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Daily Journal Newswire: "Wave of Litigation Over 'Greenwashing' Poised to Break"

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February 10, 2010 -- As more companies market their businesses to take advantage of growing consumer demand for earth-friendly products, legal battles are erupting over the veracity of such claims.

By Fiona Smith

Daily Journal Staff Writer 

As more companies market their businesses to take advantage of growing consumer demand for earth-friendly products, legal battles are erupting over the veracity of such claims.

Buzzwords such as "sustainable," "biodegradable" and "carbon neutral" are plastered on everything from garbage bags to sweatshirts and consumers are now faced with a dizzying array of eco-labels that purport to guarantee products have met rigorous environmental standards.

The growing response from consumers is to push back against the act of exaggerating or falsely marketing products, known as "greenwashing."

"I think you're going to see a potential tidal wave of this litigation - it's just a matter of time," said Neal Marder, chair of Winston & Strawn's litigation group in Los Angeles. "You have companies trying to put out environmental, 'green' products and marketing themselves as such, and that raises the issue of potentially misleading advertising ... On behalf of my clients, I'm very concerned and I'm telling them they need to be very careful about how they go about doing business."

Among the legal battles brewing against alleged greenwashing are two proposed class action suits in the Bay Area, against Fiji bottled water and Windex glass cleaner.

In the case of Windex, manufactured by Wisconsin-based S.C. Johnson & Son, plaintiff's attorney Michael Reese claims the "Greenlist" label placed on the product is misleading and deceptive because the green certification does not come from an independent third-party, but rather the company itself. Reese said his client paid a premium for the product, and he is seeking an injunction and damages claiming unfair and deceptive business practices.

"We feel these cases are important to protect consumers," said Reese, of Reese Richman in New York. "Deceptive green marketing dilutes the meaning of what an actual green product is."

"Greenlist" is a patent-protected process developed by S.C. Johnson that ranks its product ingredients in terms of their environmental benefits with the aim of using more benign ingredients whenever possible. S.C. Johnson, and its attorney Nickolas Kacprowski with Kirkland & Ellis in San Francisco, declined to comment for the story. In court filings, the company defended its "Greenlist" label, arguing the plaintiff failed to show an actual injury and did not use common sense in interpreting the label.

Reese, representing Santa Cruz resident Wayne Koh in the suit, claims the label misled Koh into thinking the product was non-toxic and certified green.

"Hypothetically, toxic sludge, if it's in the product, it's a Greenlist ingredient," Reese said.

Reese has filed two proposed class actions on the issue against S.C. Johnson, one in Wisconsin, where the company is based, and another in San Jose district court, Koh v. S.C. Johnson & Son Inc., 09-927. Both courts recently denied S.C. Johnson's motions to dismiss, and discovery is under way.

In a similar case, Reese is representing a San Francisco woman suing Fiji Water Co. and its holding company, Roll International Corp., on similar grounds. Reese alleges the green water drop label on Fiji bottled water tricks consumers into paying more for a product they think is environmentally superior, but in fact is not. San Francisco Superior Court Judge Richard Kramer dismissed the initial complaint for lack of stating a claim and is set to rule in March on whether to dismiss the amended complaint, Hill v. Roll International Corp., CGC-09-487547.

Los Angeles-based Fiji Water Co. and its attorney Neil Popovic, with Sheppard Mullin in San Francisco, declined to comment for the story. In briefs filed by Fiji, the company denied it is deceptively marketing Fiji water and stated it follows the Federal Trade Commission's green marketing guidelines.

Those guidelines, referred to as the Green Guides, set the parameters for how companies can use certain green terms in their marketing. While the guide lays some ground rules on the how to use words such as "biodegradable" and "recyclable," it does not give exact legal definitions, nor does it have the force of law. The FTC has the discretion to go after deceptive green marketers under the Federal Trade Commission Act. Under the act, a claim is deceptive if it strays from what a reasonable person would believe the claim to mean.

The commission has brought only 22 cases related to green marketing since the Green Guides first came out in 1993. There was a spate of enforcement actions in the early years, but none during the administration of George W. Bush. In 2009, the FTC brought seven cases, including one against Kmart Corp. and others over claims that paper products were biodegradable, as well as others against several clothing sellers over claims that clothes made of rayon were instead made of eco-friendly bamboo.

At the state level, California and others have passed green marketing statutes that incorporate the parameters laid out in the FTC's Green Guides. But with California's Environmental Advertising Claims Act rarely, if ever, invoked, and with few investigations at the federal level in recent years, it's creating perfect conditions for greenwashing to grow unchecked, said Brooks Beard, a partner at Morrison & Foerster in San Francisco.

The FTC is currently revising its Green Guides to address the proliferation of green marketing in recent years and will release new guidelines in the "not too distant future," said James Kohm, associate director of the enforcement division with the FTC.

Green marketing claims pose a real challenge because it's impossible to tell from looking at a greeting card, for example, whether it's really made from recycled paper, Kohm said.

"[Consumers] don't have a good way of finding out if that's true, and it's particularly important in those claims to have someone policing them," Kohm said.

In the new Green Guides, the FTC has signaled it may for the first time craft guidance over the marketing of carbon offsets and the use of words such as "sustainable" and "renewable."

The FTC has to be careful to balance the need to have a specific enough definition of such words to avoid loopholes, but make it general enough so it doesn't tie businesses' hands, said Sylvia Burks, a partner with Pillsbury Winthrop Shaw Pittman in Palo Alto.

Burks, who advises clients on this issue, including a startup that makes biodegradable dinnerware, said the issue of green claims will only grow more important if federal climate change legislation creates even more economic incentives and requirements to go green.

"I get frustrated as a lawyer, looking at packaging, when people are saying they're 'more renewable.' What does it mean and what's the science to back this up?" Burks said. "Everyone's just getting on the bandwagon."

Even the timber industry is trying to get a piece of the action, leading to a recent dispute over the integrity of two eco-labels, both of which are vying for market share to meet the growing demand for environmentally certified wood.

San Francisco and Canada-based nonprofit ForestEthics filed a complaint in September of 2009 with the FTC against eco-label Sustainable Forestry Initiative, alleging it is controlled by the timber industry and its process has lax standards that deceive consumers into thinking its certified timber is environmentally sound.

"We're talking about billions of dollars in discretionary consumer spending in green products," said Peter Goldman, director and managing attorney at the Washington Forest Law Center, who is representing ForestEthics in the complaint. "There's a whole green world coming where consumer and businesses purchasers of paper products are going to insist on green certification."

The FTC's Kohm declined to comment.

In reaction to the complaint, a group of timber companies and landowners - many of whom have received their certification through Sustainable Forestry Initiative - formed the Coalition for Fair Forest Certification. The coalition in turn filed a complaint with the FTC against Sustainable's rival, the Forest Stewardship Council, claiming that its certification process lacks uniform standards and, as a result, hurts domestic timber producers and amounts to deceptive marketing, according to the group's attorney, Thomas Collier, a partner with Steptoe & Johnson in Washington, D.C.

The coalition's complaint also accuses the U.S. Green Building Council, a nonprofit that certifies green buildings, of illegally discriminating against the Sustainable Forestry Initiative by only accepting FSC-certified wood into its popular LEED green building standard.

"My clients are very concerned over what they feel are discriminatory practices against timber grown in the U.S," Collier said. "Timber being grown in the U.S. is being pushed out of the market and being pushed out of the green market."