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Press Release – FTC Uses Penalty Offense Authority to Seek Largest-Ever Civil Penalty

Continuing its recent enforcement trend, the Federal Trade Commission (FTC) took action against national retailers Kohls and Walmart for deceptive environmental claims by utilizing its Penalty Offense Authority. The commission has not only asked the court to order both retailers to stop making deceptive green claims but also pay the largest-ever civil penalty (a combined $5.5 million) in this area. According to the press release:

“The Federal Trade Commission used its Penalty Offense Authority today to take action against national retailers Kohl’s, Inc. and Walmart, Inc. for falsely marketing dozens of rayon textile products as bamboo. Both companies also are charged with making deceptive environmental claims, touting that the “bamboo” textiles were made using ecofriendly processes, while in reality converting bamboo into rayon requires the use of toxic chemicals and results in hazardous pollutants.

The Commission has asked the court to order Kohl’s and Walmart to stop making deceptive green claims or using other misleading advertising, and pay penalties of $2.5 million and $3 million, respectively, by far the largest penalties in this area. The complaints and proposed orders were filed by the U.S. Department of Justice on the FTC’s behalf.

“Kohl’s and Walmart are paying millions of dollars under the FTC’s Penalty Offense Authority for mislabeling their rayon products as bamboo,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “False environmental claims harm both consumers and honest businesses, and companies that greenwash can expect to pay a price.”

The FTC’s complaints against Kohl’s and Walmart are similar in their structure and allegations. According to the complaints, since at least January 2015, Kohl’s, headquartered in Menomonee Falls, Wisconsin, and Walmart, based in Bentonville, Arkansas, have each marketed at least two dozen items as made of bamboo in both product titles and descriptions. In addition, the companies have marketed some of the “bamboo-derived” products as providing general environment benefits, such as being produced “free of harmful chemicals, using clean, non-toxic materials.”

As the complaints allege, Kohl’s and Walmart’s supposed “bamboo” textiles are actually made of rayon derived from bamboo, which was not disclosed to consumers, in violation of the FTC Act and the Textile Act and Rules. Further, the complaints allege the claimed environmental benefits of the products are false and misleading because the rayon manufacturing process uses toxic chemicals and results in the emission of hazardous pollutants.”

The release also goes on to state the following regarding its Penalty Offense Authority:

“The FTC’s Penalty Offense Authority enables the agency to seek civil penalties provided that: 1) the company knew the conduct was unfair or deceptive in violation of the FTC Act; and 2) the FTC had already issued a written decision that such conduct is unfair or deceptive. Over the last six months, the Commission has revived this authority and expanded it to address false earnings claimsfalse job placement claims, and deceptive reviews.

In conjunction with this announcement, the FTC is reviving additional Notices of Penalty Offenses that were issued in the 1970s or 1980s but remain valid and relevant today. These notices cover, for example, textilesenergy savingsfur productshome improvement productsauto rentalsbait and switchtoys, and weight reduction. Businesses in these industries should familiarize themselves with the Commission’s determinations in these areas.”

Click here to read the entire press release from the FTC.

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