© Copyright 2014 by K&L Gates LLP. All rights reserved. Expert Insight on the New Federal Trade Commission’s Green Marketing Guidelines GoGreen Portland Conference – October 16, 2014 Presenter: Carol Pratt, Ph.D. JD One SW Columbia St., Suite 1900 Portland, OR

FTC’s Green Guides FTC first issued Green Guides in 1992 FTC revised Green Guides in 1996 and 1998 FTC proposed revisions in October 2010 Released final revised Green Guide in October 2012 klgates.com 1

FTC’s Revised Green Guides – 16 CFR Part 260 klgates.com 2 Sec Purpose, Scope, and Structure of the Guides Interpretation and Substantiation of Environmental Marketing Claims General Principles General Environmental Benefit Claims Carbon Offsets Certifications and Seals of Approval Compostable Claims Degradable Claims Free-Of Claims Non-Toxic Claims Ozone-Safe and Ozone- Friendly Claims Recyclable Claims Recycled Content Claims Refillable Claims Renewable Energy Claims Renewable Materials Claims Source Reduction Claims.

FTC’s Revised Green Guides – Highlights Substantiation A claim is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers’ decisions Before making a claim, must ensure that: “all reasonable interpretations” of claim are truthful and not misleading, and supported by a reasonable basis Often requires competent and reliable scientific evidence Must substantiate explicit and implicit claims klgates.com 3

FTC’s Revised Green Guides – Highlights Substantiation Tests must be done on actual product conditions (industry standards are not sufficient) “Recyclable” claim may be misleading if there are no recycling facilities in the area where the product is marketed “Degradable” claim may be misleading if it will not degrade within a reasonable time in the environment where it is customarily disposed in that area klgates.com 4

FTC’s Revised Green Guides – Highlights General claims of environmental benefit Product is generally good for the environment “Green” “Eco-friendly” or “environmentally friendly” “Eco-smart” “Sustainable” FTC warns against use of such claims They are vague, misunderstood by consumers and too broad to be substantiated Must add qualifiers – clearly and prominently displayed Net environmental benefit must be > de minimis klgates.com 5

FTC’s Revised Green Guides – Highlights Certifications & seals of approval Deceptive to imply authentication by an independent third party that, in fact, is not independent E.g., trade association controlled by entities for which it provides certifications Should not use unqualified certifications/seals of approval that do not specify the basis for the certification Unqualified certifications/seals = general environmental benefit claims Third party certification does not eliminate responsibility for substantiation klgates.com 6

FTC’s Revised Green Guides – Highlights Compostable claims Unqualified claims “100% compostable” Are deceptive unless have scientific evidence that: all materials in the product will decompose within about the same time as the materials with which the product is composted in an appropriate composting facility, or in a home compost pile or device klgates.com 7

FTC’s Revised Green Guides – Highlights Compostable claims Should qualify claims if product: cannot be composted safely or in a timely manner in a home compost pile or device, May not be compostable when disposed of in a landfill If facilities are not available to a substantial majority of consumers or communities where the item is sold klgates.com 8

FTC’s Revised Green Guides – Highlights Degradable claims Unqualified claims are deceptive unless have scientific evidence that: the entire item will completely break down and return to nature (i.e., decompose into elements found in nature) within one year of customary disposal Unqualified degradable claims for items that are customarily disposed of in landfills, incinerators, and recycling facilities are deceptive These locations do not present conditions in which complete decomposition will occur within one year klgates.com 9

FTC’s Revised Green Guides – Highlights “Free of” Claims Claim that a product, package, or service does not contain or use a substance is deceptive if: The product, package, or service contains or uses substances that pose the same or similar environmental risks as the substance that is not present; or The substance has not been associated with the product category. klgates.com 10

FTC’s Green Guides - Enforcement klgates.com 11 Investigate unfair or deceptive acts/practices File Complaint if FTC has“reason to believe” a violation of law has occurred Respondent can settle or defend If settle: Sign Consent Agreement - without admitting liability, consent to entry of final order and waive right to judicial review FTC posts proposed Consent Agreement on website for 30 days FTC issues final Decision and Order

FTC’s Green Guides - Enforcement FTC Complaint klgates.com 12 December 2013

FTC’s Green Guides - Enforcement FTC Complaint (MacNeill) Product – golf tees (“FLYTees”) Biodegradable claims “FLYTees are completely biodegradable!” “FLYTee is made from a specially formulated sustainable bio-plastic that enables the material to maintain durability and performance, while still breaking down into CO2 and water when it is done being used.” Certificate of Biodegradability klgates.com 13

FTC’s Green Guides - Enforcement FTC Complaint (MacNeill) klgates.com 14

FTC’s Green Guides - Enforcement FTC Complaint (MacNeill) klgates.com 15 Note FTC offers no proof or evidence to support allegations

FTC’s Green Guides - Enforcement FTC Complaint (MacNeill) klgates.com 16

FTC’s Green Guides - Enforcement FTC Decision and Order klgates.com 17 December 2013

FTC’s Green Guides - Enforcement FTC Decision and Order klgates.com 18 Criteria for “degradable” claim

FTC’s Green Guides - Enforcement FTC Decision and Order klgates.com 19 Competent and reliable scientific evidence before claim is made General environmental claim must be substantiated

FTC’s Green Guides - Enforcement FTC Decision and Order Maintain records For 5 years after last use of ad covered by Order of: All ads, labeling, packaging and promotional materials Substantiation data and unsupportive data Notify FTC 30 days before any change in the company that could affect compliance with Consent Order Provide to FTC within 60 days a plan for complying with Consent Order Consent Order terminates in 20 years klgates.com 20

FTC’s Green Guides – Take Home Messages FTC enforcement is painful Cannot rely on opportunity to cure (unlike FDA) Not a level playing field Cannot rely on actions of competitors as protection FTC does not target everyone in the product class Assess risk before launching ads Develop and follow SOPs Document, document, document Keep documents well organized, current and ready klgates.com 21

klgates.com 22 Questions? Carol A. Pratt, Ph.D., JD K&L Gates LLP Portland, OR