In an Initial Decision announced February 6, 2015, Chief Administrative Law Judge D. Michael Chappell of the Federal Trade Commission (“FTC”) held that ECM BioFilms, Inc. d/b/a Enviroplastics International (“ECM”) made false and unsubstantiated claims that plastics made with its additive “would completely biodegrade, including in a landfill, in a time period ranging from 9 months to 5 years.” Decision at 318. Accordingly, Chief Judge Chappell entered an order barring ECM from making claims “that any product or package will completely biodegrade within any time period, or that tests prove such representation, unless such representation is true, not misleading, and, at the time it is made, [substantiated].” Id. at 321. Importantly, however, Chief Judge Chappell also held that the FTC failed to prove that the unqualified claim “biodegradable,” when used with plastics, carries the implied message that such plastic will “completely biodegrade into elements found in nature, including in a landfill, within one year”—a meaning the FTC ascribed to the term in its 2012 Guides For The Use Of Environmental Marketing Claims (“Green Guides”). See id. at 316; 16 C.F.R. 260.8(c) (2014).
ECM is a manufacturer and seller of a plastic additive “MasterBatch Pellets” which is added to plastic during manufacture. Chief Judge Chappell found that ECM advertised the additive as follows: (1) the additive “causes plastics to be ‘biodegradable,’” (2) “that plastics treated with [the additive] are ‘biodegradable’ in a ‘landfill,’” and (3) that “plastic products made with ECM additives [f]ully biodegrade in 9 months to 5 years.” Decision at 173, 176.
In October, 2013, the FTC filed an Administrative Complaint against ECM. The FTC alleged that ECM made the following false or unsubstantiated claims:
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ECM Plastics are “biodegradable, e., will completely break down and decompose into elements found in nature within a reasonably short period of time after customary disposal,” which time period [the FTC] asserts is less than one year after disposal in a landfill;
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ECM Plastics are “biodegradable” in a “landfill;
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ECM Plastics are “biodegradable in a stated timeframe”; which according to [the FTC] was “9 months to 5 years”; and
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Tests prove that ECM Plastics have the characteristics identified in 1, 2, or 3 above. . . .
Decision at 167.
Under the revised 2012 version of the Green Guides, the FTC set forth its view that “[i]t is deceptive to make an unqualified degradable claim [which includes “biodegradable”] for items entering the solid waste stream if the items do not completely decompose within one year after customary disposal.” 16 C.F.R. § 260.8(c) (2014) (emphasis added). During the enforcement proceeding, the FTC acknowledged that the one year time limit it argued “biodegradable” implied was based upon the Green Guides. See Decision at 304.
In rejecting the “one year” time limitation as implied by the term “biodegradable,” Chief Judge Chappell held that the FTC “failed to prove that, for purposes of evaluating whether [ECM’s] claims are false or unsubstantiated, the term ‘biodegradable’ means that an item must completely break down and decompose into elements found in nature within one year after customary disposal.” Decision at 317. Instead, ECM’s survey evidence showed “consumers interpret the term ‘biodegradable’ to mean the process by which a product breaks down or decays, and do not infer from the term any particular time period, much less a rigid time period.” Decision at 222. Chief Judge Chappell rejected a Google Consumer Survey the FTC offered to prove the implied one year time limit concluding the Google survey was “not of sufficient methodological quality to constitute probative evidence in litigation, under the Commission’s standards or the standards applicable to federal courts in general.” Decision at 317.
The FTC did, however, prevail on its theories that the advertised claim of biodegradability between 9 months and 5 years was false and unsubstantiated. Chief Judge Chappell held: “[t]he expert testimony convincingly establishes that ECM Plastics are not fully biodegradable in a period of 9 months to 5 years in a landfill, and that tests do not prove such claims.” Chief Judge Chappell further noted “it has been found as a matter of fact, there is presently no single test that can substantiate the precise rate of biodegradation of plastics in a landfill.” Decision at 312. Among other failures, the Google survey did not draw a sample from the appropriate population, did not ask questions in a way to minimize bias, and was not analyzed correctly by the FTC’s expert. Decision at 190. For example, each respondent was asked only one question and the online pop-up questions presented “a distraction at best, and a barrier to respondents whose objective [was] to access information” creating “disinterest bias.” Decision at 192-93. Additionally, the FTC’s expert “force-fit” responses into categories and excluded “I don’t know” and “it depends” answers. Decision at 194-5.
In addition to calling into question the Green Guides’ guidance on “biodegradable” claims, this case illustrates the importance of methodologically sound consumer surveys in false advertising litigation. Without proper survey evidence, the FTC was unable to meet its burden to prove that the term “biodegradable” carried the additional implied meaning that a product will degrade within one year’s time to a sufficient number of reasonable consumers. