Request for additional written comments on issues raised by the January 13-14, 1999 meeting in Washington D.C.
NATIONAL ASSOCIATION OF ATTORNEYS GENERAL
750 FIRST STREET NE, SUITE 100
WASHINGTON, DC 20002
(202) 326-6015
(202) 408-7014
TO: Interested Persons
FROM: NAAG Environmental Marketing Subcommittee
RE: NAAG Environmental Marketing Guidelines for Electricity
In June 1999, the National Association of Attorneys General's Environmental Marketing Subcommittee ("the Subcommittee") solicited written comments on its Draft Environmental Marketing Guidelines for Electricity ("the Guidelines") from approximately 100 industry, consumer and regulatory organizations and individuals. The Subcommittee received comments from 22 parties. All of the comments were carefully considered, and a number of them prompted changes to the Guidelines. The Guidelines, as revised and with two subsequent clarifying amendments, were adopted by the Attorneys General in December 1999. From this point on, issues of interpretation and enforcement of the Guidelines will be handled at the state level, by the various Offices of Attorney General.
Discussed below are the most significant of the comments, along with the Subcommittee's responses and rationale, as reflected in the adopted version of the Guidelines.
1. General principles of deception. Subsection 2(a) of the Draft Guidelines set forth general principles underlying the determination as to whether an environmental marketing claim is deceptive. Two changes that were suggested by commenters were the introduction of a "reasonable consumer" analysis and the inclusion of materiality as an element of deception.
The Subcommittee declined to revise subsection 2(a), because the Guidelines reflect principles that are applicable to all states, and those principles do not include a "reasonable consumer" standard or the requirement that a claim be material before it can be considered deceptive. As the commentary to subsection 2(a) states, "The precise elements of deception will vary somewhat, depending upon the state in or into which the representation or omission is directed. Suppliers of electricity should take these differences into account by steering their marketing claims well clear of the most consumer-protective standards prevailing in their marketing area."
2. Special disclosures for "tagging"-based claims. The Draft Guidelines required that where an environmental marketing claim was based on the purchase of tradable certificates or "tags" representing the attributes of an electricity product (but not the power itself), there should be a "clear and prominent disclosure of the use of a tagging system to substantiate the claim." Subsec. 2(b), para. 6. As noted in the original Example 4 to subsection 2(b), in the case of a claim of "50% Hydro, 50% Natural Gas" that is tagging-based, such a disclosure should "explain[] to consumers that the claim is based on the purchase from specific generators of the right to claim those generators' fuel mix for the power it sells. Without this qualifier, the supplier runs the risk that consumers will understand the fuel source claim to mean something other than the purchase of tradable tags, in which case the claim is deceptive."
A number of commenters opposed this disclosure requirement, on the grounds that (1) tagging should be on equal footing with other methods of substantiation (such as auditable contract paths, under which claims would not require special disclosure); (2) since both tagging and contract paths deliver accurate, verifiable results, it should be irrelevant to consumers which system is used; (3) the required disclosure could confuse consumers and undermine confidence in the new electricity market; and (4) the law does not require disclosure of the systems used to substantiate claims.
What concerned the Subcommittee is the fact that tagging is not only a method of substantiation; it also says something specific about what it is that the consumer is buying. That is, where tags are used to substantiate a claim of "50% Hydro, 50% Natural Gas," the consumer is being asked to buy only the advertised attributes, not the underlying power itself. Contrast this with a situation in which contract paths are used to support the same claim: there, the consumer can rely on the normal expectation that he or she is being asked to buy the advertised product as a whole, including both power and its attributes.
On the other hand, the Subcommittee was persuaded by the commenters that in a tagging regime, claimed generating sources (in the above example, hydro and natural gas) will receive full payment for their product—an "environmental premium" from the consumers who buy the advertised product, plus the price of the underlying electricity when it is sold as part of the total system power. These payments achieve the same result as tagging-based environmental claims seek to portray: that full payment will flow to the preferred generators. In addition, given the general lack of public understanding about how electricity is generated and distributed, there exists the possibility that the disclosure originally mandated by the Guidelines could create more confusion among consumers, rather than less.
