Updated: It's Good for You: Managing Consumer Confusion Over Organic Labeling Claims on Non-Agricultural Products | Practical Law

Updated: It's Good for You: Managing Consumer Confusion Over Organic Labeling Claims on Non-Agricultural Products | Practical Law

Consumers increasingly seek out products that promise organic ingredients. While organic claims on food products are regulated by the Food and Drug Administration (FDA) and the US Department of Agriculture, organic claims on non-agricultural products are not specifically regulated. A recent roundtable hosted by the Federal Trade Commission (FTC) and the USDA discussed consumer confusion over organic claims and whether the FTC should impose regulations. This legal update examines the issues raised at the roundtable, provides practical guidance for making and substantiating organic claims on non-food products under the current regulatory scheme, and discusses the FTC’s first settlement with a company for making false or misleading organic product claims.

Updated: It's Good for You: Managing Consumer Confusion Over Organic Labeling Claims on Non-Agricultural Products

by Practical Law Commercial Transactions
Law stated as of 22 Dec 2017 • USA (National/Federal)
Consumers increasingly seek out products that promise organic ingredients. While organic claims on food products are regulated by the Food and Drug Administration (FDA) and the US Department of Agriculture, organic claims on non-agricultural products are not specifically regulated. A recent roundtable hosted by the Federal Trade Commission (FTC) and the USDA discussed consumer confusion over organic claims and whether the FTC should impose regulations. This legal update examines the issues raised at the roundtable, provides practical guidance for making and substantiating organic claims on non-food products under the current regulatory scheme, and discusses the FTC’s first settlement with a company for making false or misleading organic product claims.
This resource was updated on December 22, 2017, with a summary of the first FTC settlement of a case against a company for making organic product claims. See FTC Settlement.
Consumer purchasing patterns are increasingly health-conscious, even when it comes to non-food items like bathroom cleaners and mattresses. To identify healthy products, consumers may look for products with organic ingredients, but the term organic can confuse consumers and confound regulators when it is applied to non-agricultural products.
To discuss potential consumer confusion over the use of the term organic in labeling of non-agricultural products, the Federal Trade Commission (FTC) and US Department of Agricultural (USDA) held a roundtable discussion with consumer interest groups, trade associations, and academics on October 20, 2016. The discussion indicated that the FTC may be in the early stages of issuing guidance or regulations for organic claims on non-food products.
Until the FTC provides clearer guidelines, manufacturers must navigate organic labeling claims using the existing regulatory schemes, including:
This legal update will address key issues of consumer confusion raised at the October roundtable and practical steps manufacturers can take to ensure compliance with FTC regulations and guidance in light of that confusion.

Consumer Confusion Over Organic Claims on Food and Non-Food Products

The October roundtable discussion highlighted two key issues that manufacturers should consider as they seek to comply with both the Green Guides and the FTC's general requirements for truthful advertising:
  • Consumer confusion caused by the USDA's and FDA's regulation of organic food products.
  • Consumer expectations of the term organic as applied to non-food products.

Confusion Over Regulator Certification of Organic Claims

The FTC's primary concern over organic labeling claims on non-agricultural products is whether consumers believe the word "organic" serves as a stand-in for implied claims about a product's health and safety. This concern stems partly from the successful regulation of organic claims on food products under the Organic Foods Production Act (OFPA) (7 U.S.C. §§ 6501-6524) and USDA regulations, which establish the National Organic Program's more specific organic standards.
The OFPA and USDA regulations create strict labeling requirements for organic products, allowing only producers that are USDA-certified organic to make organic claims on their product's principal display panel or use the USDA organic seal on their product's label or package. Organic claims on food product labels have clear meanings defined by the USDA's scheme, which certifies claims for foods that are:
  • 100% organic.
  • Organic.
  • Made with organic ingredients.
(7 C.F.R. §§ 205.300 – 205.311.)
For more information on labeling requirements for organic food products, see Practice Note, Producing and Labeling Organic Agricultural Goods: Labeling Requirements.
Consumers familiar with this scheme for food products may assume a similar regulatory scheme exists for non-food items. They may assume that an organic claim on a bottle of shampoo or a mattress indicates that the USDA or another agency has investigated and approved the claim. The existence of a strict certification scheme for organic claims on food may have inadvertently led consumers to believe the certification process applies to non-agricultural products as well, when it does not.
The line may also be blurred by the use of agricultural ingredients in non-food products. For instance, many beauty and personal care products contain ingredients also found in food, such as acai berries or oatmeal. If these products also make organic claims on their labels, consumers could be more likely to associate the claims with the USDA's certification seals for food products.

