Companies making green claims should be prepared for a growing number of eco-fraud litigation cases, warns an article published in a legal journal.
Greenwashing is fertile ground for litigation and companies need to avoid becoming a target for eco-fraud accusations, wrote Victoria Davis Lockard and Josh Becker from US firm Alston & Bird.
The lawyers referred to eco-fraud as the ‘latest flavor of consumer product class litigation’ – law suits where multiple plaintiffs take action against a single product because it has not delivered what was advertised.
Furthermore, they claimed that such eco-fraud cases may be ‘more troublesome’ than average consumer action suits.
According to Becker and Davis Lockard, the court may be more sympathetic to the environmental cause than a more trivial issue like exaggerated efficacy claims.
In addition, the plaintiffs in eco-fraud cases will have very strong allies in the form of environmental watchdogs and public interest groups such as Greenpeace.
And thirdly, they maintain that the cost to a company’s reputation, regardless of whether it is found innocent or guilty, can be ‘huge’.
Although the authors claim that consumer class actions are the biggest threat, they warn companies that action might also come from competitors, regulators and public prosecutors.
One such case was brought last year by Dr Bronner’s Magic Soaps against competing personal care brands for making alleged misleading organic claims.
The lawsuit filed in California Superior Court claimed that a number of leading organic and natural brands and two certification bodies where ‘mislabelling’ products as organic.
Help from the green guidelines
There is some guidance to help companies use green marketing claims, and Becker and Davis Lockard said that following these should help companies avoid litigation and bolster their defence in the event of a lawsuit.
The Federal Trade Commission has a set of green guidelines which are designed to help marketers avoid making deceptive environmental claims. The guides are under review and the updated versions are on the way.
Although the guidelines do not have legal standing as such, legal enforcement can occur under the FTC Section 5 which states that unfair or deceptive acts of practices in or affecting commerce are unlawful, explained the FTC’s Michael Davis.
“If a company carefully follows the green guides they can expect a safe harbour,” Davis told CosmeticsDesign.
However, contact with the business community has shown that companies are not always aware of the guidelines, he said.
The current Guides for the Use of Environmental Marketing Claims are available on the FTC website and can found here .