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Updates to the Federal Trade Commission's "Green Guides" May Impact Building Industry

By Vincent J. Mangini

Under the Federal Trade Commission Act, the Federal Trade Commission has broad regulatory authority over the advertising of goods and services.  This includes, among other things, building products.  Persons and corporate entities, who engage in any unfair or deceptive acts or practices in their marketing activities are subject to disciplinary action, which may include various forms of injunctive relief or civil monetary penalties.  Therefore, the building industry must use caution when advertising.  This is especially the case when a marketer claims that a product or material has particular environmental attributes or will provide special benefits to consumers (such as lowering energy costs).  Fortunately, the FTC has formulated guidelines for some types of environmental marketing claims.
 

In 1992, the FTC first issued its Guide for the Use of Environmental Marketing Claims, also known as the 'Green Guides,' to assist marketers of products and services having environmental attributes.  Although compliance with the Green Guides is voluntary, marketing activity that is inconsistent with the rules outlined therein may provide a basis for corrective action by the FTC.
 

According to its statement of purpose, the Green Guides address the application of the FTC Act to environmental advertising and marketing practices, establishing general principles that apply to all sales promotional activities and providing direction on particular environmental marketing claims.  Some 'general principles' under the Green Guides include the use of clear, conspicuous and understandable qualifications and disclosures in advertising, the avoidance of overstatements relating to environmental attributes, especially ones created by implication, and substantiation.  Direction on particular environmental marketing claims in the Green Guides relates to the use of terms connoting general environmental benefits, such as 'eco-friendly,' and representations on specific attributes, including degradability, compostability, recyclability, recycled content, source reduction, refillability and ozone safety and friendliness. 
 

Presently, the Green Guides provide no specific instructions for advertising building products.  However, this may soon change.  During the course of 2008, the FTC held a series of workshops to obtain feedback from the public on ways to improve the Green Guides to address environmental marketing claims not covered by the Green Guides.  One of these workshops held on July 15, 2008, specifically treated the topic of green building.
 

Overarching themes at this workshop included, among others, (1) overstating performance, (2) defining buzz words and (3) incorporating life cycle analysis into environmental marketing claims.  An example of an overstatement might be a builder's assertion that an energy efficient home will guarantee specific energy savings when the truth of such claim is dependent on factors outside of the builder's control, such as fluctuating utility costs and homeowner use patterns.  Similarly, the words 'sustainable,' 'natural' or 'low-emitting' may also deceive a consumer if they are not defined.  Certainly, the word 'natural,' for instance, can be misleading if the consumers being targeted interpret all things 'natural' to be good, when – in reality – this is not always the case.  Finally, life cycle analysis is essential to understanding the true impact of a building product and its benefit to the environment.
 

For example, according to Rick Cantrell, who testified on behalf of Sustainable Forestry Initiative at the July 15th FTC workshop, significantly less energy is required to manufacture exterior walls with wood than concrete or steel.  However, in order to more fully evaluate the environmental friendliness of wood, it might also be necessary to look at the cost and energy factors at each stage of the product's 'life' beginning with the extraction of raw materials and continuing through the manufacturing process, installation or delivery, actual use and maintenance and finally ending with retirement and disposal.
 

The Green Guides currently do not address the use of life cycle analyses in environmental marketing claims due to the insufficiency of life cycle data on products.  The participants at the July 15th FTC workshop spoke about this continuing reality, as well as the lack of consensus on scientific methodologies for life cycle analyses.
 

In short, it is unclear what changes the FTC will make to the Green Guides relating to the marketing of building products and materials or when the updates will be issued and released to the public.  Perhaps, the final product will make the exchange of these goods a little bit easier.  In any event, green builders and producers of energy-efficient products would be well advised to seek legal counsel before embarking on their advertising campaigns.

Full post as published by New Jersey Law Blog on April 22, 2010 (boomark / email).