Antitrust Law Daily Wrap Up, ADVERTISING NEWS: Marketer of biodegradability additive responds to FTC complaint over environmental claims, (Nov 22, 2013)

By Jeffrey May, J.D.

ECM BioFilms, Inc., a company that markets additives that purportedly make plastic products biodegradable, has denied FTC allegations that it made misleading environmental claims for its product. Last week, the company filed its answer to the FTC’s administrative complaint, which was issued in October (In the Matter of ECM BioFilms, Inc., FTC Dkt. 9358, FTC File No. 122 3118).

The FTC alleges that ECM advertised its plastics additive, marketed under the name MasterBatch Pellets, as making plastic products biodegradable. However, according to the government, scientific tests relied on by ECM did not show that treated plastics would completely decompose as claimed, and did not replicate the physical conditions of either landfills, where most trash is disposed, or other disposal facilities stated in ECM’s claims.

ECM was charged with violating the FTC Act by misrepresenting that (1) plastics made with ECM’s additives are biodegradable and will completely break down within a reasonably short period of time after customary disposal; (2) ECM plastics are biodegradable in a landfill; (3) ECM plastics are biodegradable in a stated qualified timeframe; and (4) that various scientific tests prove ECM’s biodegradability claims. Finally, the complaint charged ECM with providing its customers and independent distributors with promotional materials that permitted them to deceive consumers. At the same time the FTC brought its case against ECM, the agency announced that it had reached settlements with former ECM customers and others for making false and misleading environmental claims in their marketing efforts.

According to ECM’s answer, dated November 14, the FTC’s complaint “disserves the public interest because it is based on an anachronistic and inapplicable scientific model, on flawed consumer surveys, and on policy that is contradicted by generally accepted industry standards reflective of current science.” ECM contends that the relief sought in the complaint was unconstitutional because it would prevent the company “from communicating truthful and non-misleading commercial speech” and would impose “a blanket ban on ECM’s prospective speech concerning biodegradation of plastics when there are obvious, less speech-restrictive alternatives in the form of reasonable claim qualifications.”

ECM asserts that the FTC has failed to state a claim upon which relief can be granted under Section 5 of the FTC Act. The FTC did not demonstrate that ECM’s well-qualified claims were false or had a tendency to deceive or that Part 3 adjudication was in the public interest, in the company’s view. ECM also questioned the FTC’s attempts to hold it liable for third-party marketing of finished plastics products containing its products.

In its defense, the company contended that it had acted in good faith in all of its marketing practices. “ECM took affirmative steps to comply with the FTCA after the FTC revised its Green Guides effective October 2012, including the implementation of additional qualifying language,” the company protested. “ECM amended claims to follow closely the letter of those Guides. Evidence of good faith prohibits the FTC from applying in its Order a permanent injunction.”

For good measure, ECM suggested that the FTC was violating its due process rights by abrogating the Separation of Functions Doctrine. “By combining the functions of investigator, prosecutor, judge, and appellate tribunal in one body, the Commission, to which final agency review is committed, is incontrovertibly biased, it being judge of the merits of its very own charges,” according to ECM.

Administrative Law Judge D. Michael Chappell was set to hold a scheduling conference yesterday in the matter. An administrative trial could be held as early as June 2014.

Attorneys: Katherine Johnson and Elisa Jilson for FTC. Jonathan W. Emord (Emord & Associates, P.C.) for ECM Biofilms, Inc.

Companies: ECM Biofilms, Inc.

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