Manufacturers Back Bill to Limit Liability for Energy Star Ratings

If U.S. appliance manufacturers have their way, consumers who purchase washers, dryers and other appliances based on their Energy Star ratings won’t be able to sue their makers if the energy savings aren’t as good as promised.

A House bill sponsored by Robert Latta (R-Ohio) and co-sponsored by Peter Welch (D-Vt.) would remove consumers’ ability to launch class-action litigation against a manufacturer if actual energy savings did not reflect what the Energy Star rating stated at the time of sale.

The bill, which was submitted for review July 12, has the backing of several large appliance makers, including Whirlpool and LG, which are members of Alliance to Save Energy (ASE). Welch was an honorary co-chair of ASE at the time of the bill’s submission. He now serves as honorary vice-chair.

The Energy Star program is a government-backed system that rates products according to their energy efficiency. Consumers can not only save energy by using many of these products, but often receive state or federal tax rebates for using them. The increased sales from the program incentivize manufacturers to build “energy smart” products. (One of the roles of ASE is to promote the values of the Energy Star program.)

But in 2010, the Government Accounting Office conducted an investigation and found that not all Energy Star-rated products may be what they seem. The GAO applied for Energy Star certification for 15 “bogus” products, including a fossil-fuel-powered alarm clock that was “the size of a small generator and powered by gasoline,” and found that responses to the applications were inconsistent, at best. Another fabricated product was described as a geothermal heat pump whose “energy use data reported was more efficient than any product listed as certified on the Energy Star website at the time of submission.” The Energy Star program never questioned the data, and approved the application. Of the 15 applications the GAO submitted, two applications were rejected, and another three received no response. Other bogus products received purchase offers by manufacturers because of their Energy Star “ratings,” which were inaccurate.

“This clearly shows how heavily American consumers rely on the Energy Star brand,” the GAO report stated. “The program is promoted through tax credits and appliance rebates, and federal agencies are required to purchase certain Energy Star-certified products.’

The GAO researchers stated that they felt the problems stemmed from the fact that the program did not require third-party verification of energy savings data. As a result, Congress made changes to the program, requiring third-party verification and periodic product checks.

But consumers and advocacy organizations have also reported problems: In February 2010, Consumer Reports found that an Energy Star-rated Kenmore refrigerator (made by LG) registered reasonable energy consumption – so long as the ice maker was not connected. When it was hooked up, said CR, the energy usage for the refrigerator was double what the rating said.

With the publication of the GAO’s report and discoveries by consumers and CR that the Energy Star ratings weren’t matching the actual energy consumption, class-action suits began spiking. Customers who felt they had been deceived by the manufacturers’ statements joined together to fight back in the form of class-action suits.

Companies that have been hit hard by litigation, however, feel that manufacturers shouldn’t be held liable for ratings that they say are really estimates of what the product can save.

The “EPA already has sufficient authority to protect consumers and make the determination of whether compensation is appropriate,” the Home Appliance Association told the New York Times.

The ASE website refers to Latta and Welch’s House Bill 4586 as “a modest fix to Energy Star that would help appliance manufacturers avoid unfounded litigation that would deter efficiency R&D and participation in Energy Star.” It does not explain why 67 percent of the bogus energy-efficient products that were submitted by the GAO passed the Energy Star’s review process. Rather, it suggests that products that are “occasionally” found to be “in violation” of the Energy Star program and later “disqualified” have left manufacturers open to litigation after consumers assert that they have been misled by the product’s stated efficiency rating.

“[Because] of a gap in federal law,” ASE states, "manufacturers of Energy Star appliances are now being targeted when an appliance is disqualified,” and suggests that the litigation, enforcement measures and compensation are a form of “double jeopardy” that result in millions of dollars of fees to the manufacturer “while adding no value to the consumer.”

As we have reported previously, class-action litigation does indeed have its pitfalls. It most often results in no monetary compensation for secondary litigants other than the nominal reimbursement of some of the cost that has been expended in the purchase (and almost always lacks compensation for travel, research and other costs that may have been associated with getting their money back). So ASE has a point when it mentions that there is a questionable financial gain to the consumer.

But as one trial lawyer pointed out, that’s often not the point of class-action litigation.

“By eliminating consumers’ access to the civil justice system, corporations will not be held accountable in court for swindling customers,” Sarah Jones from the Association for Justice told the New York Times.

U.S. class-action litigation is designed specifically for the purpose of ensuring that beyond the financial reimbursement of their costs, consumers – and the U.S. justice system – have a way of ensuring companies are held accountable for their actions, not just the cost the consumer incurred.

And that is what may seem so unpalatable to manufacturers who are finding that sometimes it’s harder to meet consumers’ expectations for energy savings than they are willing to candidly admit. According to Govtrack.com, however, the bill has about a 3 percent chance of passing.

Image courtesy of LG