Accordingly, the Subcommittee chose to recommend, rather than mandate, that tagging-based claims be accompanied by the disclosure. The Subcommittee was of the view that it is better to be "up front" with consumers from the start about the basis for claims, but that individual states are in the best position to decide whether specific information should be required, and if so how much information and of what type.
3. Qualifications and disclosures. A sentence in subsection 2(c) of the Draft Guidelines on Qualifications and Disclosures read, "If a claim states any specific environmental benefit, it should be accompanied by disclosure of all environmental harms associated with the relevant product or company that reduce or eliminate the stated environmental benefit." One commenter stated that this sentence could be interpreted to require advertisers to disclose all environmental characteristics of their products whenever they make advertising claims about any characteristic. Another party urged that the Subcommittee clarify that the scope of disclosures must be consistent with the scope of the claim made.
The Subcommittee appreciated these concerns but considered the present language of the text and commentary to adequately convey that the scope of required disclosure ("disclosure of all environmental harms associated with the relevant product or company") be tailored to the scope of the claim ("that reduce or eliminate the stated [i.e., the claimed] environmental benefit." The commentary reinforces this meaning: "[T]o avoid overstating a claimed environmental benefit, all environmental harms associated with the advertised product or company that serve to diminish the claimed benefit should be disclosed." (Emphasis added.)
To underscore this approach further, the Subcommittee revised Example 1, which now more clearly ties its disclosure requirements to the scope of the claim made.
Finally, the quoted sentence from the text was reworded in other respects, including a clarification that what needs to be disclosed are all significant environmental harms." Thus, de minimis harms need not be disclosed.
4. Scope of claims—the "life cycle" issue. Subsection 2(h) of the Draft Guidelines stated that environmental marketing claims should take into account, as applicable, four stages in the life cycle of the generation of electricity: (a) the process by which the fuel source is created or prepared; (b) the siting of the generating facility; (c) the process of generating the electricity; and (d) the disposal of waste resulting from generation.
Some commenters suggested that the Subcommittee narrow the range of activities that should be considered when evaluating an environmental marketing claim, or that the proper scope of claims not be delineated at all. Too broad an analysis, they said, would hamper marketers' ability to make useful information available to consumers.
The Subcommittee revised the commentary accompanying subsection 2(h) to clarify that two aspects of electricity generation are not included in its life-cycle approach—the materials and processes used to construct or manufacture generating facilities or devices, and the aesthetic aspects of siting those facilities. The former (including, for example, the energy and raw materials necessary to construct a nuclear power plant or to manufacture solar panels) is simply too far removed from the generation of electricity for one to expect it to be taken into account by consumers when they interpret an environmental marketing claim. The latter (the aesthetics of siting) is both highly subjective and extremely difficult for a marketer to accurately disclose to consumers—and thus inappropriate to include as part of the life cycle under the Guidelines.
The commentary also clarifies that in determining which life-cycle aspects to take into account in any given case, "marketers should consider whether each aspect is relevant to the environmental impact that is the subject of the claim in question."
With these revisions, the Subcommittee wished to underscore the fact that it focused in the Guidelines on only those activities that are most logically related to the production of electric power, and that the life-cycle analysis occurs in the context of the particular claim being made. This is, accordingly, much narrower than what one commenter called the "entire life cycle" of electricity.
5. Definition of "clean." Two commenters asked the Subcommittee to reconsider its decision to deem the use of "clean" to be a general environmental benefit claim, for which every implied representation that the general assertion conveys to consumers must be substantiated (subsection 3(b)). One party urged that the term "clean" be equated with "not dirty"; the other recommended that it apply only to emissions, suggesting that any other approach would be premature in light of the absence of consumer perception research on the subject.
