The complaint comes on the heels of the announcement in May of this year that Canada’s Competition Bureau opened a formal investigation into the company’s environmental marketing claims following a complaint by stand.earth. If the Bureau finds that Lululemon has made materially false and misleading representations to the public, the company could be fined a penalty of up to 3% of their gross global profits for each year the company ran the ads.

The complaint filed in Florida runs over 50 pages and covers a lot of ground, but here are some highlights.

In 2020, Lululemon announced its “Be Planet” campaign, which included five goals to reduce the company’s environmental impact over the next five-to-ten years. The plaintiffs allege that the campaign is misleading because Lululemon is causing more harm than good. For example, the complaint alleges that the company’s greenhouse gas emissions have more than doubled since the start of the Be Planet campaign and that the company relies significantly more on air freight than its competitors.

In addition to challenging claims about Lululemon’s future goals, the complaint also focuses on claims that the company has made about its present actions and achievements. For example, in its 2020 Impact Agenda, Lululemon stated: “Our products and actions avoid environmental harm and contribute to restoring a healthy planet.” Despite these types of claims, the plaintiffs outline a number of actions – like those noted above – that allegedly cause environmental harm.

The plaintiffs allege that even if some of the things that Lululemon is doing – such as coming up with an end-of-use solution for all of its products by 2030 and sourcing only renewable electricity for its owned and operated facilities – will benefit the environment, those benefits are minor in comparison to the greater harm the company is causing. Lululemon’s marketing, therefore, leaves consumers with a misleading impression about the company’s overall impact.

The complaint also takes issue with Lululemon’s use of synthetic materials in its fabrics. For example, it alleges that polyester and nylon represent over 60% of the company’s material mix, and they release significant amounts of microplastics. Moreover, although “Lululemon claims that it is converting to recycled polyester and nylon in its products, experts do not consider these products to be a truly sustainable alternative as they are energy intensive to manufacture, do not biodegrade, and still release microplastics.”

The complaint was just filed and we only have one side of the story, so it’s too early to predict how this case will turn out. What we can predict, though, is that we’re likely to continue seeing these types of lawsuits and allegations. Stay tuned for updates. In the meantime, if your company makes green claims in marketing copy, in a sustainability report, or in some other public-facing communication it’s worth taking a look at how your claims and your company’s efforts compare against those alleged in this complaint.

The set of principles recognize the role that carbon credits have in promoting the country’s climate goals and unlocking economic potential; however, the principles acknowledge that “widespread confidence in the integrity of credited emissions reductions and removals is critical for VCMs to reach their potential.”

We highlight some of the key takeaways below.

• The activities that generate the credits and the credits themselves should be certified to a robust standard that accounts for the following considerations:
  • The activity should be additional. The principles define additionality as an activity that would not have occurred in the absence of the incentives of the crediting mechanism and is not required by law or regulation. This definition accounts for “incentives” as well as legal requirements, so is broader than the FTC’s definition in the current Green Guides, which only accounts for legal requirements.
  • The credit should be unique in that it corresponds to only one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere and is not double-counted.
  • The claimed emissions reductions or removals are based on credible methodologies and leakage does not occur, which means the carbon dioxide is not just displaced outside the project or program boundary.
  • The activity design should be validated and the results should be verified by a qualified, accredited, independent third party.
  • The emissions removed or reduced should be permanent.
  • Baselines for emissions reductions and removals should be based on rigorous methodologies and avoid over-crediting.
• Corporate buyers that use credits should use VCMs to complement measurable within-value-chain emissions reductions as part of their net zero strategies. This includes working with suppliers on efforts to pursue decarbonization activities.
• The principles recommend that credit users disclose when credits are purchased, cancelled, or retired on an annual basis, a recommendation that the principles acknowledge may be more than what is required by applicable law.
• The principles note that standards for public claims based on carbon credits are constantly evolving, but that standards-setting organizations should allow companies to count reductions and removals based on carbon credits toward their Scope 3 emissions where it would be unreasonable to expect a company to fully abate those emissions within a given timeframe.

Some of these principles are addressed in the FTC’s current Green Guides, such as core integrity considerations around additionality and double counting, but overall the principles are far more robust than the FTC’s guidance on this topic. We do not expect the FTC will issue guidance in the revised Green Guides that would be contradictory to these principles, so marketers should closely review the principles and ensure that they are adhering to them when making claims based on carbon credits.

Although HoldOn was able to rely on its BPI and TÜV certifications to substantiate a claim that the bags break down “in weeks” in home and industrial compost settings, some of the company’s claims didn’t specifically mention composting. Both the challenger and NAD worried that consumers might interpret these claims to suggest that the bag will also break down quickly in other environments, such as landfills, which is not the case.

HoldOn volunteered to modify some of these claims so that they specifically referred to compost environments, but FAQs on the website told users that the HoldOn bags can be thrown out like any other trash bag and are designed to reduce plastic waste, no matter how you dispose of them. NAD reminded HoldOn that the evidence only supports this claim when the bags are composted, so NAD told HoldOn to either discontinue the FAQ claims or qualify them. If you think you can hide claims in an FAQ section, think again. HoldOn went even further in some ads by also touting how the bag “breaks down cleanly without producing microplastics or toxic residue.” NAD said the evidence did not support this.

The challenger argued that HoldOn’s claims that the bags are “a sustainable replacement for traditional plastic bags” and similar phrases could convey broad messages of environmental benefits that are not limited to the bag’s disposal in a composting environment. NAD agreed, noting that HoldOn had not produced evidence that its products provided environmentally preferable benefits outside of that disposal method. Accordingly, NAD recommended that the advertiser either stop making the claim or better qualify it.

The challenger also complained that some of HoldOn’s ads expressly stated or otherwise suggested its bags are not made from plastic. For example, an Instagram post included the following caption: “Say NO to plastic trash bags and YES to HoldOn Bags!” NAD agreed that this conveyed the message the company’s bags are not plastic. Although the bags were made from biobased plastic (renewable biomass sources) and not conventional plastic (petroleum-based polymers), they are still plastic and so NAD recommended that the company stop making these claims.

