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January 24, 2013

The FTC Continues to Cut Down Allegedly Deceptive Bamboo Labeling

Consumer Advertising Law Blog

Four retailers have agreed to pay a combined $1.26 million to settle Federal Trade Commission charges that they violated the Textile Products Identification Act and the FTC's Textile Rules by marketing and advertising rayon products as made of bamboo. According to the FTC, the companies' textile product labels and advertisements − such as "bamboo," "100% bamboo fiber," or "55% Bamboo/45% Cotton" − constituted unfair or deceptive advertising because the products were made of rayon and not actual bamboo fibers woven into fabric. (Long-term readers of this blog will recall that similar FTC enforcement actions were a topic of interest in August 2009 and February 2010.) The settlement does not constitute an admission of wrongdoing by any of the retailers.

The recent trend of marketing products as made of bamboo is an attempt to appeal to the growing market of consumers that consider "green" the new black. However, the process for manufacturing rayon is hardly eco-chic -- rayon is a man-made fiber that is created from the regenerated cellulose of many plants and trees, including bamboo.

In August 2009, after settling similar claims with other companies, the FTC distributed a business alert, How to Avoid Bamboozling Your Customers, cautioning textile manufacturers and sellers that if a product is not made directly with bamboo fiber, it may not be advertised as "bamboo," even if bamboo was used somewhere in the production process. Rather, textile products composed in whole or in part of regenerated cellulose fiber should be labeled using the generic fiber name: rayon. The FTC also said that if bamboo is used as the raw material, the product can be labeled "rayon made from bamboo," which accurately indicates that bamboo was used to make the rayon without implying that the product has the environmentally-friendly qualities of pure bamboo fiber.

Furthermore, in January 2010 the FTC sent a warning letter to more than 78 companies, including the four retailers in this case, informingthem about potential civil liability for claiming that rayon products were made of bamboo, and urging them to correct any misleading claims. The FTC alleges that despite the warning, these companies continued to improperly label and advertise rayon textiles as "bamboo" products. The settlement amounts in these cases were determined in part by how long the companies allegedly continued to sell mislabeled products after receiving the January 2010 warning letter from the Commission.

The settlement orders prohibit future advertising misrepresentations about "bamboo" textiles.

And, consistent with current law, the settlement orders allow the companies to avoid future liability by obtaining a "good faith" guaranty from suppliers certifying that products are not mislabeled, falsely invoiced, or falsely advertised. This "good faith" provision does not apply, however, if the company knew or should have known that products were mislabeled. The orders make clear that if the Commission sends a warning letter about improper labeling (as it did in this case), that company is on notice and is thus precluded from relying on a supplier's guaranty to avoid liability. The orders also state − consistent with the FTC's new Enforcement Policy Statement − that if the company cannot obtain a good faith guarantee from the supplier, as long as the company does not (i) embellish claims provided by the supplier, or (ii) sell the product as a private label product, the company will not be liable for a Textile Act violation unless it knew or should have known that the product was improperly labeled.

It is clear that the FTC is intent on cutting down all misleading bamboo claims. It is important that retailers of textile products assess their labeling and advertising claims to ensure that the fiber content and environmental benefits of such products are not being misrepresented, especially after receiving a warning letter from the Commission.

© Arnold & Porter Kaye Scholer LLP 2013 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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Matthew Shultz
Matthew Shultz
Counsel
Washington, DC
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