The Subcommittee decided to revise the Guidelines as recommended by these commenters, defining a "clean" energy source as "any energy source that does not cause significant emissions." ("Emissions" are defined broadly in section 4(f) of the Guidelines as "all discharges of matter or energy that have a significant negative impact on the environment.") It was difficult to envision environmental marketing claims utilizing the term "clean" that could be used to convey something unrelated to emissions. However, if an advertisement combined "clean" with other text or images, the context of the ad would be evaluated to see if it extends beyond "clean."
6. "Renewable." The Draft Guidelines contained a specific definition of "renewable" energy sources—namely, those that are naturally replenishable and replenished on some reasonable time scale (subsection 4(a)). Commenters raised three issues relating to this definition: (a) whether the Guidelines should follow existing definitions of "renewable" in state and federal laws and regulations; (b) whether municipal solid waste ("MSW") should be excluded from renewable energy sources (as it is in the Draft); and (c) whether the term "renewable" has a broader meaning than the Guidelines provide.
Several commenters noted that there exist alternative, and in some respects, inconsistent definitions of "renewable," and recommended that the Guidelines defer to these. This the Guidelines already did, as long as the competing definitions applied to environmental marketing claims, see n. 2 (Footnote 2 was amended by the Attorneys General to state, "In the event of a conflict between such state laws or regulations and these Guidelines, the former [may] will prevail." [New language in italics, deleted language in brackets.]); but a new sentence as added to this section to underscore this general point: "Notwithstanding the above, if a particular state's law provides for a different definition of 'renewable,' that definition would prevail in that state."
Some commenters urged that municipal solid waste (or, more generally, waste-to-energy) be considered "renewable" for environmental marketing purposes, though other commenters opposed this view. The problem with permitting all waste-to-energy to be advertised as renewable is that, as in the case of municipal solid waste, a significant portion of the fuel to be combusted may be composed of materials that are not themselves replenishable or replenished on a reasonably short time scale, such as tires, plastics, and household chemicals. Where that is the case, using renewability as a marketing tool would be deceptive. This is not to deny that there might be public benefits to converting waste to energy, so long as that can be done in a safe manner. However, the Subcommittee's task was to minimize the risk of consumer deception, not to make energy policy; and it was believed that marketing as renewable the conversion to energy of a mixture of renewable and non-renewable materials would indeed be misleading. Notwithstanding the above position, the Guidelines do recognize that the laws of certain states include municipal solid waste in their definitions of "renewable," and in those states, the marketing of municipal solid waste as "renewable" would not be deceptive.
Finally, the Subcommittee was cognizant of the potential for using renewability to convey a sense of general environmental superiority. If that happens, a violation might be found under subsection 2(e) of the Guidelines (Overstatement of Environmental Attributes).
7. Emissions claims. One commenter suggested that "emissions" be defined in subsection 4(e) as discharges of matter of energy that have a significant negative impact on the environment, and that emissions managed in conformance with legal requirements are entitled to a presumption that no negative harm to the environment is occurring. The Subcommittee agreed with the first point; all emissions have some environmental impact, and only those that are significant (that is, more than de minimis) should be taken into account in analyzing marketing claims. The second point is more problematic: the fact that a generating facility's level of emission x is within legal limits is just not the same as saying that that no significant harm to the environment is being caused by those emissions. Each statement or implication of environmental harm or benefit needs to be evaluated based on its underlying facts, without presuming either harm or benefit.
8. Environmental certifications. Subsection 4(f) of the Guidelines addresses the use of third- party certifications. To avoid consumer deception, the Draft provided that such certifications should be accompanied by the name of the certifying organization, a brief description of the criteria used to award the label, and information sufficient to allow consumers to obtain more information on the certification. (This last item was revised to ensure that at least a toll-free telephone number—to which virtually all consumers should have access—is provided.) Several commenters recommended that these disclosure requirements be relaxed, to avoid hampering environmental certification programs.