If your company makes trash bags or claims about how your products break down in the environment, this decision is worth a closer read. For others, this case still serves as a good reminder green claims are being scrutinized closely by competitors (as well as regulators and plaintiffs’ attorneys). It’s particularly important to ensure that you narrowly qualify any claims you make about environmental benefits to ones that you can substantiate.

The fisheries from which ConAgra purchases its fish are certified by the Marine Stewardship Council (MSC) as meeting certain sustainability standards. Plaintiffs challenged the claims, “Certified Sustainable,” “Certified Sustainably Sourced,” “We have full traceability of all our fish,” and “Good for the Environment.”

The Court first looked to the claims on the front of the package that the fish are “Certified Sustainable Seafood MSC” and “Certified Sustainably Sourced.” Plaintiffs argued that because ConAgra allegedly sourced the fish from fisheries using unsustainable and environmentally detrimental fishing practices, like the pelagic trawl, these claims are misleading. The Court said that whatever gripes the Plaintiff has with MSC’s certification standards, the fact remains that ConAgra was certified by MSC and there is nothing false about advertising it as such. Put differently, “ConAgra is not advertising that their products are sustainable, but that their products are certified as sustainable by MSC.”

The Court also considered the claim that ConAgra has full traceability of all its fish. The Court was not persuaded by the Plaintiffs’ assertion that traceability and unsustainable fishing practices are so connected such that unsustainable fishing practices would preclude ConAgra’s ability to trace the path of the pollock from the time of capture to the frozen food packaging. The Court concluded that Plaintiffs did not allege sufficient facts to suggest that ConAgra cannot identify the origin of the pollock or track the history of the sourcing process.

The Court was less persuaded about the veracity of the “Good for the Environment” claim. ConAgra defended its claim by saying the statement is aspirational, non-actionable puffery. And indeed, the Court noted that if it were the only statement on the package, a reasonable consumer may believe it to be. But, as advertisers are well-aware, “context matters.”

Because the package displays the MSC certification indicating that the fish is “Certifiably Sustainably Sourced,” a reasonable consumer reading that the product is “Good for the Environment,” can infer that the fish is sourced in a manner that is not harmful to the environment. Moreover, the claim contains no aspirational language like “promotes,” “aims,” “or supports,” so a reasonable consumer would not take the claim as a mere goal to be sustainable. The Judge said that “because the question of whether a fish is sourced in a manner that benefits, or at least does not harm, the environment can be evaluated and measured,” and because the complaint alleged that the products are not in fact sustainable, the claim would be allowed to proceed.

ESG challenges are coming from all angles and consumer plaintiffs are eager to dispel inaccuracies about sustainable practices, even those that rely on technical fishing practices occurring outside of the U.S.. Marketers should carefully craft ESG claims to ensure they are not overstating the benefits. And, when reputable third party certifications may be available, marketers should take advantage of them as they help provide credibility and validation, which ultimately may insulate some of the more technical green claims from legal scrutiny.

Amyris made the following claim: “Our 100% sugarcane derived squalane is ethically and sustainably sourced.” To support the claim, the company relied on a certification from Bonscuro, a leading global sustainability platform that sets standards for sugarcane. The certification is based on an assessment of each step in the sugarcane’s chain of custody in the production process. Based on that certification, NAD determined that the claim was substantiated.

Next, NAD examined the support for the advertiser’s claim that “all of our ingredients are also ethically and sustainably sourced.” To support this claim, Amyris relied on its Supplier Code of Conduct which requires all of its suppliers to assure that, among other things, they engage in ethical practices (including labor practices) and that they source their ingredients in a way that minimizes deleterious impacts to the environment.

NAD noted that it has previously found that supplier codes of conduct can support aspirational claims related to sustainability efforts. For example, in this case, the advertiser referred to its Supplier Code of Conduct as evidence that reducing its carbon emissions is a focus of its sustainability efforts and that those efforts are growing and evolving, an aspirational claim. NAD thought the evidence was enough to support the advertiser’s claims.

In this case, though, NAD questioned whether the Supplier Code of Conduct could support “a broad, unqualified claim that all of the ingredients in the product are ethically and sustainably sourced.” It determined that while the Code might demonstrate a “commitment to ensuring that ingredients are ethically and sustainably sourced, it does not, standing alone, demonstrate that all ingredients are, in fact, ethically and sustainable sourced.” Therefore, NAD recommended that the company either stop or modify the claim “to better fit the evidence in the record.”

This case suggests that certifications from reputable organizations that engage in thorough assessments can be helpful in substantiating sustainability claims. Although supplier codes of conduct can also be helpful to substantiating certain sustainability claims, those claims will need to be worded carefully to avoid conveying a broader claim than the advertiser can reasonably support.

NAD notes that context in which “clean” claims are made dictates their meaning and, therefore, that advertisers should explain exactly what they mean. In a nod to challenges outside of the self-regulatory context, NAD warns that “this is especially important in light of numerous class action lawsuits filed against beauty companies for touting their ‘clean’ products” which contain ingredients that some may not consider clean. (Click here for an example of one of those suits.)

In this case, Amyris Clean Beauty qualified its “clean ingredients and clean formulas” claim by adding the following explanation in the same sentence: “we ban over 2,000 ingredients that are known to be toxic to you and the environment.” In response to NAD’s inquiry, Amyris pointed to lists of substances that various regulatory bodies, countries, and trade associations have deemed to be toxic to human health or the environment and explained that the company doesn’t use those substances in its products.

Based on NAD’s decision, it seems like defining what “clean” means by clearly explaining what ingredients aren’t included in a product may be a good strategy. However, that’s only part of the strategy. Leaning on the FTC’s Green Guides, NAD notes that “a truthful claim that a product, package, or service is free of, or does not contain or use, a substance may nevertheless be deceptive if the substance has not been associated with the product category.”

In this case, NAD found that it wasn’t clear whether the over 2,000 ingredients Amyris doesn’t use are typically associated with cosmetics. Thus, NAD recommended that the company modify the claim “to reflect the ingredients banned that are typically used in cosmetics products.” Presumably, that means that Amyris can continue to make the “clean ingredients and clean formulas” as long as it updates the disclosure, as recommended.

