When Green Advertising May Leave You Black and Blue

Today, many products that target household consumers tout some sort of environmental benefit – that a product is recyclable, biodegradable, or that it has a seal of approval from a third-party organization. These products often command a premium in the market. To win over consumers seeking these “green” products, marketing tactics are becoming more and more creative. On occasion, however, a company may go too far and engage in “greenwashing,” the practice of making a product seem environmentally friendly when, in reality, it is not. Deceptive and unsubstantiated “green” advertising may not only invite an investigation by the Federal Trade Commission (“FTC”), but, as the discussion of two cases below demonstrates, it could also lead to a civil lawsuit and, potentially, monetary liability.

The FTC Green Guides

The FTC Guides for the Use of Environmental Marketing Claims, also known as the “Green Guides,” were last issued in 1998. The Green Guides are not enforceable regulations, but do provide the agency’s view of the application of Section 5 of the FTC Act, which targets unlawful deceptive commercial acts and practices. Following the explosive trend in environmentally friendly products and related marketing in 2007, the FTC issued proposed revisions to the Green Guides in 2010. Among other things, the proposed revisions caution companies not to use unqualified certifications or seals of approval. Two recent cases demonstrate that a company’s product packaging may run afoul of this guidance and invite a deceptive trade practice lawsuit by a consumer.

Koh v. S.C. Johnson & Son, Inc. (N.D. Cal.)

In this federal lawsuit, seeking class certification, the plaintiff asserted various California unfair competition and false advertising claims against S.C. Johnson, alleging that the company’s Windex® and Shout® products prominently display a Greenlist™ label, which is an example of greenwashing – a logo deceptively designed to look like a third party seal of approval and falsely representing that the products are environmentally friendly.

S.C. Johnson moved to dismiss the complaint, arguing primarily that no reasonable consumer could have found the Greenlist™ label misleading because it makes no mention of a third party, describes Greenlist as a “rating system” not a seal of approval, and directs consumers to the company’s own web site for further information. The district court, however, denied the motion to dismiss in an unpublished decision. The court held that the issue was a question of fact, citing a Green Guides example of an environmental seal that could be found deceptive without substantiation.

The suit, along with an identical suit pending in Wisconsin, were recently settled. As part of this settlement, S.C. Johnson agreed to stop using the Greenlist™ logo on its Windex® products, stating in a press release that it did not “want consumers to be confused . . . .”

Hill v. Roll Int’l Corp. (Cal. App. 1 Dist.)

In this lawsuit, also seeking class certification and asserting California false advertising and unfair competition claims identical to those in Koh, the plaintiff alleged that a “Green Drop” logo placed on bottles of Roll’s Fiji® spring water was deceptive greenwashing. The plaintiff asserted that the logo, created by Roll itself, was similar to “seals of approval” used by several, independent third-party organizations, misleading consumers into believing that Fiji® water was environmentally superior to other brands of water.

Unlike the court in Koh, the court in this case dismissed the complaint. Adopting the “reasonable consumer” standard from the Green Guides relied upon by the plaintiff, the appellate court held that the “Green Drop” logo did not convey to a reasonable consumer that the product was endorsed for environmental superiority by a third party. In its analysis, the court noted that the logo bore no name or recognized logo of any group, nor any trademark symbol. The court also noted that the logo was not analogous to the earth environmental seal example in the Green Guides. Rather, the court found that the “Green Drop” was a logical icon for touting the green features of the product being sold – water.

Contrary to Koh, the court found that the www.fijigreen.com web site printed next to the “Green Drop” logo made it clear that the logo was not a third-party seal of approval, but rather the company’s own creation. In distinguishing Koh, the court also noted that the Greenlist™ logo in that case was very different, in that it used a trademarked name and identified a rating system, which suggested that it was plausibly a third-party certification.

What This Means For You

We will likely see more lawsuits like these as companies continue to ramp up their “green” marketing efforts. As these two contrasting decisions demonstrate, however, there is no clarity as to what type of marketing will be found to be non-deceptive. As a result, if your company engages in “green” advertising, it should undertake a thorough review of any related marketing plans and strategies to ensure that they do not run afoul of the Green Guides or applicable federal and state statutes. To minimize the risk of a lawsuit or FTC action, a core principle for any marketing strategy should be to ensure that the message to the consumer is both clear and substantiated.

-- Anuj Desai, Esq.

Not If, But How

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Georgia’s New Law On Noncompete and Nonsolicit Agreements

In the past, Georgia employers have had difficulty enforcing all but the most carefully drafted and limited noncompete agreements with their employees. This year, for the first time, companies can take advantage of a dramatic change in the law that expands the protection available not only through noncompete, but also nonsolicit and nondisclosure agreements with employees.