The Subcommittee agreed that there should not be an absolute requirement that the disclosures in question be made and has revised this subsection accordingly. Under the revised text, the disclosures (certifier's name, certification criteria and contact information) are recommended but not mandated. However, if adequate qualifying language is not given, the certification will be treated as a general environmental benefit claim, encompassing whatever meanings consumers may derive from the label.
This subsection was further revised to require that a certifier have the expertise that it represents it has; that it exercise that expertise in rendering the certification; that the certification be by the organization as a whole; and that the certifier be independent of the company or product it certifies. The first three of these requirements were adapted from the Federal Trade Commission's Guides on Endorsements and Testimonials in Advertising, 16 C.F.R. part 251. The last of the requirements—the certifier's independence—is logically inferred from the use of such an endorsement.
9. Mandatory labeling. Subsection 4(g) of the Draft Guidelines called for governmentally mandated labels for electricity products to be in conformity with the Guidelines. Several parties commented that states should have a free hand in designing labels that provide consumers with important information on fuel mix, emissions and other energy attributes.
The Subcommittee recognized that mandatory labels serve a different function from marketing guidelines; they are designed to educate consumers, not to prevent deception. If a state regulatory agency makes the judgment that only four particular emissions can understandably be disclosed on a "Fuel Facts" label sent by companies to their customers, it wants to be able to mandate a label containing only that information—even if some generators produce significant amounts of other, non-labeled emissions. Yet there is a risk of misleading consumers, who may think that any emissions that do not appear on the governmentally-sanctioned label do not exist or are at such a low level as not to warrant being mentioned.
To strike a better balance between the labeling and non-deception functions, the Subcommittee qualified its goal of consistency by adding the phrase, "to the maximum extent possible" in the text and by making comparable changes to the commentary. The revised commentary goes on to state that the goal of consistency can be furthered by including in any label "a clear and prominent explanation of what information is being presented (for example, absolute and relative levels of four specific air emissions) and what information is being omitted (all other emissions into air, land and water)." Such an explanation will serve to set in context the disclosures in the label, helping consumers to understand that there may be other factors to consider in evaluating the environmental impact of a given product or company. The explanation will also help avoid implications about environmental impacts that an advertisement by the same private company could not legally have conveyed.
10. Other quantitative claims. Subsection 4(h) sets out principles governing claims such as "no x," "low x," and "all x." Some commenters urged that the specific quantitative benchmark for "low x" in the Draft Guidelines (less than ten percent of the percentage of the amount of an emission or of the percentage of a fuel source) be eliminated or raised. The Subcommittee was persuaded that embracing any specific quantitative standard is at least premature, given the absence of consumer perception research, and has thus substituted the phrase "substantially less" for "less than ten percent." Individual cases will have to be evaluated on their own facts.
11. First Amendment issue. One commenter urged the Subcommittee to add to the Guidelines a statement that entities, such as trade associations, that do not have a product to sell, may advertise the environmental attributes of their industry without triggering the Guidelines' application, based on their First Amendment right of free speech. The Subcommittee was sensitive to First Amendment concerns and to the value of vigorous and unfettered public debate on energy policy. By the same token, a trade association that makes claims about the environmental attributes of its members' electricity products may effectively be acting as a solicitor of consumer interest in purchasing those products, in which case it should be subject to the Guidelines. In any case, these Guidelines are not the proper place to attempt to draw the line between commercial and political speech.
CHRISTINE T. MILLIKEN
Executive Director
General Counsel
PRESIDENT
CHRISTINE 0. GREGOIRE
Attorney General of Washington
PRESIDENT-ELECT
ANDREW KETTERER
Attorney General of Maine
VICE PRESIDENT
CARLA J. STOVALL
Attorney General of Kansas
IMMEDIATE PAST PRESIDENT
MIKE MOORE
Attorney General of Mississippi
|
