In This Issue:

• Stretching the Truth? Class Action Targeting Lululemon Claims Athleisure Brand "Greenwashing" Its Environmental Impact
• Misleading Business Endorsements Make a Cameo in Multistate AG Settlement With Celebrity "Shoutout" Video Company
• Made in the U—er, Europe? NAD Matter Considers Whether Use of EU Flag Imagery Is Misleading as to Country of Origin

Stretching the Truth? Class Action Targeting Lululemon Claims Athleisure Brand "Greenwashing" Its Environmental Impact

Claims of greenwashing in the ESG space continue: A Florida class action lawsuit alleges that "athleisure" fashion brand Lululemon is misleading consumers about the environmental impact of its business practices and that its efforts to position itself as a company that contributes to a sustainable environmental future are false advertising.

The plaintiff focuses on a campaign launched by Lululemon in 2020 with the release of an "Impact Agenda" outlining various steps Lululemon would take to address various environmental and social goals. In particular, in a section of the initiative called "Be Planet," Lululemon described how it would reduce its environmental impact, including sourcing its electricity from renewable power sources, incorporating sustainable materials in 100% of its products by 2030 and reducing carbon emissions. And following the campaign launch, the plaintiff asserts, Lululemon continued to publish statements and images on its website and in ads and other marketing materials creating the impression that Lululemon is a "planet-friendly" company.

These claims, says plaintiff, are false. The complaint characterizes Lululemon as a carbon-hungry retailer that also sheds microplastics into the environment and uses billions of liters of freshwater to make its products, citing Lululemon's own Environmental Impact Report. According to the plaintiff, Lululemon's business practices are not sustainable, and rather than "sustaining and positively improving the planet" cause "negative impact and harm." The complaint asserts that environmental messages conveyed by Lululemon's marketing campaign are "unfair, false, deceptive, and misleading to reasonable consumers" and flout "every single guideline for environmental marketing claims" in the FTC's Green Guides.

The complaint focuses on broad statements contained in various Lululemon communications that the company's products "avoid environmental harm and contribute to restoring a healthy planet," asserting that such statements do not accurately reflect the company's business practices. The complaint also details various statements by Lululemon that, according to plaintiff, overstate the relatively minor beneficial impact of Lululemon environmental initiatives and mislead consumers regarding the company's progress toward its stated greenhouse gas emission reduction targets. The complaint indicates that Lululemon (and the retail sector generally) are large contributors to greenhouse gas emissions, and that the company's "Scope 3" greenhouse gas emissions actually doubled between 2020 and 2022. In addition, claims plaintiff, many of the company's products are made with synthetic fabrics manufactured from fossil fuels, and its representations that it is working with suppliers to increase its use of renewable energy are not "verifiable."

The complaint alleges violations of Florida's Deceptive and Unfair Trade Practices Act and Fla. Stat. §§ 817.41 forbidding misleading advertising, as well as common law causes of action.

Lululemon has not yet filed an answer to the complaint, but a spokesperson indicated that the company stands by its public statements regarding its environmental goals.

Key Takeaways

This case is one of the latest in a seemingly never-ending wave of greenwashing lawsuits targeting corporate environmental and sustainability claims. As this matter and other greenwashing false advertising cases show, advertisers making environmental and sustainability claims—including those that are aspirational—should expect continued scrutiny from an aggressive plaintiffs' bar.

Misleading Business Endorsements Make a Cameo in Multistate AG Settlement With Celebrity "Shoutout" Video Company

If this were a video made on the Cameo platform, which allows ordinary Joes and Janes to hire small-time celebrities and influencers to voice congratulatory "shoutout" videos, it would feature the attorneys general of 30 states, including New York, Florida, California, Alabama, and Ohio, congratulating each other on reaching a settlement with the company.

These 30 attorneys general entered into a settlement with Cameo to resolve a multistate investigation alleging that the company's "Business Cameo," which allows businesses to hire celebrities to promote their products or services offerings, violates the Federal Trade Commission (FTC) Endorsement Guides and state consumer protection laws.

According to the attorneys general, Cameo failed to ensure that consumers were aware that videos promoting products under "Business Cameo" were paid endorsements and to implement measures to ensure that endorsements made in these videos were properly disclosed. The endorsements accordingly did not comply with the FTC Endorsement Guidelines and, the attorneys general contend, violated state laws.

