Relational integrity regulation: nudging consumers toward products bearing valid environmental marketing claims.

• Author: Minneti, Jeffrey J.

1. INTRODUCTION II. BUILDING A FRAMEWORK FOR RELATIONAL INTEGRITY REGULATION A. Recent Environmental Regulation Scholarship B. The Genesis of Relational Integrity Regulation III. PUBLIC AND PRIVATE ENVIRONMENTAL MARKETING CLAIM REGULATORY SCHEMES A. Assessment of the United States' Regulation of Environmental Marketing Claims 1. Regulation of Self-Declared Claims: The Green Guides 2. Eco-labels: Energy Guide and Energy Star 3. Proposed Eco-Label for Other Environmental Product Attributes B. Application of Relational Integrity Regulation Criteria to the U.S. Environmental Regulatory Scheme 1. Reflexive. 2. Preference-Directed 3. Product- and Process-Based 4. Personal Norm Activation C Application of Relational Integrity Regulation Criteria to the Discussion Draft of the Eco-Labeling Act of 2008 1. Reflexive 2. Preference-Directed 3. Product- and Process-Based 4. Personal Norm Activation D. Assessment of the European Union's Regulation of Environmental Marketing Claims 1. The European Union's Eco-Label Scheme a. Eco-Label Scope b. Eco-Label Actors c. Development of Eco-Label Criteria d. Adoption of Eco-Label Criteria 2. Application of the Relational Integrity Regulation Criteria to the European Union's Environmental Marketing Claim Regulation a. Reflexive b. Preference-directed c. Product- and Process-Based d. Personal Norm Activation E. Assessment of the International Organization for Standardization's Eco-label Efforts 1. Description of the International Organization for Standardization s Environmental Standards 2. Application of Relational Integrity Criteria to the International Organization for Standardization's Environmental Marketing Claim Standards a. Reflexive b. Preference-Directed c. Product- and Process-Based d. Personal Norm Activation IV. IMPLICATIONS OF THE APPLICATION OF RELATIONAL INTEGRITY CRITERIA TO THE U.S., EU, AND ISO ENVIRONMENTAL MARKETING CLAIM REGULATORY SCHEMES V. CONCLUSION I. INTRODUCTION

   Recently, I attended a law school function where clear plastic cups were provided for cold beverages. The cups prominently declared that they were made from corn and were 100% compostable. Intrigued by the cups' claims, I researched NatureWorks LLC, the cups' manufacturer, and learned that the cups are made from Ingeo fiber, which is derived from dextrose, or sugar, found in corn. (1) Nothing on the cup or its packaging indicated that the cup could not be composted in my backyard compost pile. However, the NatureWorks website states that the cups are only compostable in an industrial composting facility. (2) Unfortunately, the nearest industrial composting facility is located in Georgia, approximately four hundred seventy-five miles from where I used the cup. (3) A conversation with the school's purchasing chef indicated that in a campus-wide effort to "go green," the chef is "encouraged" to purchase "green" products for the law school's cafeteria and cafe. When I informed the chef that the "green" cups were not compostable in Florida, the chef shook his head and questioned why he had paid extra for the cups. He noted that the NatureWorks cups costs $0.10 each, but a comparable paper cup costs $0.06.

   Aware of the propensity for sellers to make self-declared environmental claims about their products, the Federal Trade Commission (FTC) has promulgated Guides for the Use of Environmental Marketing Claims (Green Guides or Guides). (4) The Green Guides include principles, definitions, and illustrations (5) that shed light on the kinds of claims that will not run afoul of Section 5 of the FTC Act. (6) For example, the Guides offer the following regarding products claiming that they are "Compostable":

   (1) It is deceptive to misrepresent, directly or by implication, that a product or package is compostable. A claim that a product or package is compostable should be substantiated by competent and reliable scientific evidence that all the materials in the product or package will break down into, or otherwise become part of, usable compost (e.g., soil-conditioning material, mulch) in a safe and timely manner in an appropriate composting program or facility, or in a home compost pile or device. Claims of compostability should be qualified to the extent necessary to avoid consumer deception. An unqualified claim may be deceptive if:

   (i) The package cannot be safely composted in a home compost pile or device; or

   (ii) The claim misleads consumers about the environmental benefit provided when the product is disposed of in a landfill.

