On October 20, 2015, the U.S. Federal Trade Commission (FTC) released a “Final Order and Opinion” against ECM BioFilms, Inc., stating that ECM made false and unsubstantiated environmental claims that its additives for plastics (ECM Plastics) would make treated plastics biodegrade in a landfill. The opinion come two years after FTC issued an administrative complaint against ECM and ten months after an FTC Administrative Law Judge (ALJ) issued an Initial Decision finding ECM violated FTC Act Section 5 because evidence did not support its claims that ECM Plastics would biodegrade plastics within nine months to five years. Significantly, FTC reverses part of the ALJ’s decision, finding that FTC counsel hadn’t met its burden in proving ECM made false, misleading, and material-implied biodegradable claims that ECM Plastics will completely biodegrade in a landfill within one year, a temporal period identified in the FTC Green Guides.
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Background
The FTC Green Guides are intended to help ensure marketers’ claims about their products’ environmental attributes are “truthful and non-deceptive.” The Green Guides are administrative interpretations of law and are not independently enforceable. Under the FTC Act, all marketers must have a reasonable basis, supported by competent and reliable scientific evidence, for any express or implied claims about their products. FTC provides general principles with which claims must comply.
Before the Green Guides were issued in 2012, ECM’s claims included a logo of a tree with the word “biodegradable” and a claim that ECM Plastics will break down in approximately nine months to five years in nearly all landfills. ECM later omitted the “9 months to 5 years” claim from its marketing materials, instead stating that ECM Plastics will biodegrade in any biologically active environment (including most landfills) in some period greater than a year.
In the Initial Decision, the ALJ found evidence supported that ECM Plastics don’t fully biodegrade within five years in a landfill, and thus ECM’s biodegradation claims were false, misleading, and in violation of the FTC Act. FTC upheld the ALJ’s decision, noting that ECM hadn’t appealed the ALJ’s ruling that its nine-months-to-five-years express biodegradation claim was false and unsubstantiated (although ECM did appeal whether these claims are material).
The crux of the FTC opinion addresses the ALJ’s finding that FTC’s counsel failed to prove that ECM Plastics are “biodegradable,” and “biodegradable in some period greater than a year” imply that ECM Plastics will completely biodegrade in a landfill within one year. In a significant development, FTC reversed this ALJ finding, stating that “…we find that ECM also made implied claims that ECM Plastics will biodegrade in a reasonably short period of time, or within five years, and the implied claims are false, unsubstantiated, and material.” With regard to the rate of biodegradation implied, FTC states “that the extrinsic evidence in the record establishes that reasonable consumers expect that plastic products labeled ‘biodegradable’ will decompose within a reasonably short period of time (i.e., within five years), and would be misled if a plastic product labeled ‘biodegradable’ did not do so.”
The Final Order bars ECM from representing that a plastic product or package is degradable unless the representation is true, not misleading, and substantiated by competent and reliable scientific evidence. It also requires ECM to ensure that either the entire plastic item will completely decompose into elements found in nature within five years after customary disposal; or the claim is clearly and prominently qualified by either the time for complete decomposition or the type of non-customary disposal required, and the availability of such disposal facilities.
Discussion
FTC’s Final Order and Opinion establishes significant precedents for the types of biodegradation claims it would consider false or misleading. To make such claims, companies must have reliable evidence to substantiate the rate and extent of decomposition and the time to complete decomposition, which may be difficult evidence to obtain depending on varying factors (e.g., temperature and soil composition). The decision also establishes a “reasonable” interpretation of the word “biodegradable” as total biodegradation within five years. One FTC Commissioner dissented and agreed with the ALJ in the Initial Decision that FTC’s counsel failed to prove ECM’s unqualified “biodegradable” claim caused reasonable consumers to believe that treated products would biodegrade in a reasonably short time period.
Considering the likely controversy over the FTC’s decision and the dissenting opinion with regard to permissible biodegradable claims, it wouldn’t be surprising if ECM sought judicial review. Similarly, FTC may wish to consider amending the Green Guides’ one-year standard for biodegradability in light of the decision.
