FTC Wields Penalty Offense Authority Against Walmart and Kohls Over Environmental Claims

  • In two parallel Stipulated Orders, the FTC has reached settlements with retailers Walmart Inc. and Kohl’s Inc. to resolve allegations that both companies violated the FTC Act, the Textile Fiber Products Identification Act, and the Rules and Regulations Under the Textile Fiber Products Identification Act, by marketing rayon textile products as bamboo textiles.
  • According to the FTC’s complaints against Kohl’s and Walmart, since at least 2015, both companies have allegedly mislabeled dozens of products made of rayon derived from bamboo as bamboo textiles and “greenwashed” these products by falsely claiming that they are “gentle on the planet,” manufactured in “environmentally friendly facilities,” and are “free of harmful chemicals, using clean, non-toxic materials.” In reality, rayon manufacturing requires highly toxic chemicals. Both companies previously received Warning Letters from the FTC in 2010 regarding these practices.
  • Under the terms of the Stipulated Orders, Kohl’s and Walmart will pay penalties of $2.5 million and $3 million, respectively, and are both enjoined from continuing to make misleading statements concerning the fiber composition of products, and the alleged environmental benefits of the use of the fiber, among other things.
  • While the FTC’s authority to seek monetary relief was significantly curtailed by the U.S. Supreme Court in 2021—the fallout from which was recently analyzed by Cozen O’Connor State AG Practice attorneys—the FTC’s Penalty Offense Authority allows it to seek civil penalties if the company knew the conduct was unfair or deceptive in violation of the FTC Act, and if the FTC had already issued a written decision to that effect.