The settlement requires Cameo generally to comply with disclosure requirements and to refrain from misrepresentations in connection with endorsements of Cameo's own products and services—and to put in place practices to ensure that users of Cameo's services will do the same when using Cameo's services to promote the users' products and services. These practices, which are set out in detail in the settlement, include maintaining a watermark or similar disclosure system to identify videos as paid Cameo videos, providing guidance to brands regarding the proper use of the disclosure system, requiring endorsers who create Cameo videos to expressly confirm that they will comply with FTC and state law disclosure requirements, monitoring for noncompliance, and establishing a mechanism for third parties to report noncompliant videos to Cameo.

The settlement also requires a settlement payment by Cameo of $600,000 but provides that due to Cameo's inability to pay, after payment of $100,000, the remaining payment obligation would be suspended (subject to Cameo's ongoing compliance with the settlement terms).

Key Takeaways

The multistate AG settlement is an interesting companion to the various steps taken by the FTC in recent years to ensure that material connection disclosures are front and center in influencer and related advertising. The settlement generally tracks the FTC's Endorsement Guides in its focus on ensuring disclosures are made and misrepresentations are avoided in connection with endorsements, and spells out in significant detail the measures Cameo must implement to accomplish those goals. This is the latest warning to brands large and small, and the companies that provide marketing services to them, that disregarding the Endorsement Guides can bring with it significant regulatory risk.

Made in the U—er, Europe? NAD Matter Considers Whether Use of EU Flag Imagery Is Misleading as to Country of Origin

In advertising to an American audience, is use of an EU flag image misleading when featured on infant formula that is labeled as a product of the U.K.?

That's the question the National Advertising Division (NAD) recently considered in a Fast-Track SWIFT challenge by Mead Johnson & Company (MJ), manufacturer of Enfamil infant formula, to claims made by Kendal Nutricare on packaging for Kendal's Kendamil Nutricare infant formula. Kendamil is made in the United Kingdom and the EU, both with milk sourced from the U.K. as the primary ingredient.

MJ argued that when Kendamil entered the U.S. market following the formula shortage of 2022, it replaced packaging featuring the British flag with an image of a flag resembling that of the European Union, an entity that excludes the U.K. MJ argued that this conveyed the false claim that Kendamil formula is made in the EU.

Analogizing to the FTC's "Made in USA" claim substantiation standard (for background, see here, here, and here), MJ argued that use of the EU flag required Kendal to manufacture "all or virtually all" of its formula in the EU. Because Kendal also manufactures Kendamil in the U.K., MJ asserted, they could not meet an "all or virtually all" standard. Therefore, the claim was false.

Kendal countered that nothing in its advertising represents that its products are made in the EU, given that the flag image it uses is a circular image of the nine gold stars against a blue background, which is not equivalent to the EU flag and was chosen as a representation of the European continent rather than a political entity. Its advertising, Kendal argued, truthfully conveys that its products are produced in Europe and comply with European baby formula standards.

NAD side-stepped the awkward attempted application of the FTC's "Made in USA" standard and focused instead on the net impression. NAD found that the flag logo was not associated with the European Union but with the European continent (which includes the U.K., even if the European Union no longer does). NAD also considered that the Kendamil packaging featured other images and language including "made with love in Europe" and an express disclosure of the U.K. as the country of origin. Taken together, these conveyed the message that the products originate from the European continent rather than specifically in the EU. Further, "European Union" or "EU" did not appear anywhere on the packaging. In this context where the flag did not appear by itself, the message conveyed to American consumers is that the product is "European" rather than domestic.

NAD did recommend that Kendal modify its website, which featured the same nine-star blue flag logo. Like the package, the website references Europe generally and doesn't claim the products are from the European Union, but without the inclusion of a specific country of origin on the site, consumers could come away with a more "ambiguous" message about the product origin.

Key Takeaways

Whether national symbols or colors convey a country of origin claim or are held to a specific substantiation standard are tricky questions. Although NAD mentions it almost in passing, the inclusion of a foreign country of origin disclosure—Product of the U.K.—which was required for U.S. Customs compliance, was significant. This is not the first time that such a disclosure has been the deciding factor. Followers of false advertising litigation are likely familiar with the recent 2nd Circuit affirmation of the lower court's dismissal in Hardy v. Ole Mexican Foods, in which the court found that no reasonable consumer would be misled into thinking that tortillas branded with the colors of the Mexican flag were made in Mexico when the product expressly disclosed that it was "Made in USA." The lesson, dear readers, is if companies want to use branding indicative of a particular region, they may also want to consider an express disclosure of origin (even if not required for Customs compliance) to help ensure that their claims are defensible if challenged.

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