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Kohl’s, Walmart Face Largest-Ever FTC Civic Penalty for Bogus Bamboo Marketing

Walmart and Kohl’s could pay a steep price for playing fast and loose with how they described certain textiles.

The Federal Trade Commission (FTC) used its Penalty Offense Authority on Friday to take action against the two retail giants 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 the reality is that converting bamboo into rayon requires the use of toxic chemicals and results in hazardous pollutants.

The FTC 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 ever levied in this area. The complaints and proposed orders were filed by the U.S. Department of Justice on the FTC’s behalf.

“False environmental claims harm both consumers and honest businesses, and companies that greenwash can expect to pay a price,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.

According to the complaints, since at least January 2015, Kohl’s and Walmart 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.

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The proposed orders settling the FTC’s complaints against Kohl’s and Walmart prohibit the companies from conduct alleged in the complaint. The companies must shut down bogus bamboo marketing claims; stop claiming that a textile product is made of bamboo or bamboo fiber, unless they can substantiate it; stop making unsubstantiated green marketing claims for products made of bamboo or bamboo fiber; stop claiming that it is produced free of harmful chemicals, using non-toxic materials or in a way that is safe for the environment or non-polluting, or has any other environmental benefits because it is derived from bamboo, unless they can substantiate it.

They must also stop violating the FTC’s Textile Act and Rules by deceptively advertising textile contents, in addition to paying a combined $5.5 million in penalties. Walmart did not immediately respond to a request for comment.

Kohl’s acknowledged the FTC fine and pledged to follow agency guidelines.

“We have reached a settlement with the FTC and continue to take these regulations seriously,” Kohl’s said in a statement.

The FTC’s Penalty Offense Authority enables the agency to seek civil penalties provided that the company knew the conduct was unfair or deceptive in violation of the FTC Act and the FTC had already issued a written decision that such conduct is unfair or deceptive. Over the past six months, the FTC has revived this authority and expanded it to address false earnings claims, false 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, textiles, energy savings, fur products, home improvement products, auto rentals, bait and switch, toys and weight reduction. Businesses in these industries should familiarize themselves with the commission’s determinations in these areas, it said.

The vote to authorize the staff to refer the complaints to the DOJ and to approve the proposed orders was 4-0. The DOJ filed the complaints and proposed orders on behalf of the FCT in U.S. District Court for the District of Columbia.

The FTC authorizes the filing of a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the commission that a proceeding is in the public interest. Consent orders have the force of law when approved and signed by the District Court judge.

In 2010, the FTC sent letters to 78 companies nationwide warning that they may be breaking the law by selling clothing and other textile products that are labeled and advertised as “bamboo,” but actually are made of manufactured rayon fiber. The letters made the retailers aware of the FTC’s concerns about possible mislabeling of rayon products as “bamboo,” so the companies could take corrective steps to avoid agency action.

Additional reporting by Jessica Binns.