This may be a good model for companies who are faced with NAD challenges, but we’ll have to wait and see whether plaintiffs’ attorneys and courts will feel the same way. In the meantime, tomorrow we’ll look at lessons that this decision may hold for sustainability claims.

Although JBS made some changes after the NARB decision, those changes weren’t enough for the trade association, who filed a compliance inquiry before the NARB. The changes also weren’t enough for the NARB, who recommended that JBS make additional modifications to the claims. And the changes weren’t enough for the NY Attorney General who, last week, filed a lawsuit alleging that JBS continues to mislead consumers, despite the NAD and NARB decisions.

The AG’s complaint alleges not only that JBS isn’t currently implementing a plan to achieve its goal, but – taking a stronger stance than both NAD and NARB – also that the goal simply isn’t feasible. For example, in 2021, JBS reported total global greenhouse gas emissions of over 71 million tons, not including Scope 3 emissions. The complaint alleges that “there are no proven agricultural practices to reduce its greenhouse gas emissions to net zero at the JBS Group’s current scale.”

With this lawsuit, the AG is asking the court to require JBS to cease its “Net Zero by 2040” campaign, conduct a third-party audit of its compliance with New York’s consumer protection statutes, and pay disgorgement of all ill-gotten gains earned by misleading the public about their business practices as well as penalties of at least $5,000 per violation. The total number of violations will be determined at trial.

It’s too early to predict how this case will turn out, but there are a few key points worth noting for now. First, it’s clear that green claims – including aspirational claims about what companies plan to achieve in the future – are likely to continue to face challenges from all angles. Regulators, consumers, competitors, and industry groups are all watching. Second, companies should think twice about ignoring NAD recommendations. The consequences of doing that can prove to be very costly.

Other FDA-authorized categories, such as non-stick pots and pans, rubber O-rings and gaskets used in food processing equipment, and manufacturing aids added to other food contact polymers remain in place at the federal level. FDA determined that PFAS in these products would not be available to migrate at more than negligible amounts under the intended conditions of use and would, therefore, not pose a safety risk.

The recent phase-out of PFAS-containing grease-proofing food packaging was a result of a series of FDA determinations and industry action. In the early 2000s, FDA first raised safety concerns with certain PFAS substances commonly referred to as ​“C8 compounds” or ​“long-chain” compounds. This category was phased out of the U.S. market between 2011 and 2016 voluntarily and through FDA authorization revocations. In their stead, industry began to use ​“short-chain” PFAS replacements that had been authorized for use as grease-proofing agents.

In 2020, FDA found that a short-chain PFAS – 6:2 fluorotelomer alcohol (“6:2 FTOH”) – also may pose a safety risk. FDA found that under certain conditions, the smaller PFAS ​“sidechain” can detach from the polymerized molecule. As a result, there is potential for PFAS to migrate to food at levels that may result in a potential safety concern. FDA sought and obtained market-phase-out commitment letters from each of the manufacturers of PFAS grease-proofing agents that contain this substance. And in 2023, FDA received confirmation from manufacturers of all remaining authorized grease-proofing substances containing different types of PFAS (not the subject of the safety review) that those manufacturers had voluntarily stopped producing and selling these products for business reasons unrelated to safety.

FDA indicated that it will continue to test foods from the general food supply this year and next to accurately estimate U.S. consumers’ exposure to PFAS from foods. This includes testing samples from the Total Diet Study (see more on this study here) as well as a survey of bottled water. The agency will also conduct additional seafood testing. If the testing supports an FDA finding of a health concern relating to a particular food based on PFAS exposure, FDA has indicated it will take action.

As we have discussed here and here, several states have laws regulating PFAS exposure from food packaging products that are in place or moving rapidly through legislatures. Please continue to watch this space as ​“forever chemicals” continue to consume ever greater attention from regulators.

In its motion to dismiss the complaint that “carbon neutral” is misleading, Danone argued that no reasonable consumer would understand “carbon neutral” to mean the product emits no carbon dioxide during its lifecycle. How else could the product be transported from the French Alps to the United States without expending carbon dioxide in the process? Danone argued that consumers would not be misled because the “carbon neutral” claim is defined by the adjacent “Carbon Trust Certified” logo, the reference to the evian website to “Learn More about the Carbon Trust certification,” and the company’s use of the PAS 2060 standard for evaluation.

The judge did not agree, saying “carbon neutral” is a technical term that may mean a number of different things depending on the context. The judge agreed with plaintiff that it is akin to an unqualified general environmental benefit claim, which the FTC’s Green Guides warn advertisers not to make.

Danone argued the notion of adding a lengthy explanation on the label of what carbon neutrality means and the underlying data is not just unreasonable, it is not legally required. But the judge did not agree, saying that the steps consumers would need to take to visit two webpages to understand the meaning of “carbon neutral” and the Carbon Trust standards and certification process amounts to too much research.

The judge did not specifically address the plaintiff’s allegations that the “carbon offsetting market is awash with challenges, fuzzy math and tough-to-prove claims with a long history of overpromising and under delivering.” Delta was sued last year based on a similar challenge to the carbon offset market (see here).

This order raises a number of questions about how much information companies should be including on the product label, and if directing consumers to websites for important information is acceptable. The order also raises questions about the carbon offset market and whether claims based on carbon offsets will be permissible support for carbon reduction claims. We’ll continue to monitor this case as it develops.

• Regulators’ Favorite Shade – Dark Patterns: Following the FTC’s 2022 Dark Patterns Report and high profile enforcement action against Epic Games, regulators including the FTC, CFPB, and state AGs continued to bring enforcement and provide guidance on perceived “dark patterns” – primarily related to automatic renewal and continuous service options, but also as to chat bots, disclosures, and marketing practices more broadly. In January, the CFPB released guidance focused on dark patterns in negative option marketing. In March, the NAD joined the discussion in a decision highlighting potential issues with Pier 1’s advertising of discounted pricing only available with a paid subscription and its use of a pre-checked box for enrollment with that same subscription. The FTC continued to lead the charge – with dark patterns allegations playing a key role in a number of enforcement actions, including against Publishers Clearing House, Amazon, and fintech provider Brigit.

• Beyoncé and Taylor Swift Concerts Lead to War on Junk Fees: Okay, the war against junk fees may have predated the fees associated with the pop stars’ mega tours, but it continued in earnest throughout the year. As with dark patterns, the FTC, CFPB and state AGs all took on junk fees at various times. Most notably, the FTC proposed a far-reaching rule that could fundamentally alter how prices and fees are disclosed in businesses across the country. The comment period was just extended until February 7, 2024 for the proposed rule. Not to be outdone, California passed new legislation banning hidden fees and the Massachusetts AG issued draft regulations that would prohibit hidden “junk fees,” enhance transparency in various transactions, and make it easy for consumers to cancel subscriptions.

• Endorsement Guides: In June, the FTC released its long-awaited update to the Endorsement Guides. We noted that the Guides include some significant changes, including new examples of what constitutes an “endorsement,” details about what constitutes a “clear and conspicuous” disclosure, and an increased focus on consumer ratings and reviews. We also examined how the revisions could affect influencer campaigns. In November, we reported that the FTC had sent warning letters to two trade associations and 12 influencers over their posts, giving us a glimpse of enforcement to come. Meanwhile, NAD has also been active in this space and even referred a case to FTC for enforcement. Expect this to be a priority for both FTC and NAD in 2024.

• Green Guides: The FTC’s Green Guides review progressed this year with an initial comment period closing in April, followed by an FTC workshop on “recyclable claims,” which we attended and highlighted here. With its history of hosting several workshops on hot green topics, we expect to hear of more workshops in the new year. California has been active as well with the governor signing a new law in October that aims to regulate carbon claims and make businesses more transparent about their carbon reduction efforts by requiring certain website disclosures (see our summary of the law here). The effective date is the first of the new year, but according to a recent letter from the bill’s sponsor, we expect that California will defer enforcement until January 1, 2025 to give companies time to comply (see here). With ESG efforts continuing to be front and center for most companies, consumers and regulators are holding companies accountable for those claims by questioning messaging about their efforts, aspirations for the future, and basis for the claims (see, for example, here, here, and here).

• State Privacy Laws: It’s getting increasingly hard to remember a time before state privacy laws regulated data sales, targeted advertising, sensitive data, and privacy disclosures. At the start of the year, five states had enacted privacy laws, and now there are 13 comprehensive consumer privacy laws (CA, CO, CT, DE, FL, IN, IA, MT, OR, TN, TX, UT & VA) and an additional two health-focused laws (WA, NV). What does this mean for advertisers? (1) Know who your vendors are and their data practices. (2) Obtain consent before building inferences based on sensitive data, like race/ethnicity, religion, or health. (3) Disclose up-front the collection, use, and disclosure of personal information. (4) Finally, recognize the limitations of third-party data as new regulations and laws take effect.

• Children’s Privacy: Congress, regulators, and advocates focused time and energy on children’s privacy issues in 2023. The House and Senate held hearings focused on children’s safety and privacy. Although the Senate Commerce Committee advanced the Kids Online Safety Act, it never received a floor vote; Senators Markey and Cassidy continued to advocate for approval of the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). The FTC reached settlements with companies about practices it alleged violated the Children’s Online Privacy Protection Act (COPPA) on the Xbox and Alexa platforms and with edtech provider, Edmondo. In September, the FTC released a ​“Staff Perspective” on digital advertising to children, which included recommendations on how to protect kids from the harms of “stealth advertising.” Also in September, a federal court agreed with industry advocates that California’s Age Appropriate Design Act, which imposes a variety of obligations on businesses that provide online services “likely to be accessed by children,” violated the First Amendment. California is appealing the decision, and regulators, including a number of Attorneys General and FTC Commissioner Alvaro Bedoya, have joined the state as amici. One of the most anticipated developments occurred with just 11 days left in the year, when the FTC proposed revisions to the COPPA Rule—more than four years after initiating its review process. Among other things, the proposed Rule would require new, additional consents for third-party disclosures and could affect operators’ approach to “internal operations.” Online services with children’s audiences have lots to consider in 2024 and beyond. Stay tuned for further updates.

• State AG: State Attorneys General continued to make their presence felt in 2023. State AGs continued to go after companies for using fake reviews and false endorsements, enforced and proposed new price gouging rules, pursued telehealth companies for deceptive practices, supported the FTC’s Negative Option Rulemaking while bringing their own auto-renewal actions, continued to impose significant penalties against companies for data breaches, pursued companies for misleading consumer financial practices, and focused efforts on so-called “junk fees.” But two topics continue to be the highest priority of AGs – the impact of developments in AI (which we’ve written about here, here, and here – just to name a few) and protecting the most vulnerable consumers – especially our nation’s youth. The incoming president of the National Association of Attorneys General president, Oregon Attorney General Ellen Rosenblum, has already made protecting youth, especially teens, this year’s presidential initiative. Look for AGs to continue to this focus well into 2024.

• Automatic Renewal: While auto-renewal service sign-up flows remain important, this year, we have seen a transition to cancellation processes being the hottest topic as states enforce their specific requirements and the FTC has drawn attention to “click to cancel” through its proposed rule. But we shouldn’t forget all of the FTC’s other proposals under the negative option rule NPRM, including expanding the scope, requiring more specific disclosures, separate consent for negative option, consent for save offers, and expanded notice requirements. Regardless of whether a federal rule formally comes into play in 2024, as referenced above certainly states have agreed are on board with FTC’s proposals, and they also resolved a multistate investigation this year requiring checkbox consent, online cancellation, and limiting save attempts. And don’t forget Massachusetts is working on its own rulemaking involving online cancellation.

• NAD: This year, NAD issued number of decisions that caught our attention. For example, a decision in February narrows the scope of what claims may be considered puffery. NAD later elaborated on what it thinks advertisers must do in order to substantiate aspirational claims about future goals. NAD also issued a number of decisions involving endorsements – including employee endorsements and disclosure requirements – and even referred a case to FTC for enforcement. In August, NAD held that emojis could convey claims, though NARB later disagreed with how NAD had applied that principle. As always, NAD plays a big role in the advertising law landscape, so companies will want to continue to watch what NAD does in 2024.

