After Keurig Green Mountain reached a class-action settlement in a case concerning the company’s K-Cup recyclability claims, the plaintiffs anticipated the brand owner would end up paying consumers $1.25 million.
It turned out to be roughly $3.50 million. In February, just before they ended the lawsuit in a northern California court, the parties said over 623,000 class members submitted valid claims for compensation. That’s 623,000 Americans who bought K-Cup single-serve coffee pods over a seven year period and who saw notices suggesting Keurig Green Mountain was dishonest with them regarding the recyclability of the pods. Of course, as part of the settlement, Keurig Green Mountain denies any wrongdoing.
“By any measure, the Settlement has been a resounding success and well-received by the Class,” the parties wrote in an update to the court.
It’s a “resounding success” that brand owners should pay attention to, especially as the U.S. Federal Trade Commission (FTC) looks to update its guidelines for what it considers honest versus deceptive recyclability claims. The FTC has received a flood of comments as it looks to update its Guides for Use of Environmental Markets Claims, otherwise known as the Green Guides.
Next week, on May 23, the FTC will hold a public workshop on the Green Guides update, with speakers drawn from a wide range of public and private organizations, including government regulators, recycling industry groups, brand owners, environmental activists and others. A lawyer who works as Keurig Dr Pepper’s head lobbyist is among the speakers.
Gaining an unfair advantage
All of us know how complicated the seemingly simple question actually is: Is this recyclable?
We’ve all been asked this by friends, family and even strangers, and we’ve seen their attention wane as we explain that the question is really whether a particular item will be recycled into a new product if placed into that particular receptacle in a particular condition. The lay public understands the idea of recycling, but not the process.
But what constantly amazes me is how some of the largest consumer product brand owners – massive corporations that touch the lives of people around the planet and have the resources to hire the sharpest marketers around – seem equally in the dark, slapping “recycle” and the chasing arrows symbol on products that obviously won’t be recycled at the curb or at a community recycling drop-off depot.
I say “some,” of course, because many companies do seem to “get it,” redesigning products to be widely recyclable via different collection and sorting systems and buying the recovered materials for use in their products.
For me, a million dollar question is this: Are those marketers who either don’t take the time to understand recycling, or who don’t think their customers are patient enough to endure a nuanced explanation of what is recyclable, gaining an unfair advantage over the corporations that are more carefully tailoring their packaging language to match the reality of our country’s disjointed recycling system?
As consumers increasingly shop for “green” products, I think the answer is “yes.”
And the FTC thinks so too.
“When you have deceptive claims, that can distort the market for environmentally friendly products and also hurt honest companies who are bearing the costs of green business practices,” Lina Khan, chair of the FTC, said during a December 2022 FTC meeting.
Another way to frame that question is this: Are the purveyors of arguably obtuse recycling text suffering consequences? Probably not.
Another way to frame that question is this: Are the purveyors of arguably obtuse recycling text suffering consequences? Probably not. By and large, penalties haven’t been all that stiff.
In fact, the Keurig settlement is one of the higher-profile class-action settlements to be reached in the U.S. over recyclability claims in recent years, and $10 million sounds like a lot of money. But I searched the company’s financial filings with the Securities and Exchange Commission – it’s in these filing that companies need to tell the truth or there can be serious consequences – and couldn’t find any mention of the California litigation and settlement.
The $10 million the company paid out simply wasn’t material to a company that brought in nearly $2.4 billion in net income in 2022. So not counting the undoubtedly tender public relations black eye and the presumably real costs of altering its packaging, Keurig Dr Pepper paid out less than half of 1% of its income for one year.
They’re just guides, but pay attention
You also have to acknowledge the fact that judges are humans, and they don’t all understand or recognize the damage done to the recycling system – and, by extension, public agencies’ budgets and ratepayers/taxpayers’ pocketbooks – by overly broad or aspirational recyclability claims.