The Impetus for Change

In the past, the Georgia courts, guided by decisional law rather than statute, have defined what constitutes a constitutionally enforceable “restraint on trade,” and thus, what restrictions can and cannot be placed on competitive action by former employees. Because the courts have been bound by existing legal precedent, this case law has been very slow to change, and in the view of many, adjust to modern business realities. The rules and guiding principles were perceived by many to be outdated and to hinder the attraction of new business to Georgia.

Highlights Of The New Law

First, the new law, which is codified at O.C.G.A. § 13-8-50 et seq., is intended to apply to agreements entered into on or after January 1, 2011. Existing agreements will be governed by the same case law as before, even if a company seeks to enforce one of them now or in the future.

Second, in a sea change for Georgia, the new law allows courts to “blue pencil,” or modify, a restrictive covenant that they deem to be overbroad or unreasonable. Although courts in the vast majority of states other than Georgia had long had this power, this aspect of the new law represents a major change in direction for the state. Prior to its enactment, if any portion of a noncompete or nonsolicit provision was found to be unreasonable, the entire covenant would be deemed unenforceable. Now, a court may choose to enforce a provision only to the extent that it is necessary and reasonable to protect the employer’s legitimate business interests.

Third, the new law provides some long-sought-after guidance as to the scope of restrictive covenants that will be deemed enforceable. With respect to true noncompete agreements, the amendment changes the current law concerning the permissible geographic scope of an enforceable agreement. Rather than being tied to the geographic area in which an employee physically worked, a noncompete provision can now extend to the area in which the employer does business (so long as such area is reasonable). In the alternative, a noncompete provision can list specific competitors of an employer for which an employee may not go work. Such changes are significant in today’s business environment, in which an employee may physically sit in one place while conducting business on the other side of the state or the country.

The new law further clarifies that, in addition to or in lieu of a noncompete agreement, an employer may utilize and enforce a customer nonsolicit provision, pursuant to which a former employee is prohibited from soliciting business on behalf of a competitor from customers, or prospective customers, of his former employer with whom the employee had material contact. Such provisions do not require a geographic limitation and are particularly useful in the sales context.

Fourth, the law gives guidance as to the time limitations that will be deemed reasonable, and therefore enforceable, for restrictive covenants. In the employment context, the new law provides a rebuttable presumption that a two-year limitation following the termination of employment will be reasonable with respect to noncompete and nonsolicit agreements. In a significant change from current law, the law further provides that nondisclosure provisions seeking to prevent the disclosure of an employer’s confidential business information or trade secrets need not have a time limitation, but may continue in effect for so long as the information in question remains confidential.

Fifth, the new law does not apply to all employees, but rather only those who have access to the kinds of sensitive business information that warrant protection. Indeed, the definition of “employee” extends only to executives, research and development personnel or other persons in possession of the employer’s confidential information, and employees in possession of selective or specialized skills, learning, or abilities or customer contacts or information. Thus, “rank and file” employees who do not have access to their employer’s proprietary information in some fashion should not be subject to restrictive covenants governed by the new law.

Impact on Your Company

The passage of the new law will allow employers far more latitude than in the past to craft reasonable restrictive covenants for their employees that protect the employer’s legitimate business interests. Because the new law applies only to those agreements executed on or after January 1, 2011, though, companies desiring to take advantage of the new law should consider having their Georgia employees execute new agreements. For companies that do not currently have restrictive covenant agreements in place with their employees, now is a good time to implement such a practice to ensure that the employers’ sensitive business information is not improperly used or disclosed in the event of the departure of a key employee. Given the complexities of the new law, it would be also advisable to have these new agreements reviewed by counsel to ensure that they will have the greatest potential for being fully enforced by the courts.

Correcting a Timing Discrepancy

You may read that legislators have begun the process of reenacting the law again this legislative session. The reason is a timing discrepancy, which arises from the two-part enactment process of the new law – through a bill, which was enacted first, and an amendment to the Georgia constitution, which was approved and voted upon second. When Georgia voters approved the constitutional amendment on November 2, 2010, it triggered the effective date of the bill. To look at the bill itself, it would appear that it was effective immediately. But a constitutional amendment is not effective until January 1 of the following year, leaving a “gap period” from November 3 until December 31 in which the status of the new law could be questioned.

For questions, please contact Andrew B. Flake. Mr. Flake is a partner in the Litigation Group at Arnall Golden Gregory LLP (andrew.flake@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, www.agg.com.