest in sustainability has already driven an ongoing rise in related marketing claims by consumer and investment companies in recent years.[29]

The updated Green Guides could add terms like "sustainable," as well as terms directly addressing carbon emission disclosures. Were the FTC to engage in a rulemaking surrounding deceptive environmental marketing based upon the guides, this could further increase their application.

Meanwhile, the SEC is considering public comments on (1) a proposed rule that would require additional ESG-related disclosures for registered investment advisors and funds,[30] and (2) a proposed rule on climate-related disclosures for public companies.[31]

The proposed SEC rules, if enacted, would likely increase climate and sustainability-related disclosures by companies subject to the rules, as well as by companies who, though not directly subject to the rules, could face disclosure pressure from investors, suppliers, customers and other stakeholders who are subject to the rules. This increased disclosure could prompt additional greenwashing scrutiny over the veracity of these claims.

In view of the Green Guides' broad application in evaluating environmental claims, companies can consider using them as a tool for reviewing not only traditional marketing, but also regulatory disclosures related to climate, sustainability and other environmental topics, in order to reduce any risk that such marketing and disclosures may be considered misleading.

Integration of advertising and FTC expertise into review of SEC and sustainability disclosures presents an important emerging strategy for avoiding potential liability.

Bruce Ratain, Olivia Adendorff and Ross Weisman are partners at Kirkland & Ellis LLP.

Kirkland & Ellis partner Abbey Raish and summer associate Madeline Thompson contributed to this article.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] As one recent example, in March of 2021, three environmental groups filed a complaint directly with the FTC, claiming Chevron violated the Green Guides with its climate related advertising; see https://www.reuters.com/article/us-usa-fossilfuel-climate-change-adverti-idUSKCN2DZ00B.

[2] See https://www.federalregister.gov/documents/2021/07/02/2021-13724/regulatory-review-schedule.

[3] See https://www.ftc.gov/news-events/news/press-releases/2022/12/ftc-seeks-public-comment-potential-updates-its-green-guides-use-environmental-marketing-claims?utm_source=govdelivery. The notice will be published in mid-January 2023, and open for 60 days.

[4] See https://www.ftc.gov/system/files/ftc_gov/pdf/GreenGuides-FRN-11-5-22.pdf.

[5] See https://www.ftc.gov/legal-library/browse/cases-proceedings/2023171-kohls-inc-us-v.

[6] Id.

[7] Id.

[8] The Green Guides are codified into law under California Business and Professions Code Section 17580.5 as of Jan. 1, 2022. 

[9] California Business and Professions Code Section 17580.5.

[10] Maine Revised Statutes Title 28 Section 2142.

[11] Rhode Island General Laws Title 6, Section 6-13.3-1.

[12] Michigan Compiled Laws Section 445.903.

[13] Mattero v. Wholesale Corp. , 336 F.Supp.3d 1109 (N.D. Cal. 2018).

[14] Id. at 1113.

[15] Id.

[16] Id. at 1118.

[17] Rosenberg v. S.C. Johnson & Son Inc. , No. 20-CV-869-JPS, 2021 WL 3291687 at *1 (E.D. Wis. Aug.2, 2021).

[18] Id. at *5. As of November 2022, this case remains pending. A similar case was filed against S.C. Johnson in the Southern District of New York, alleging the same misleading marketing of Windex products. Notably, the court in that case rejected S.C. Johnson's argument that plaintiff's interpretation of "non-toxic" was inappropriate in part for not comporting with the Green Guides' definition, granting S.C. Johnson's motion to dismiss on other grounds. Rivera v. S.C. Johnson & Son Inc. , No. 20-CV-3588 (RA), 2021 WL 4392300, at *4 (S.D.N.Y. Sept. 24, 2021). That case also remained pending as of November 2022.

[19] Downing v. Keurig Green Mountain Inc. , No. 1:20-CV-11673-IT, 2021 WL 2403811 (D. Mass. June 11, 2021). As of November 2022, this case was stayed pending preliminary approval of settlement in a related California case.

[20] Id. at *3, 6.

[21] White v. Kroger Co ., No. 21-CV-08004-RS, 2022 WL 888657 (N.D. Cal. March 25, 2022). As of November 2022, this case remained pending.

[22] Id. at *2.

[23] Rawson v. Aldi Inc.,  No. 21-CV-2811, 2022 WL 1556395 (N.D. Ill. May 17, 2022). This case remained pending as of November 2022.

[24] Id. at *3.

[25] Id.

[26] Curtis v. 7-Eleven Inc. , No. 21-CV-6079, 2022 WL 4182384, at *1 (N.D. Ill. Sept. 13, 2022).

[27] Id. at *16.

[28] Id. at *17. 

[29] See, e.g., Dee Pridgen and Richard M. Alderman, Consumer Protection and the Law (Nov. 2021) § 11:43 ("[the] demand for 'green products' and the concurrent tidal wave of marketing in response, has continued through the first decades of the 21st century, with even more urgency due to concerns about the global effects of climate change"); https://www.ibm.com/downloads/cas/EXK4XKX8#:~:text=Nearly%20six%20in%2010%20consumers,sustainability%20is%20important%20for%20them at 7 (discussing rise in sustainable and environmental related investment, and shift in consumer preferences toward products perceived as more sustainable); see also, e.g., https://www.morganstanley.com/ideas/sustainability-investing-institutional-asset-owners (discussing rise in sustainable investing).

[30] See https://www.sec.gov/news/press-release/2022-92. For a discussion of the proposed rule, see https://www.kirkland.com/publications/kirkland-alert/2022/03/sec-proposes-new-climate-disclosure-requirements.

[31] See https://www.sec.gov/news/press-release/2022-92. For a discussion of the proposed rule, see https://www.kirkland.com/publications/kirkland-aim/2022/06/enhanced-disclosure-on-esg-investment-practices.