   (2) A claim that a product is compostable in a municipal or institutional composting facility may need to be qualified to the extent necessary to avoid deception about the limited availability of such composting facilities. (7)

   Arguably, the "100% Compostable" claim on the NatureWorks cups is deceptive because the compostable claim is unqualified, yet the cups are only compostable in industrial composting facilities. The provisions of the Green Guides, however, are not law; (8) instead, conduct inconsistent with the Guides "may result in corrective action" if FTC finds that the seller's conduct is unlawful under Section 5 of the FTC Act. (9) Section 5 directs FTC to prevent "persons, partnerships, or corporations" from engaging in "deceptive acts or practices in or affecting commerce." (10) Should it find that NatureWorks's compostable claim is deceptive, FTC may issue a complaint against NatureWorks, which would trigger a notice and hearing procedure, and could result in a cease and desist order. (11) However, such cease and desist orders are few and far between, (12) and retail shelves are replete with products bearing false or arguably deceptive claims. (13) Meanwhile, consumers are left to try to make sense of sellers' claims. Some, such as the purchasing chef above, blindly reach out to products making environmental marketing claims, hoping that the claims are valid. Others attend to the claims, but because they distrust them, they use different product attributes, such as price to distinguish between products, and still others have grown completely indifferent to environmental marketing claims, to the point where such claims are largely ignored. (14)

   Since the early 1990s, scholars have addressed whether the regulation of environmental marketing claims is necessary and if so what form that regulation should take. (15) In recent years, authors have observed that the Green Guides' approach has not been effective in controlling the proliferation of false environmental marketing claims, (16) and they have proposed a variety of remedies, which generally include some form of increased regulation. (17) In an earlier article, I argued that, given consumers bounded rationality and self-interest and the high information costs associated with determining the validity of environmental marketing claims, government regulation of the claims was appropriate, even when considering the cognitive loss that consumers would experience by not having to make the determination for themselves. (18)

   The question is no longer whether to regulate environmental marketing claims, but how to effectively do so. Over the last two decades scholars have addressed attributes of effective environmental regulation and advocated a wide spectrum of regulatory approaches, from the traditional command-and-control model to a libertarian-paternalism approach. (19) Some writers have used those approaches to advocate for modifications to the Green Guides. (20) This Article joins that conversation and accomplishes two goals. First, it harmonizes environmental regulation scholarship, resulting in the creation of a new form of regulation that it terms "Relational Integrity" regulation. Second, in light of the Relational Integrity approach to regulation, the Article examines public and private environmental claim regulatory schemes and suggests how those schemes could be more effective.

   More specifically, in Part II, the Article summarizes recent scholarship on models for environmental regulation, including reflexive law, preference-directed regulation, product- and process-based regulation, and personal norm activation. Part II synthesizes that scholarship, resulting in criteria for Relational Integrity regulation. In light of the Relational Integrity model, Part III assesses several environmental marketing claim regulatory schemes, including existing and proposed legislation in the United States, recently enacted eco-label regulation in the European Union (EU), and a set of environmental marketing claim standards promulgated by the non-governmental International Organization for Standardization (ISO) and suggests ways that each could be improved. Part IV discusses the implications of the Relational Integrity criteria assessment and observes that although the ISO standards are a product of an international non-governmental entity, the standards fare as well as, if not better than, existing and proposed governmental regulation in reaching the Relational Integrity standard.

2. BUILDING A FRAMEWORK FOR RELATIONAL INTEGRITY REGULATION

   1. Recent Environmental Regulation Scholarship

      In recent years, environmental marketing regulation scholarship has expressed multiple points of view. Some writers, concerned with the rapid proliferation of false environmental marketing claims, have argued that the federal government should enact command-and-control legislation that would prohibit firms from making false claims. (21) Others assert that market forces are capable of weeding out false claims without government intervention or that price, as opposed to a product label, is the more effective vehicle to communicate a product's environmental value. (22) Striking a balance between command-and-control and pure market-based approaches, reflexive law advocates point out that regulation that draws firms into the regulatory process, beyond the mere opportunity to offer comment, is more effective because the regulation is more in tune...