Del Percio 2011 Greenbuild Legal Forum Presentation - FTC Green Guides

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This presentation analyzes the recent changes to the FTC Green Guides in the context of marketing green buildings and real estate, using images of actual green building projects to suggest best practices for owners and operators.

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  • I have been charged with, over the next 15 minutes, providing you with some 30,000-foot answers to the following three questions about the FTC Green Guides: (1) what are they? (2) how are they enforced? (3) how do they apply to green buildings and real estate?
  • So, what are they? The Guides assist marketers in making “truthful and substantiated environmental claims.” The Guides have progressively elbowed their way into the green building legal conversation since 2007, when FTC opened a review of them.FTC actually received 75 written comments on the proposed revisions from various organizations, and also held 3 public workshops which generated an additional 125 written comments – one of which was submitted by USGBC; we’ll get to that shortly. Thereafter, it proposed revisions to the Guides which were released in April of 2010. The public comment period on those revisions closed in October of 2010, and we’re still waiting for a final release of the updated Guides.I spoke earlier this week with an attorney at FTC and the Commission is still reviewing the comments and we’re in a holding pattern; there’s no update on the final release.- FTC reviews the Guides as part of its ongoing review processes and any party can petition FTC for a review. So, inevitably, more updates will be coming.
  • The existing Guides focus on these ten major areas of environmental claims.The proposed revisions to the Guides include changes to each of these areas, which you can review in detail on FTC’s website. I’m going to focus on two areas: general environmental benefit claims and certifications and seals of approval.At the outset, it is important to note that none of these areas are specific to environmental claims in the context of the green building or real estate industries. With respect to general environmental benefit claims, previously, the Guides allowed unqualified claims as long as they could be substantiated(i.e., you could call something “green” or “eco-friendly” as long as you could prove it).Now, “marketers should not make unqualified general environmental benefit claims. They are difficult, if not impossible, to substantiate. Qualifications should be clear and prominent, and should limit the claim to a specific benefit.” Proposed Guides also drastically increase the discussion of third-party certification and seals of approval, which were previously mentioned in passing under the GEB section.
  • The proposed Guides also add these three sections relating to carbon offset, renewable energy, and renewable materials claims.Again, none of these areas were addressed in the 1998 version of the Guides, What’s most important here is that we can expect that as new technologies continue emerging in this space, future versions of the Guides will respond by addressing them in kind.
  • There is no private cause of action within the Green GuidesThey are enforced by the FTC through Section 5 of the FTC Act in either an administrative proceeding or a federal action.As you can see here, the FTC Act does provide a variety of remedies to FTC.
  • Will the Green Guides apply outside of the consumer context? Yes!FTC has indicated that it will enforce the FTC Act against commercial actors, particularly in light of the increased volume of environmental marketing in the commercial context (which gave rise to the revisions to the Guides in the first place).This is an important issue to keep an eye on moving forward, particularly in the context of the marketing of green buildings.
  • Does that mean private actors – either consumers or commercial entities – don’t have a remedy against deceptive marketing claims? Answer, as you likely know, is no, thanks to both the federal Lanham Act and state-level unfair competition laws, under which consumer claims are generally structured as class actions. In this slide I’ve just noted just a couple of illustrative cases:The first is pending in CA over Honda’s alleged misrepresentation of the gas mileage of its hybrid cars, the second granted an injunction against a Chinese solar panel company from using a registered U.S. trademark in the course of business in the U.S.
  • While the Green Guides are not specifically addressed at the marketing of green buildings and/or real estate, FTC did hold a Green Building workshop on July 15, 2008 to get feedback about how the new Guides would apply to the green building industry.Subsequent to that, USGBC submitted to FTC a fairly substantial document of comments on the Guides relating specifically to best practices for marketing the LEED certification process and use of the USGBC logo & LEED seal, and AP credential. These were NOT incorporated into the proposed Guides that are currently pending, but doesn’t mean they couldn’t be addressed at some point in the future.With that background, I'd like to show you some examples of how owners and developers have actually marketed green buildings, both in terms of the general environmental benefits that I mentioned earlier, as well as LEED certification. I think these slides will demonstrate that USGBC's concerns as articulated to FTC are quite legitimate, and that more guidance from FTC on this topic is inevitable.- I've tried to arrange these slides from bad to good in terms of prevailing FTC guidance, and as I go through them I’ll also volunteer some of USGBC’s comments on the issue.
  • Website for potential purchasers of “seriously green” condos in Prospect Heights, Brooklyn.No qualification whatsoever, just the blanket use of the term “green.”Under the new Guides, this would be impermissible; these are general environmental benefit claims without any qualification.
  • - Same issue here for ground-level retail space in the Argonaut Building in Midtown; this picture was taken well before the building earned LEED-CS Gold back in March and includes no qualification whatsoever.
  • Rest of the slides address Certifications & Seals of Approvals:This slide demonstrates USGBC’s second area of concern I noted earlier: improper claims of LEED building certification.Note that this building was still very much under construction when it was claiming “LEED Gold certified.” No indication that it was pre-certified under LEED for Core and Shell, for example.
  • Same problem, same building, just a few months later.“LEED Gold certification for environmental sustainability.”In its comments to FTC after the Green Building workshop in 2008, USGBC specifically identified this as an issue, writing that “[w]hilea registered project may indicate that it is seeking LEED certification, claims of certified status by builders or project owners prior to the completion of LEED's third-party certification process are misleading and inappropriate.“I should add that this was a major NYC construction project; this sidewalk bridging faced onto West 42nd Street in Times Square, so this isn’t just a theoretical issue or one limited to smaller projects and owners with limited resources.
  • - Although I think that this is the type of qualified environmental benefit claim that the Guides are pushing for, notice that the building is still very much under construction when this particular claim was asserted.
  • At first glance, this image of the lobby entrance to 1740 Broadway in NYC looks fine.But what does the seal actually indicate? LEED Silver for . . . New Construction? Existing Buildings? Commercial Interiors? USGBC’s written comments to FTC addressed the importance of paying close attention to this issue:“USGBC urges the inclusion of guidance clarifying that blanket statements about the equivalency or superiority of specific certification levels across independent rating systems are inappropriate and misleading. For example, the second certification level of one system is titled 'Silver'; another competing system also maintains a 'Silver' level. While these levels share similar names, they do not reflect the same level of sustainable attributes."
  • Much better, but still unclear which rating system is being pursued.
  • - This is more or less ideal in the Certifications and Seals of Approval context, “Registered under LEED 2009 for O&M.”
  • Finally just some quick key takeaways:The final 2010 Guides have not been released yet.Environmental marketing is becoming increasingly important, so parties both consumer and non-consumer will not hesitate to enforce their rights.FTC will not hesitate apply the Guides and the FTC Act against non-consumer actors, so the A/E/C community must pay increased attention to them.More guidance will be forthcoming as new environmental technologies, seals, and accreditations emerge.
  • - Thank you!
  • Del Percio 2011 Greenbuild Legal Forum Presentation - FTC Green Guides

