March 2, 2012

Closing the Window on Deceptive Claims

Seller Beware: Consumer Protection Insights for Industry

Last week, the Federal Trade Commission (FTC) touted settlements with five replacement window sellers over energy efficiency and heating and cooling cost savings claims as “part of a broad FTC effort to ensure that environmental marketing is truthful and based on solid scientific evidence.”  This is further evidence that even though the revised Green Guides have yet to be finalized, green claims are still an FTC enforcement priority because of their popularity with advertisers.

The consent orders prohibit the sellers from making any claims that consumers will achieve a specific (or up to a specific) energy or costs savings unless the seller “possesses and relies upon competent and reliable scientific evidence to substantiate that all or almost all consumers are likely to receive the maximum represented savings or reduction.”  The analyses accompanying the proposed orders explain that the “all or substantially all” standard represents “fencing-in” relief--relief that reaches beyond the conduct complained of to related conduct, which may not violate the FTC Act, to help ensure compliance with the order.  The FTC typically tries to include fencing-in relief in its consent orders.

The “all or substantially all” standard in the consent orders applies to claims that consumers will achieve savings “up to” a specified amount.  Some of the analyses accompanying the proposed orders explain that in the context of the sellers’ advertisements, “up to” did not effectively qualify the claims about what energy or cost savings consumers should expect, and that the proposed orders should not be read as a statement as to how the FTC will interpret “up to” claims for other products or services.  In other words, the FTC apparently concluded that the sellers’ advertisements represented that consumers should expect to receive the maximum specified savings.  For example, one seller ran a newspaper ad claiming “Up to 40% FUEL SAVINGS” and another ad claiming “40% Fuel Savings.”  Other marketing materials also claimed a 40% savings without the “up to” qualification.

The proposed consent orders also highlight that specificity counts when making environmental claims. The Green Guides advise that specific environmental claims are easier to substantiate and are less likely to be deceptive.  The Green Guides also caution that the basis of a comparative environmental claim needs to be clear in order to avoid confusion about what comparison is being made.  As discussed in the analyses accompanying the proposed orders, a house’s energy efficiency depends on several factors, including its geographic location, its insulation, as well as the existing windows.  Because each consumer’s circumstances are different, it could be difficult to substantiate general claims about energy or cost savings.  Thus, the consent orders allow claims of specific energy or cost savings under specified circumstances if those circumstances are clearly and prominently disclosed in close proximity to the claim.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.



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