• Same Product/Different Label Litigation: We chronicled a Connecticut district court’s denial of a motion to dismiss in a case in which the plaintiff alleged that Beiersdorf, maker of Coppertone sunscreens, engaged in false advertising by selling the same sunscreen formula in two different packages, one of which was labeled as “FACE” and sold in a smaller tube at twice the price of the regular Coppertone Sport Mineral sunscreen. That case is one to watch but it is not the only one of its kind. In fact, 2023 saw several similar cases involving allegedly the same formula marketed as different products with varying price points, such that the plaintiffs alleged that they were misled into purchasing the more expensive item because they believed it was uniquely suited to their needs when, in fact, it was the same as the lower-priced item. These cases involved a range of products, such as baby/adult lotions, infant/children’s acetaminophen, children’s/adult cold remedies, to name a few. So far, decisions are mixed, with some courts being more willing than others to find that the differing prices were justified. Marketers of food and personal care brands that merchandise the same formula in varying iterations will want to remain mindful of these cases as they update packaging and claims.

Keep following us in 2024, and we’ll keep you posted on how these trends develop. In the meantime, have a great holiday!

Six months after that dismissal, the same law firm that filed the first class action filed a second class action against H&M over the same line of clothing. This time, the firm focuses on a different angle, arguing that “H&M falsely and misleadingly markets the Products as made with ‘recycled’ and/or ‘organic’ materials.” The complaint alleges that, in reality, the products “are all made with virgin synthetic, conventionally grown, and/or non-organic materials.”

The plaintiff bases these allegations, in part, on information that appears in a “Materials & Suppliers” tab for each product on the website and in the H&M app. Examples in the complaint show the tab for some of the products in the collection states that the products are made with “cotton” or “polyester,” rather than with “recycled” or “organic” versions of those materials. The plaintiff also claims to have independent testing on a sample of those products to confirm that they aren’t recycled or organic.

The complaint was just filed and H&M hasn’t answered. Having only have one side of the story, it’s too early to predict how this will end. What we can predict, though, is that these types of lawsuits are likely to continue. Stay tuned for more updates. In the meantime, if your company makes any “green” claims, make sure that you have adequate substantiation and that you accurately describe the composition of all products.

In a recent letter to the Chief Clerk of the Assembly, Assemblymember Jesse Gabriel – the VCMDA’s sponsor – indicated that it was his “intent that the first annual disclosure be posted by January 1, 2025,” to give companies time to comply. Gabriel intends to submit a formal letter to the Assembly Daily Journal when the State Assembly reconvenes on January 3, 2024.

Complying with the VCMDA is going to be a heavy lift for some companies, so the extra time will be welcome.

A law that was quietly signed by California Governor Newsom on Saturday – the Voluntary Carbon Market Disclosure Act (or “VCMDA”) – aims to force companies to more clearly disclose the basis for their carbon reduction claims. The VCMDA takes effect on January 1, 2024.

The VCMDA requires that companies who make claims (1) regarding the achievement of net zero emissions, (2) that the entity, a related or affiliated entity or a product is “carbon neutral,” or (3) implying the entity, a related or affiliated entity or a product does not add net carbon dioxide or greenhouse gases to the climate or has made significant reductions to its carbon dioxide or greenhouse gas emissions, to disclose on their websites the following information pertaining to the greenhouse gas emissions associated with the claims:

• All information documenting how, if at all, a “carbon neutral,” “net zero emission,” or other similar claim was determined to be accurate or actually accomplished and how interim progress toward that goal is being measured. This information may include, but is not limited to, (1) disclosure of independent third-party verification of the entity’s greenhouse gas emissions, (2) identification of its science-based targets for its emissions reduction pathway and (3) disclosure of the relevant sector methodology and third-party verification used for the science-based targets and emissions reduction pathway.
• Whether there is independent third-party verification of the company data and claims listed.

This provision is applicable to companies who operate in California and make these claims outside of California, or who make these claims within California. It is not limited to claims based on VCOs.

In addition, companies who operate in California and make the types of claims described above based on the use of VCOs, or who make these claims outside of California based on the use of VCOs purchased in California, must make additional disclosures on the website for each applicable project or program:

• The name of the entity selling the offset and the offset registry or program.
• The project identification number, if applicable.
• The project name as listed in the registry or program, if applicable.
• The offset project type, including whether the offsets purchased were derived from a carbon removal, an avoided emission or a combination of both, and the site location.
• The specific protocol used to estimate emissions reductions or removal benefits.
• Whether there is independent third-party verification of company data and claims listed.

All of the required disclosures must be updated at least once per year. (It’s unclear from a plain reading of the law whether a website or QR code link to the required disclosures will need to be included in ads for products making these claims or if having it on the website will be sufficient.)

The law also requires companies who market or sell VCOs in California to disclose certain information about the underlying projects on their websites.

Entities that violate the disclosure requirements could be subject to a civil penalty of not more than $2,500 per day, for each day that information is not available or is inaccurate on its website, for each violation, up to a maximum penalty of $500,000. Civil actions could be brought by the California Attorney General or by a California district attorney, county counsel or city attorney. There is no private right of action.

California has been particularly active with carbon-related legislation this week. Governor Newsom also signed two other related laws – the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act – on Saturday.

The Climate Corporate Data Accountability Act requires large public and private companies doing business in California to disclose their scope 1, 2, and 3 emissions, beginning in 2026. Scope 1 emissions are those that result directly from a company’s activities, while scope 2 are those released indirectly. Scope 3 includes all indirect emissions produced from a company’s entire supply chain. Scope 3 emissions reporting would not be required until 2027 on 2026 data.

The Climate-Related Financial Risk Act requires certain entities doing business in California to prepare and submit climate-related financial risk reports that cover climate-related financial risks consistent with recommendations from the Task Force on Climate-Related Financial Disclosure (“TCFD”) framework.

These new California laws, along with the FTC’s revisions to the Green Guides and the SEC’s proposed climate risk disclosure rules, both of which are expected to be finalized soon, send a clear signal to companies that environmental efforts and claims touting these efforts should be supported and transparent. Companies should prepare for increased scrutiny related to environmental claims in the near future.