    1. 1. 2011 Greenbuild Legal Forum<br />THE FTC GREEN GUIDES: <br />UPDATE & GREEN BUILDING MARKETING PRIMER<br />Presented by<br />Stephen Del Percio, B.Eng., J.D.<br />Arent Fox LLP <br />Washington, DC | New York, NY | Los Angeles, CA<br />October 6, 2011<br />
    2. 2. What are the FTC Green Guides?<br /><ul><li>Federal regulations setting forth how the Federal Trade Commission will apply Section 5 of the FTC Act (15 U.S.C. §§ 41-51), which prohibits “unfair or deceptive advertising,” in the area of environmental marketing claims
    3. 3. Green Guides first issued in 1992; last updated in 1998
    4. 4. FTC currently reviewing public comments submitted in response to updates proposed in 2010 </li></li></ul><li>What are the FTC Green Guides?<br /><ul><li>General environmental benefit claims
    5. 5. Certifications & seals of approval
    6. 6. Compostable claims
    7. 7. Degradable claims
    8. 8. Free-of and non-toxic claims
    9. 9. Ozone-safe and ozone-friendly claims
    10. 10. Recyclable claims
    11. 11. Recycled content claims
    12. 12. Refillable claims
    13. 13. Source reduction claims</li></li></ul><li>Proposed 2010 additions to the FTC Green Guides<br /><ul><li>Carbon offsets
    14. 14. Renewable energy claims
    15. 15. Renewable materials claims</li></li></ul><li>How are the Green Guides enforced?<br /><ul><li>No private cause of action
    16. 16. Section 5 of the FTC Act allows FTC to file administrative actions or lawsuits in federal court
    17. 17. Remedies include injunctive relief, corrective advertising, and civil penalties up to $16K per violation of injunctive order</li></li></ul><li>Will the Green Guides apply to commercial actors?<br /><ul><li>FTC typically enforces marketing claims made to consumers
    18. 18. However, it has recognized that “many environmental marketing claims are commercial in nature”, and has stated formally that it will “not hesitate to enforce its standards outside of a traditional consumer context”*</li></ul>*J. Kohm, Associate Director, Division of Enforcement, “Green Marketing: Communicating Environmental Benefits to Effect Change and Sell Product,” ABA Consumer Protection Conference, June 20, 2009<br />
    19. 19. So how do private parties make environmental marketing claims?<br /><ul><li>By asserting false advertising and/or unfair competition claims
    20. 20. Lanham Act (federal)
    21. 21. Consumer protection statutes (state)
    22. 22. Typically consumer class actions alleging performance levels or environmental benefits advertised cannot be achieved under standard operating conditions
    23. 23. Illustrative cases
    24. 24. Paduano v. Am. Honda Motor Co., 169 Cal. App. 4th 1453 (2009) (hybrid gas mileage; companion class action )
    25. 25. Suntech Solar v. Solar Tech Co., No. 08-CV01582 (S.D. Cal. 2008) (non-consumer trademark dispute)</li></li></ul><li>Is there anything in the Green Guides specific to real estate?<br /><ul><li>No, but USGBC did provide comments to FTC relating to third-party certification and seals in the context of:
    26. 26. Improper claims of LEED product certification
    27. 27. Improper claims of LEED building certification
    28. 28. Improper claims of professional accreditation
    29. 29. Misleading comparisons of rating systems and certification programs</li></li></ul><li>How does environmental marketing intersect with real estate?<br />
    30. 30. How does environmental marketing intersect with real estate?<br />
    31. 31. How does environmental marketing intersect with real estate?<br />
    32. 32. How does environmental marketing intersect with real estate?<br />
    33. 33. How does environmental marketing intersect with real estate?<br />
    34. 34. How does environmental marketing intersect with real estate?<br />
    35. 35. How does environmental marketing intersect with real estate?<br />
    36. 36. How does environmental marketing intersect with real estate?<br />
    37. 37. Some takeaways<br /><ul><li>Updates to the FTC Green Guides are still pending
    38. 38. Private parties, including non-consumer parties, seeing increased value in environmental marketing claims, and will assert rights vigorously
    39. 39. FTC will not hesitate to police non-consumer conduct
    40. 40. More specific guidance about green building marketing is inevitable</li></li></ul><li>Thank you! <br />Stephen Del Percio<br />delpercio.stephen@arentfox.com<br />www.greenrealestatelaw.com <br />@StephenDP<br />

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