Three Practical Steps to Safeguard Your Company from Potential Greenwashing Lawsuits.
For nearly a decade, false advertising claims have dominated the ledes in major industry vertical publications. Some legal observers have pegged a nearly threefold increase in false advertising claims in the last few years compared to a decade ago. In New York alone, the epicenter of marketing and advertising, consumer class actions alleging deceptive marketing practices tripled between 2017 and 2020, while the New York state legislature seems primed to set these kinds of lawsuits on a fast track with A.7138 and S.795. Across the country, our recent review of the nationwide federal dockets showed hundreds of new false advertising lawsuits filed in just the last twelve months.
Greenwashing vs. Greenhushing
Companies making laudable efforts to support environmentally friendly business practices and/or sustainable products now face scrutiny for these same goals under the umbrella of false advertising. According to the Federal Trade Commission (FTC), “Greenwashing” at its core is an allegation that a company is making unsupported claims about how its product is environmentally friendly. “Greenhushing,” by contrast, is a newer movement among companies to keep their environmental and other ESG initiatives quiet to avoid the plaintiffs’ bar microscope. While this article focuses on greenwashing, it is important to note the unintended consequences of the movement to improve corporate responsibility and environmental sustainability. Companies taking a quieter approach to their environmental initiatives are not safe from the ongoing threat of false advertising litigation. In fact, choosing to avoid commenting publicly could hamstring your corporate counsel and public relations team’s ability to be informed as well as their readiness to respond quickly to adverse events, including lawsuits.
Some of the most common examples of greenwashing are statements that include the use of unqualified terms like eco-friendly, environmentally friendly, greener, recyclable, bio-degradable, and compostable. In recent years, individuals have brought a rash of lawsuits over these sorts of allegedly exaggerated environmental or sustainability claims related to their products. One of the world’s largest beverage companies recently fended off multiple cases brought by activist groups and consumers in the Northern District of California and the D.C. Superior Court over the current and future recyclability of its products.
But greenwashing is not limited just to statements. It also can occur by a company’s use of “green packaging.” A particularly instructive example comes from the “Green Guides,” first issued by the FTC in 1992 to help marketers avoid making environmental claims that mislead consumers:
A marketer’s advertisement features a picture of a laser printer in a bird’s nest balancing on a tree branch, surrounded by a dense forest. In green type, the marketer states, “Buy our printer. Make a change.” Although the advertisement does not expressly claim that the product has environmental benefits, the featured images, in combination with the text, likely convey that the product has far-reaching environmental benefits and may convey that the product has no negative environmental impact. Because it is highly unlikely that the marketer can substantiate these claims, this advertisement is deceptive.
These sorts of green packaging claims have also become a focus of the plaintiffs’ bar in recent years.
The government is bringing its own enforcement actions resulting in the companies paying millions of dollars in penalties. In the last ten years, the Federal Trade Commission has filed dozens of lawsuits aimed at environmental marketing claims. These enforcement actions have targeted everything from clothing and bedsheets touted as “eco-friendly” bamboo textiles, to hair care products, body washes, lotions, baby products, personal lubricants, and cleaning sprays sold as “100% organic” or “vegan.”
Don’t wait for a lawsuit to determine whether your marketing folks are making unsubstantiated claims.
Greenwashing litigation is not industry specific. Preventing unsubstantiated claims is the most effective means to prevent a meritorious lawsuit from being filed. Here are three practical steps and tools that can help corporate counsel keep your product development and marketing folks on track and your company out of hot water:
1. Beware comparative claims.
Historically, comparing your product to another of your prior products, a specific competitor’s product, or even the competition generally, was a very common advertising practice. These kinds of claims are now increasingly fraught with danger because companies often make them without the requisite evidence. If a competitor plaintiff can demonstrate that a claim is literally false, not simply misleading, the ramifications are significantly greater. Once literal falsity is proved under the Lanham Act, there is typically no requirement for additional evidence showing consumer deception. This means that a successful competitor plaintiff in a false advertising case can more easily obtain injunctive relief to stop the offending advertising, receive actual damages, and treble damages in exceptional cases as well as attorneys’ fees.
2. Keep abreast of product development and marketing documents.
Whether it is through comparative or performance testing before a product hits the marketplace or other measures, add one more layer of compliance review to assess greenwashing vulnerabilities. Rolling out this kind of safeguard not only makes you a better steward of your company but also gives you the kind of insider knowledge that sets you apart from your corporate counsel counterparts and competitors. It is tremendously important to understand what your product development and marketing folks are saying before any environmental claims are made about a product in an advertisement. Confirming that there is evidence, or a lack of evidence, to support a statement guides your required revisions to an advertisement to avoid enforcement actions from the FTC or litigation from a competitor. Being proactive goes a long way in minimizing the extent of any liability for prior conduct.
3. Don’t reinvent the wheel; review, understand, and follow FTC guidance.
The legal landscape is always changing, and this is particularly true in the arena of false advertising. While no single source can provide an exhaustive list of “dos and don’ts”, the FTC Green Guides provide meaningful examples of environmental marketing claims that are unfair or deceptive. While a company may never face an action from the FTC, these Green Guides are often used in private litigation, whether the claim is brought under state or federal statutes.
At the end of last year, the FTC announced that it was seeking public comment on potential updates and changes to the Green Guides. In its press release, the FTC expressly sought comments on whether it should change the current threshold that guides marketers on when they can make unqualified recyclable claims, as well as the need for additional guidance regarding claims such as “compostable,” “degradable,” ozone-friendly,” “organic,” and “sustainable, as well as those regarding energy use and energy efficiency. By April of this year, the FTC received nearly 3,500 comments from individuals, associations, and companies, including on whether new mandatory rules should exist at the federal level.
As more companies offer green products, the uptick in false advertising lawsuits will continue through 2024 and beyond. The sustainability space is rife with feel-good buzzwords for a good reason—we all want to do our part. Making choices based on assertions from favorite consumer brands is a powerful purchase driver. Knowing the risks will help your company avoid false impressions and guide better marketing messages while supporting and driving positive choices for our environment.