In its appeal, JBS highlighted the steps it had already taken towards its goal, including that it had already spent millions of dollars, committed more than an additional billion, made efforts to define its emissions baseline, and set a near-term target date to submit a detailed roadmap to SBTi for its review. JBS argued that NAD was mistaken about what consumers expect when they see aspirational claims. Given that 2040 is 17 years in the future, JBS argued consumers would not expect the company to have made more progress toward its goal than it has documented as its progress to date.

The NARB panel agreed with NAD that “the challenged claims communicate that JBS is already in the process of implementing a documented plan that has been evaluated and found to have a reasonable expectation of achieving ‘net zero’ by the year 2040.” Despite this, NARB determined that JBS hadn’t actually formulated such a plan – instead, it was “in the exploratory stage of its effort.” Moreover, given the complexities involved, the panel was also concerned “that JBS does not currently have sufficient scientific support to show that its goal is feasible.”

JBS questioned whether consumers would really interpret its claims to mean, as NAD suggested, that JBS was currently implementing its plan and noted that its claims were actually part of a B2B campaign targeted at a more sophisticated audience. The panel dismissed these arguments. Even if the campaign was targeted to businesses, many claims appeared on websites that are readily available to consumers interested in supporting sustainability. Moreover, even a more sophisticated audience is “unlikely to understand the full complexity of the challenges inherent in JBS’s net zero 2040 undertaking.”

This decision suggests that companies face a high bar when making aspirational claims about their goals to achieve net zero in the future. Still, the decision leaves some room for companies that may not have made substantiation progress towards those goals. Like NAD, the NARB panel noted that JBS could still make “narrower truthful and not misleading claims regarding its efforts at researching potential methods for reducing emissions and any efforts it is undertaking to reduce emissions.” The line between those permissible narrower claims and the broader ones may be hard to identify, though.

The complaint alleges that there are various “foundational issues with the voluntary carbon offset market” that render “carbon-neutral” claims based on offsets inherently problematic, even those that have been verified by an independent third party. Relying largely on various articles that criticize offsets, the plaintiff focuses on four main themes:

• Accounting Issues: The complaint alleges that the voluntary carbon market has a “tendency to inflate” carbon impacts, resulting “in phantom carbon credits.” More specifically, the plaintiffs complain that major voluntary carbon markets often use “inaccurate projections” and that they “have engaged in fraudulently double and triple counting of projects.”

• Non-Additional Offsets: The complaint alleges that the major voluntary carbon markets often provide credit “for reductions that would have occurred regardless of the involvement of the voluntary carbon market.” The plaintiffs argue that “any claim of carbon neutrality that is even fractionally predicated on non-additional carbon projects is definitively false.”

• Timing of Offsets: The complaint alleges that any benefits from offsets may not be realized until far into the future. For example, although a flight today will “dump carbon dioxide into the atmosphere right now, … saplings planted today won’t grow large enough to offset today’s emissions for decades.” Thus, Delta’s claims that it was carbon neutral in a calendar year are false.

• Impermanent Offsets: The complaint argues that because CO2 emissions “stay in the atmosphere for a century or more,” a company “must offset an equivalent amount of emissions for at least that long.” However, many offset projects may not last that long. For example, the plaintiffs allege that some forests associated with carbon crediting projects have already been destroyed by fires.

Although some of what the plaintiffs would seem to require of companies – such as accurate accounting to ensure that emission reductions are measured properly and not sold more than once – is consistent with the FTC’s Green Guides, other things arguably go beyond what the FTC requires. For example, the Green Guides don’t require that reductions happen immediately. Instead, they state that marketers should disclose if emission reductions won’t occur for at least two years.

The lawsuit was just filed and Delta hasn’t answered yet, so it’s too early to predict how this case will turn out. We’ll be watching this case closely, though, because the decision could have a significant impact on any company that makes claims based on the purchase of carbon offsets. Stay tuned for updates.

• Substantial Majority Test: The Green Guides state that a company can make an unqualified “recyclable” claim, as long as a substantial majority – defined as 60% – of communities or consumers where a product is marketed have access to recycling facilities that will accept the material. We learned right up front that the FTC is particularly interested in whether it should take another look at the “substantial majority” test. No one recommended that the FTC change that threshold – and one audience member noted that doing so would cause confusion – so we don’t suspect the FTC will do so, unless there is compelling survey data to suggest it is necessary. As we heard during the workshop, whether something will be accepted for recycling can vary from state-to-state and town-to-town, so imposing a stricter standard would make “recyclable” claims harder to manage.
• Capability v. Actuality: Some panelists suggested that advertisers shouldn’t be able to make “recyclable” claims unless they have evidence that a product is actually recycled into something new. Plaintiffs have advanced similar theories in lawsuits, but some courts – like this one – have rejected them, noting that “no reasonable consumer would understand ‘100% recyclable’ to mean that the entire product will always be recycled.’” Instead, that court held that “recyclable” simply means that a product is capable of being recycled. We agree, but we’ll see how the FTC comes out. Again, we think there would need to be pretty compelling consumer perception survey data suggesting consumers understand recycling to mean that it the entire product will always be recycled in order for the FTC to change its view in the Green Guides.
• Resin Identification Codes: Resin Identification Codes or “RICs” – little numbers at the bottom of a container enclosed within a chasing arrow triangle, like this – were also a hot topic. Because consumers may interpret a RIC to mean a package is recyclable, the Guides advise marketers to place it in an inconspicuous location, such as on the bottom of the container. Panelists generally agreed that consumers continue to be confused, and some suggested that for plastics that are generally not recyclable, companies should be required to include a disclosure stating that a product is not recyclable. Currently, if a product may be recycled by only a few consumers, companies must include a strong qualifier, such as “this product is recyclable only in the few communities that have appropriate recycling programs.” Will the FTC require another disclosure saying “this product is not recyclable” for a product that is not recyclable, and doesn’t claim to be recyclable, but has the RIC number at the bottom of the package? We’ll have to wait and see. In the meantime, remember that a new law in California will also impact this issue.
• Chemical Recycling: Another hot topic at the workshop involved chemical recycling. Although FTC staff made it clear at the outset that the workshop was not for discussing environmental policy, that’s exactly what happened when panelists and attendees debated chemical recycling. Currently, the primary technology for plastic recycling is mechanical recycling, which uses physical processes – such as sorting, grinding, and washing – to recover used plastics. GAO reports that mechanical recycling technology is expensive, labor intensive, and generally results in lower quality plastics. Chemical recycling (or advanced recycling) uses heat or chemical reactions or both to break down plastic material from the polymer down to the monomers and additives. The industry says that through advanced recycling, a “circular” plastics economy can be created that reduces the need to tap virgin fossil fuels to make its products. Some chemical recycling is used to break down plastic into fuel, which was not favored at the workshop since fuel will eventually get burned and end up in the atmosphere. Whether claims around chemical recycling resulting in new plastics will be permitted is an open question and one that the FTC will assess during its review of the Guides. Since this is a new and emerging area of interest with open questions around the environmental benefits versus trade-offs, we think it is unlikely that the FTC will provide much concrete guidance on these types of claims.
• Circular Economy: Many of the panelists brought up the term, “circular economy,” which is about reusing products, rather than scrapping them and then extracting new resources. We heard how there has never been more momentum around circularity and products should be designed with recycling and end use in mind. To this end, a panelist from The Recycling Partnership noted that the organization provides helpful guidance for product design. While not discussed at the workshop, we expect the Green Guides might provide new examples of how marketers may substantiate claims touting that their product promotes a circular economy.
• Rulemaking: FTC staff was very interested in hearing from panelists on whether the FTC should engage in rulemaking or if the Guides are working. In the wake of the Supreme Court’s decision in AMG (holding that the FTC can’t obtain monetary relief under Section 13(b)), the FTC is increasingly relying on other legal tools to get money – notably, alleging rule violations wherever possible, which enables the FTC to seek civil penalties and/or consumer redress. This has resulted in a long list of proposed rules. Our colleague Jessica Rich covered many of the pending rules here. Panelists were split on whether rulemaking should be initiated, and we’ll have to wait to see if the FTC adds this topic to its growing list.

While the comment period for the Green Guides is now closed, the Commission is still accepting comments until June 13, 2023 for those who wish to provide input on the topics discussed at the workshop.

Lizama argued that H&M misled consumers into thinking that its Conscious Choice collection was “environmentally friendly.” (By our count, that phrase appears more than 100 times in the complaint.) The court pointed out, though, that H&M never actually uses that phrase to describe its garments. Moreover, H&M does not represent that its Conscious Choice products are “sustainable” – only that the line includes “more sustainable materials” and its “most sustainable products,” which the court said are obvious comparisons to H&M’s regular materials.

Lizama argued that the garments were not sustainable because recycling PET plastics into clothing isn’t as good for the environment as recycling those plastics into plastic bottles. Even if that’s the case, the court noted that the comparison wasn’t relevant in determining whether H&M’s claims were misleading. “Instead, the relevant comparison is whether one garment using recycled polyester is more sustainable than another garment using non-recycled (also known as virgin) polyester.”

The court noted that H&M provided “copious amounts of information” about its comparisons on its website (which Lizama admittedly reviewed). “H&M disclosed on its website all of the information Lizama needed to determine the source, composition, and relevant comparison of the ‘more sustainable materials’ used by H&M in its Conscious Choice collection. For this reason, Lizama’s claims that he was misled into believing something that was never represented by H&M must fail.”

The court also rejected Lizama’s contention that H&M’s claims are “unqualified general environmental benefit claims” as defined by the FTC’s Green Guides. Indeed, the court said the sustainability claims were clearly qualified by “explaining that its conscious choice items are made with ‘a little extra consideration for the planet’ because they use ‘more sustainable materials’ than its regular collection.” The court also dismissed Lizama’s argument that the messaging overstated the environmental benefit since the products in the conscious choice category included only those with the majority of their materials being ‘more sustainable’ than the regular collection.

There’s a lot more going on in this case, and the decision may be worth a read for retailers making similar claims, but there is at least one important takeaway in this case. Plaintiffs will continue to file lawsuits when their ideas about what is “sustainable” or good for the environment differs from a company’s ideas about those concepts. Companies will fare better in those lawsuits if they are able to provide detailed and accurate information to explain their claims and have substantiation that the touted attributes actually result in an overall benefit for the environment.

For more information on these topics and the increase in legal risks associated with ESG messaging, please join our Hot Topics in Green Marketing webinar on May 31, 2023.

ABBY STEMPSON (Special Counsel in the Ad Law and State AG practices) will be speaking on a panel entitled Fundamentals – Consumer Protection. The session will include a fact pattern to help set the scene for the audience and will discuss potential violations of federal and state law, as well as BBB self-regulatory standards. Panelists will examine enforcement, corporate compliance, and emerging issues, with Abby focusing in particular on state consumer protection laws, AG enforcement, and business compliance strategies. This session takes place on Wednesday from 9:00-10:15.

DONNELLY MCDOWELL (Partner in the Ad Law Practice) is moderating the panel Navigating the “Green” Minefield of ESG Claims, which will offer perspectives from the FTC, in-house counsel, and plaintiff’s counsel on issues related to green marketing and environmental, social and governance (ESG) initiatives. As we’ve discussed at length on Ad Law Access in a series of posts, green marketing claims continue to generate attention and scrutiny from the FTC, NAD, and plaintiff’s attorneys and are more prevalent than ever. In addition, the FTC has solicited comment on potential revisions to the Green Guides, as we discussed here. This session will address all of these developments and more, and takes place on Wednesday from 1:45-3:15 pm.

LAURA RIPOSO VANDRUFF (Partner and Chair of the Ad Law Practice) is the Session Chair and Moderator of the panel Is AMG the Tip of the Iceberg? Two years after the Supreme Court stripped the FTC of its authority to use Section 13(b) to obtain monetary remedies in FTC v. AMG, the FTC is facing new challenges on other fronts. Laura’s panel includes a former Chairman of the FTC; an attorney representing the Petitioner in Axon v. FTC; the FTC Bureau of Consumer Protection’s Chief Litigation Counsel; and a prominent member of the FTC defense bar. Among other things, the panel will assess whether Chair Khan’s ambitious rulemaking priorities are vulnerable to constitutional challenges, including under the major questions doctrine. This panel is on Thursday from 8:30-10:00 am.

