United States: Green Is In The Eye Of The Beholder: Without A Third-Party Seal Of Approval, Companies Should Think Twice About Labeling Their Products As "Green", "Sustainable" Or "Environmentally-Friendly."

Last Updated: May 2 2011
Article by Peter W. Sheehan Jr.,

Next November, a federal court in California is scheduled to preside over an important "greenwashing" class action lawsuit. In Koh v. S.C. Johnson & Son, Inc., No. C-09-00927 RMW, a plaintiff, on behalf of himself and other individuals that purchased various S.C. Johnson & Son household cleaning products, sued that company, alleging that the company's "Greenlist(tm)" labeling system was false and misleading.

Some background on "Greenlist(tm)" is helpful to understanding the plaintiffs' allegations. S.C. Johnson & Son developed its Greenlist process and labeling system as a way to rate its products in terms of their impact on the environment. In January, 2008, the company began marketing and selling Windex in packages that, according to the U.S. District Court for the Northern District of California, "prominently display[ed]" the company's Greenlist label. The front of the label contained "a stylized drawing of two leaves and a stem." The reverse side of the label, which allegedly could be viewed through the back of the Windex packaging, read, "Greenlist(tm) is a rating system that promotes the use of environmentally responsible ingredients. For additional information, visit [S.C. Johnson & Son's website]." Eventually, S.C. Johnson & Son started affixing its Greenlist label to other products that it sold.

The class of plaintiffs contends that S.C. Johnson & Son "deceptively designed [its Greenlist label] to look like a third party seal of approval, which it is not." Their basis for seeking to hold the company liable for misleading them is as follows. They maintain that "among today's environmentally-conscious consumers, products seen as 'green,' or environmentally friendly, often command a premium price and take market share away from similar, non-'green' products." They claim that S.C. Johnson & Son capitalized on this trend, charging higher prices for products with a Greenlist label than for comparable products with no "green" credentials. They allege that they would not have purchased S.C. Johnson & Son's Greenlist products, had they known that the Greenlist label was the result of the company's own review process, and that, as a consequence, they suffered an economic loss by purchasing those products instead of cheaper products with no "green" credentials.

In January, 2010, S.C. Johnson & Son asked the court to dismiss the claims against it, arguing that no reasonable consumer could consider its Greenlist label deceptive. The company pointed out that the label made no mention of third party certification and that the label described Greenlist as a "rating system," not a "seal of approval." The court, however, rejected the company's argument, ruling instead that "it is plausible that a reasonable consumer would interpret the Greenlist label as being from a third party." Moreover, drawing from Federal Trade Commission guidelines recognizing that certain icons and language convey the message that a product is "environmentally superior," the court suggested (1) that the Greenlist label's stylized drawing of two leaves and a stem perhaps conveys the message that Greenlist products are environmentally superior, and (2) that, unless S.C. Johnson and Son can substantiate that message, a jury could find that the Greenlist label is deceptive. The court's denial of S.C. Johnson & Son's motion to dismiss means that the plaintiffs' claims are legally sufficient to be presented a jury. Assuming this case proceeds as scheduled, a California jury will determine whether S.C. Johnson & Son's Greenlist labeling system was deceptive.

Although liability based on misleading labeling is nothing new, the Koh case is noteworthy because it involves the possibility of liability based on a company's characterization of its product as environmentally friendly. It is difficult to imagine a more subjective characterization of a product, and it is almost certain that, with consumers putting so much emphasis on perceived environmental sustainability, there will be more litigation in this area. Yet, one thing is clear already: if S.C. Johnson & Son is found liable in the Koh case, it will be because the company (1) used its own review and labeling process and (2) failed to clearly identify that process as its own. Perhaps S.C. Johnson & Son nevertheless can escape liability by persuading the jury that the Greenlist label is not misleading or that Greenlist products are, in fact, environmentally superior to comparable products with no "green" credentials, but doing so will require the time and expense associated with complex commercial litigation; moreover, the jury might not accept either argument. Thus, companies should be exceedingly careful when marketing and selling environmentally friendly products or services, if that characterization is not supported by an independent third party.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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