FTC Fines Company for Not Being Truly Organic

The FTC Recently Announced that Truly Organic, Inc. and its Founder/CEO Maxx Harley Appelman will Pay $1.76 Million Settlement for Deceptive Advertising

Organic and eco-friendly products are increasingly popular with consumers. However, businesses that rely on environmental marketing to sell their products and services must have the science to back up their claims. If not, you could face costly allegations of deceptive advertising from regulators and consumers.

FTC Complaint Against Truly Organic

The Federal Trade Commission (FTC) recently announced that Truly Organic Inc. (Truly Organic) and its founder and CEO, Maxx Harley Appelman, will pay $1.76 million to settle a complaint alleging that their nationally marketed bath and beauty products are neither “100% organic” nor “certified organic” by the U.S. Department of Agriculture (USDA). The FTC’s complaint alleged violations of Section 5 of the Federal Trade Commission Act (FTC Act), which prohibits unfair or deceptive acts or practices in or affecting commerce.

According to the FTC complaint, Truly Organic used non-organic ingredients in its products, such as non-organic lemon juice, which can be sourced an organic version. Other products contained ingredients that the USDA doesn’t allow in organic handling, including cocamidopropyl betaine and sodium cocosurfactant. Other Truly Organic products were made by third-parties, including bath bombs and soaps, and fail to contain any organic ingredients. The FTC also alleged that certain products contain non-vegan ingredients such as honey and lactose.

On May 4, 2016, the USDA contacted Truly Organic to notify them that NOP had received complaints alleging that Truly Organic “markets its product as organic in violation of the USDA organic regulations.”  After receiving a Notice of Warning from the USDA, company president Maxx Appelman told USDA that “previous management” had erroneously used the USDA Organic seal, and that “we have removed the seal from all packaging, marketing/promotional materials, website, everything as you can see and are selling a completely redesigned group of products. We are well aware of the rules and regulations that govern the USDA Seal and have not used the seal whatsoever and do not plan to unless we gain proper certification.”

Truly Organic’s Response to USDA Warning Letter

Truly Organic offers a good lesson on what not to do if contacted by a regulator regarding allegations of false advertising. Despite its statements to the USDA, Truly Organic continued to make the false “certified organic,” “USDA organic,” and “vegan” claims. According to the FTC, Appelman subsequently stated in an email to Urban Outfitters, Inc. that all of its products were certified organic and vegan. He maintained they were “certified organic (and actually the most organic in the world)” and “everything is vegan, made in the USA, cruelty-free, fair trade, non-gmo and gluten-free,” according to the FTC. The agency also alleged that the company falsified USDA certification by taking a document issued to another company, erasing that name, and adding its own. Truly Organic then provided falsified certification to third parties as purported proof for its “certified organic” claims.

FTC Settlement

Truly Organic and Appelman have agreed to pay a monetary fine of $1.76 million to resolve the FTC complaint. The settlement also prohibits Truly Organic and Appelman from making deceptive claims, including false and/or unsubstantiated claims, that any good or service: 1) is wholly or partially organic; 2) contains or uses organic ingredients; 3) is certified organic; 4) is vegan; or 5) has been evaluated by any third party, including one affiliated with the USDA NOP, based on its environmental or health benefits or attributes.

“To know if a product is truly organic, consumers have to rely on companies to be truthful and accurate,” Andrew Smith, director of the FTC’s Bureau of Consumer Protection, said in a press statement. “That’s why we’ll hold companies accountable when they lie about their products being organic, especially when they’ve used fake certificates and ignored USDA warnings.”

FTC Commissioner Rohit Chopra also issued a statement, praising the imposition of monetary fines in such cases. “I believe it would be helpful for the Commission to codify this approach in a Policy Statement addressing unlawful conduct that is dishonest or fraudulent,” he wrote. “In cases involving such conduct, no-money settlements are inadequate, and the Commission should commit itself to exercising its full authority to protect consumers and honest businesses.”

Key Takeaway

As organic, vegan, and eco-friendly products continue to flood the market, regulators are taking a closer look at any associated advertising claims in an effort to prevent so-called “greenwashing.” The FTC’s latest action serves as an important reminder that all environmental marketing claims must not be misleading, must be true at the time they are made, and must be supported by competent and reliable scientific evidence. The FTC’s Guides for the Use of Environmental Marketing Claims, (“Green Guides”), are an excellent resource for New York and New Jersey businesses seeking to ensure that their environmental marketing claims do not violate federal truth-in-advertising standards.