PAUL SINGER (Ad Law Partner and co-chair of the State AG practice) is the Session Chair and Moderator of this year’s Consumer Protection Year in Review panel. This panel will feature representatives from the FTC, DOJ, NAD Division of BBB National Programs, Florida AG’s Office, and the private bar. This annual panel takes a look back at the major consumer protection developments of the past year, and will include a robust discussion of many of the hot topics that emerged through enforcement efforts, including dark patterns, privacy and data security, testimonials, endorsements and reviews, green claims, and health claims. The panel will also discuss the increased collaboration among enforcers – both between federal agencies (FTC/DOJ) and state-federal partnerships (FTC/State AGs). This panel will take place on Thursday from 1:30-3:00 pm.

Please join us at any or all of these interesting and timely panels.

Although NAD determined that certain bottles could be recycled in at least 60% of recycling programs nationwide, NAD found that ABA’s claim that “they’re collected and separated from other plastics so they can be turned back into material that we use to make new bottles” conveys a message that the bottles are recycled (as opposed to a message that they could be recycled). NAD held that “the challenged claim does not make clear that this is a goal towards which the companies are working to achieve.”

NARB agreed, noting that while ABA may have intended to explain the potential for bottles to be recycled, the ad went beyond that, conflating current recycling practices and outcomes with aspirational ones. Therefore, NARB recommended that AB modify its claims to better clarify that its statements relate to aspirational goals. Similarly, NARB stated that the ads shouldn’t suggest the industry is currently making significant use of recycled bottles or reducing plastic, if that isn’t the case.

Aspirational green claims are a big topic at NAD. Exactly what companies need to do to support these types of claims is still unclear, especially because some courts have taken different positions from NAD and because we’re still waiting to see if the FTC addresses this issue in the revised Green Guides. In this case, though, the main lesson may be companies need to ensure that they clearly differentiate what they’ve already achieved and what they hope to achieve.

As we’ve noted in previous posts, NAD has held that “when aspirational claims are tied to measurable outcomes, an advertiser must be able to demonstrate that its goals and aspirations are not merely illusory and to provide evidence of the steps it is taking to reach its stated goal.” In several recent cases involving aspirational claims – including cases involving claims by Chipotle and Georgia Pacific – NAD found that the advertisers had provided enough evidence.

In a case announced last week, NAD came to a different conclusion, and advertisers that make aspirational claims about their environmental efforts should take note. The decision covers a lot of ground, but here are some of the key themes.

JBS – the second-largest food company in the world – made several aspirational claims about its commitment “to be net zero by 2040” on its website, social media, newspapers, YouTube, and publicly accessible corporate reports. Those claims were challenged by the Institute for Agriculture & Trade Policy (“IATP”), who argued that the claims convey an unsupported message that “JBS has an operational plan in place to achieve its net zero goals and is implementing such a plan.”

According to IATP, JBS’s claim is definitive and it gives the net impression that JBS is “actively reducing its emissions and building more sustainable operations,” when this is not currently the case. In response, JBS argued that its claim is aspirational and intended to communicate the message that it has set a goal. The company presented evidence of how it is taking concrete steps to carry out this goal. For example, JBS noted that it had:

• Signed a contract with Carbon Trust Advisory Limited to provide a detailed “Global Footprinting and Net Zero” plan for JBS with steps the parties will take together to set targets in line with SBTi’s Net-Zero Standard inclusive of Scope 1, 2, and 3 emissions across JBS’s operations to reduce overall emissions;
• Issued a $1 billion Sustainability-Linked Bond, linked to its net zero climate goals;
• Partnered with experts at the University of Minnesota and Colorado State University to research and study supply chain considerations to address Scope 3 reductions and help it reach its net-zero by 2040 goal;
• Partnered with science-based companies and research centers to develop and expand the use of feed additives to help reduce methane emissions in the beef value chain;
• Signed an agreement with a company to use a feed additive for cows that would reduce methane emissions; and
• Signed an agreement to purchase verified emission reductions (i.e., carbon offsets).

NAD acknowledged that JBS had made a “significant preliminary investment” toward reducing emissions, that it had “undertaken steps to begin learning” how to address the operational and scientific challenges it will face, and that these steps “may be helpful towards achieving net-zero by 2040.” Nevertheless, NAD found that these steps were not enough to “support the message conveyed by the claim.” NAD thinks the message is “that JBS has a plan it is implementing today to achieve net zero operational impact by 2040.”

NAD also reviewed JBS’s claim that “the SBTi recognized the Net Zero Commitment of JBS,” which NAD said conveyed the impression that SBTi had reviewed and approved the company’s net zero goals and objectives. However, because the claim was based only on JBS’s submission of an SBTi Commitment Letter, the NAD found the claim conveyed a broader message than JBS could support.

According to SBTi, companies that have “Commitments” have “demonstrated their intention to develop targets and submit these for validation within 24 months.” This is in contrast to companies with “SBTi Targets” which mean that there are “clearly-defined pathways . . . to reduce greenhouse gas (‘GHG’) emissions.” Again, the efforts the company had taken were too preliminary, according to the NAD, and did not include an approved strategy or plan to allow it to achieve net-zero climate impact by 2040.

Does that mean an advertiser has to stay silent until it has that plan in place? Not necessarily. NAD writes that the decision doesn’t stop JBS from making “narrower truthful and not misleading claims regarding its efforts at researching potential methods for reducing emissions and any efforts it is undertaking to reduce emissions.”

The decision raises a lot of questions. For example, do consumers really expect that companies have all the details worked out when they make an aspirational claim? What separates a good foundation from a good plan? And what more narrow and less definitive statements can a company make while it formulates its plan? JBS has indicated that it will appeal the decision, so we may have more clues when the NARB weighs in. In the meantime, we expect to see a lot more activity in this area.