Antitrust Law Daily Wrap Up, ADVERTISING—FTC: Plastics additives manufacturer makes false, misleading biodegradability claims, (Oct 20, 2015)

By Greg Hammond, J.D.

A plastics additives manufacturer’s express and implied biodegradability claims were deemed false, misleading, and unsubstantiated where plastics containing its additives did not fully biodegrade within five years in a landfill, the FTC has concluded. In partially affirming an administrative law judge’s (ALJ’s) January 2015 order, the Commission agreed that the manufacturer’s express claim of biodegradation within nine months to five years was false and misleading, in violation of Section 5 of the FTC Act, but disagreed with the ALJ’s determinations that complaint counsel failed to prove the manufacturer’s implied biodegradation claims (In the Matter of ECM BioFilms, Inc., October 11, 2015, FTC Dkt. 9358).

ECM BioFilms, Inc. manufactures, advertises, sells, and distributes additives for plastics, including “MasterBatch Pellets.” According to the Commission’s administrative complaint, ECM made a number of express and implied biodegradability claims that plastics containing MasterBatch would: biodegrade, biodegrade in some period greater than a year; and completely biodegrade in a landfill within a period of nine months to five years. The ALJ concluded that ECM’s express claims of biodegradation within nine months to five years were false, misleading, and material, in violation of Section 5 of the FTC Act. The Commission, however, failed to prove that ECM’s representations—that plastics containing MasterBatch are “biodegradable” and “biodegradable in some period greater than a year”—implied that those plastics would completely biodegrade in a landfill within one year. Both complaint counsel and ECM appealed the ALJ’s decision.

Implied biodegradability claims. In the majority opinion, the Commission first determined that ECM’s unqualified representation of biodegradability and the representation that plastics containing MasterBatch biodegrade “in some period greater than a year” implied that those plastics completely biodegrade in landfills within a reasonably short period of time. The evidence, according to the Commission, demonstrated that ECM intended the term “biodegradable” to convey a reasonably short time element. In addition, consumer survey evidence demonstrated that at least a significant minority of reasonable consumers would interpret ECM’s unqualified representation to convey the claim that plastics containing MasterBatch fully biodegrade in landfills within a reasonably short period of time. A review of ECM’s marketing materials, in combination with consumer survey evidence, also supported the FTC’s conclusion that ECM’s representation that plastics containing MasterBatch biodegrade “in some period greater than a year” was that those plastics biodegrade within a reasonably short period of time.

Second, the Commission concluded that ECM lacked a reasonable basis for its implied biodegradable rate claims and that those claims were false and unsubstantiated. The FTC based its decision on ECM’s failure to appeal the ALJ’s finding that the company lacked substantiation for its “9 month to 5 year” claim; agreement among scientific experts that no evidence was proffered demonstrating that plastics containing MasterBatch fully biodegrade in a landfill in less than five years; and the FTC’s review of various tests in the record.

Materiality, public interest. Lastly, the FTC found that ECM’s implied rate claim and its related establishment claim were material and the Commission rejected ECM’s argument that the ALJ’s proposed order was not in the public interest. Specifically, the Commission noted that all of ECM’s claims were presumptively material. In addition, apart from any presumption, the evidence clearly demonstrated materiality because it strongly supported the inference that ECM’s rate claims were important to consumers’ purchasing decisions and that those in ECM’s commercial supply chain knew their customers cared about products that could help the environment.

Final order. ECM was consequently enjoined from representing, in any manner, that any plastic product or package is degradable, that any product affects a plastic product or package’s degradability, or that any product or package offers any environmental benefit, unless the representation is true, not misleading, and ECM has competent and reliable evidence that substantiates the representation at the time it is made. In addition, ECM was prohibited from providing others with the “means and instrumentalities” to make any false, unsubstantiated, or misleading representation concerning environmental benefits, and from misrepresenting the existence and results of any test, study, or research.

Ohlhausen dissent. Commissioner Maureen K. Ohlhausen partially dissented from the Commission’s decision finding liability on the unqualified biodegradable claim, arguing that “Complaint Counsel lacks reliable extrinsic evidence sufficient to prove that ECM’s unqualified claim caused reasonable consumers to believe that treated products would biodegrade in either a year or in a period between one and five years. Furthermore, in finding that the extrinsic evidence supports Complaint Counsel’s claim interpretation, the majority misapplied the Deception Statement’s ‘significant minority’ exception.” She suggested that the Commission open proceedings to revise its Guides for the Use of Environmental Marketing Claims.

Attorneys: Katherine Johnson, FTC. Jonathan W. Emord (Emord & Associates) for ECM BioFilms, Inc.

Companies: ECM BioFilms, Inc.

Cases: Advertising ConsumerProtection FederalTradeCommissionNews