Confusion Over the Meaning of Organic

Another key issue raised at the roundtable was the way consumers interpret and define the term organic when it is used as a labeling claim on non-food products. The OFPA clearly defines organic as applied to food products to mean generally that the food is:
  • Produced and handled:
    • without the use of synthetic chemicals; and
    • in compliance with a USDA approved organic plan.
  • Not produced on land treated with any prohibited substances, including synthetic chemicals, during the three years before the agricultural product's harvest.
(7 U.S.C. § 6504.)
No such clear definition exists for non-food products. Consumers may could take an organic claim to mean that a product is produced in a particular way, or that the product does not contain certain substances. They may generally associate organic products with healthy and non-toxic ingredients. These associations may be appropriate in many cases, but the lack of a clear definition of organic for non-food items means that, in some cases, the consumer is not obtaining the benefits from a product that she might have expected.

Substantiating Organic Labeling Claims

Consumer confusion over organic labeling claims on non-food items is a problem for manufacturers because the FTC requires that advertising claims be both truthful and not misleading. Manufacturers therefore must be able to substantiate all labeling claims, both express and implied.
This does not mean manufacturers cannot make organic claims on non-food products, but they must be cautious in how the claim is presented. As with all advertising claims, manufacturers must have a reasonable basis for making the organic claim. They must also consider how the claim is being conveyed to consumers.
Manufacturers can find guidance for organic claims in the FTC's Guides for the Use of Environmental Marketing Claims (Green Guides) and its updates. (16 C.F.R. §§ 260.1-260.17.)
The Green Guides apply to all forms of marketing, including labeling. They provide four general principles for green marketing claims:
  • Make clear, prominent, and understandable statements.
  • Identify to what the claims apply.
  • Do not overstate the environmental attribute or benefit.
  • Ensure that the basis for any comparative claims is clear.
For more detailed information on the Green Guides, see Practice Note, Green Marketing in the US.
If the FTC decides to provide guidance specific to organic claims for non-food products, it will likely do so through an update to the Green Guides. Until it issues that guidance, the guides still provide important information. Based on both the general principals of the Green Guides and the specific guidance offered for similar claims such as "free-of" or "non-toxic," manufacturers making organic claims on non-food product labels should:
  • Ensure they have a reasonable basis for claiming that a product is organic, and be able to substantiate the claim.
  • Make clear and conspicuous qualifiers of the claim to the extent necessary to avoid consumer deception.
  • Specify whether the claim refers to the product, the product's packaging, a service, or just a portion of one of these.
  • Use precise language for the claim, and not overstate the benefits of the product's organic qualities.
For more on substantiation of advertising claims, including claims related to health and environmental benefits, see Practice Note, Substantiation of Advertising Claims.

FTC Settlement

The FTC challenged a company’s organic product claims for the first time on September 28, 2017, when it filed an administrative complaint against Moonlight Slumber, LLC. Moonlight Slumber manufactures and sells baby mattresses, including several styles of mattress the company advertises as organic and with materials the company claims are organic, hypoallergenic, natural, and eco-friendly. The FTC alleged these claims were false and misleading.
Moonlight Slumber’s product claims highlight several of the risks of making unsubstantiated claims that a product is organic or natural. Specifically, the company:
  • Made numerous claims that its baby mattresses and their components were organic, even though most of the mattresses components were entirely or mostly inorganic.
  • Made numerous claims that its baby mattresses and their components were made from natural or plant-based materials, even though these components were primarily made from synthetic materials.
  • Claimed that testing showed Moonlight Slumber products did not release Volatile Organic Compounds (VOCs), even though the company did not possess testing proving this claim.
  • Displayed a Green Safety Shield on its products near certifications from independent third parties without disclosing that the company, not an independent third party, awarded this shield to its own products.
Moonlight Slumber agreed to settle these allegations. The FTC issued a consent order on December 12, 2017, which prohibits Moonlight Slumber from making the above claims in the future without being able to substantiate them. In particular, the order prohibits the company from:
  • Making organic or natural product claims that are false or misleading.
  • Making claims regarding VOCs or other emissions without being in possession evidence to back up these claims.
  • Misrepresenting the results of any tests or studies.
  • Advertising or labeling products with misleading certifications, or failing to disclose material connections to an endorser.