In an Illinois case challenging 7-Eleven’s recyclability claims for disposable cups, plates and freezer bags, the judge pulled out a dictionary and decided the word “recyclable” means capable of being recycled, as opposed to likely to actually be recycled in that region.
I would argue that interpretation renders the claims meaningless. A pilot project involving Procter & Gamble in Italy is recycling dirty diapers, but clearly its existence doesn’t greenlight marketers printing “Recycle after use” and the chasing arrows symbol on diapers sold here in the U.S.
In the Chicago case, Judge Steven Seeger also discounted the importance of the Green Guides, writing one of the snarkiest yet somehow most amusing lines I’ve ever read in a court decision: “People buying red party cups at 7-Eleven are more likely to be thinking about beer pong than the FTC’s consumer guidelines.”
Compounding the issue is the fact that the Green Guides are just that – guides, not laws. They can help companies from running afoul of Section 5 of the FTC Act, which states, “Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.” But the administrative interpretations are somewhat limited in their ability to draw lines in the sand to distinguish lies from truths.
So it’s safe to say that the FTC’s updated Green Guides won’t be as clear or stringent as many would like – maybe not even all of the commissioners themselves – given that the commission still has to live within its statutory authority. Meanwhile, Republicans and Democrats in Congress probably aren’t going to reach any agreement soon to add forceful regulations governing how businesses can talk to their customers.
But that doesn’t mean brand owners should ignore the guides, because they will still set a benchmark for what the federal government thinks is honest recyclability language.
And, as Keurig and others have learned, state unfair business practices laws reference those federal guidelines. And some states, such as California and Oregon, are regulating recyclability claims themselves.
Changing labels can’t hurt too much, can it?
Perhaps the irony in all of this is it doesn’t have to be overly painful to change marketing claims. As part of its settlement, Keurig was forced to add “*Check locally, not recycled in all communities” to its claims. How many consumers will opt out of buying K-Cups because of those seven words? I argue not many. And Keurig Dr Pepper hasn’t been concerned enough to mention it in the SEC filings or in recent investor conference calls.
In fact, despite insistence from many brand owners that space on a package is more valuable than a Manhattan rent-controlled apartment and they simply can’t spare any more, some still make packaging real estate available to slap the How2Recycle “Not yet recycled” logo on their packages. Instead of a small chasing arrows graphic, they actually devote space to a larger logo telling their customers that the product is not recyclable. I’ll be sure to let you know as soon as I hear of any companies that fail because they told the recycling truth to their customers.
All evidence indicates Keurig Dr Pepper has been anything but crippled by changing its marketing language. In fact, according to a recently published quarterly report, the company sold $771 million worth of K-Cup coffee pods in the U.S. during the first quarter of 2023, up 3% year over year.
During an April 27 call with investors discussing the company’s first quarter results, executives noted that the number of pods sold decreased, but that had more to do with the fact that, a year earlier, people were drinking more coffee at home because of the pandemic, as well as the fact that prices had increased. They said not a word about the $10 million settlement or the amended recycling language.
In short, Keurig Dr Pepper started telling people their pods aren’t recycled in many communities, and the K-Cup business kept on booming.
In short, Keurig Dr Pepper started telling people their pods aren’t recycled in many communities, and the K-Cup business kept on booming. And it’s not that K-Cup buyers don’t care about the environment. At least Keurig Dr Pepper believes they do:
“Consumers are also increasingly focused on sustainability, with particular attention to the recyclability of product packaging, reducing consumption of single-use plastics and non-recyclable materials, and the environmental impact of manufacturing operations,” the company wrote in its annual report filed with the SEC. “If we do not meet consumer demands by continuing to provide recyclable packaging options and focusing on sustainability throughout our manufacturing operations, our sales could suffer.”
So brands should make sure they pay attention to the FTC’s Green Guides update, but regardless of what the federal authorities decide, they can probably be a little more honest with consumers today – and it probably wouldn’t cost them too much.
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