FTC Fines for Deceptive Energy-Efficiency, Cost-Savings Claims

FTC Action Leads to Court Order: Home Insulation Marketer to Pay $350,000

A federal court ordered a home insulation marketer to pay a $350,000 civil penalty for making deceptive and unsubstantiated claims about his products’ insulation capabilities on Jan. 31, 2013. The $350,000 figure is the largest civil penalty awarded in a home insulation case.

Edward Sumpolec, doing business as Thermalkool, Thermalcool and Energy Conservation Specialists, violated the Federal Trade Commission Act and the agency’s R-value Rule in selling liquid coating and foil radiant barrier products. Sumpolec’s advertising included false claims such as “R-100 paint,” “This . . . reflective coating will reduce wall and roof temperatures by 50-95 degrees . . .” and “Saves 40 to 60% on your energy bills.”

A product’s R-value is a measure of its resistance to heat flow: the higher the R-value, the greater the insulating power. The R-value Rule requires home insulation manufacturers, professional installers, new home sellers and retailers to provide R-value information, based on the results of standard tests, to help inform consumers.

In addition to imposing a $350,000 civil penalty against Sumpolec, the court order permanently prohibits him from making a claim about a product’s insulation value or energy savings unless it is true, not misleading, and based on competent and reliable scientific evidence.

It also bars Sumpolec from violating the R-value Rule by failing to base R-value claims only on proper tests, failing to make product fact sheets available to customers prior to sale, and failing to make mandatory advertising disclosures, including type of insulation, R-value at a specific thickness, coverage area for that thickness, and the statement: “The higher the R-value, the greater the insulating power. Ask your seller for the fact sheet on R-values.” The order also bars him from failing to have a reasonable basis for claims that insulation can cut fuel bills or fuel use, failing to make the mandatory disclosure regarding such claims, and failing to keep records of all data about such claims for at least three years.

The order was entered by the U.S. District Court for the Middle District of Florida, Orlando Division on Jan. 9, 2013. 

FTC Settles Charges on Deceptive Energy-Efficiency Claims about Windows

In a move that should caution green builders and remodelers as they market their products and services, the FTC in May 2012 approved final orders settling charges that five companies that make and sell replacement windows made deceptive energy efficient and cost savings claims.

The consent orders settle alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition in violation of Section 5(a) of the FTC Act.

The FTC previously warned 14 window manufacturers and one window glass manufacturer that they may be making unsupported energy savings claims for replacement windows. The warning letters are part of an FTC effort to ensure that environmental marketing is truthful and based on solid scientific evidence.

The FTC’s complaints alleged that Long Fence & Home, LLLP; Gorell Enterprises, Inc.; Serious Energy, Inc; THV Holdings LLC; and Winchester Industries made exaggerated and unsupported claims regarding their windows’ efficiency and how much money consumers could save on their heating and cooling bills by having them installed. 

According to the FTC’s complaint against Long Fence, the company’s ads represented either expressly or by implication that consumers who replace their windows with Long Windows’ Quantum2 replacement windows with SuperPak Glass are likely to save 50% on residential heating and cooling costs. The complaint alleged that the company did not possess and rely upon a reasonable basis substantiating these representations when it made them.

The FTC noted that, many factors determine the savings home owners can realize by replacing their windows, including the home’s location, size, insulation package and existing windows.

The FTC further noted that consumers who replace single or double-paned wood or vinyl-framed windows – common residential window types in the United States – with Long Windows replacement windows are not likely to achieve a 50% energy savings.

The order contains provisions designed to prevent the company from engaging in similar acts and practices in the future.

Unless the company can make a marketing claim that is non-misleading and based upon competent and reliable scientific evidence in its possession, it is prohibited from making any representation that:

  1. Consumers who replace their windows with the company’s windows achieve up to or a specified amount or percentage of energy savings or reduction in heating and cooling costs; or
  2. The company guarantees or pledges that consumers who replace their windows with the company’s windows will achieve up to or a specified amount or percentage of energy savings or reduction in heating and cooling costs; or
  3. Any specific number or percentage of consumers who replace their windows with respondent’s windows achieve energy savings or reduction in heating and cooling costs.

Remodelers should note that the company is further prohibited from making claims concerning any of its products or services about energy consumption, energy savings, energy costs, heating and cooling costs, U-factor, solar heat gain coefficient, R-value, K-value, insulating properties, thermal performance or energy-related efficacy – unless the representation is non-misleading and substantiated by competent and reliable scientific evidence.

If the company elects to represent, guarantee, or pledge that consumers achieve such energy savings or heating and cooling cost reductions under specified circumstances, it must: disclose those circumstances clearly and prominently in close proximity to such representation, guarantee, or pledge; and substantiate that all or almost all consumers are likely to receive the maximum represented, guaranteed, or pledged savings or reduction under those circumstances (e.g., when replacing a window of a specific composition in a building having a specific level of insulation in a specific region).

For more information from the FTC, visit ftc.gov/opa/2012/05/windows.shtm

Note that environmental marketing claims that violate the FTC regulations may also serve as the basis for an unfair and deceptive trade practices act violation at the state level. 

To learn more, see Before You Build Green: A Primer on Avoiding Liability Pitfalls, developed by NAHB’s Building Product Issues Committee.

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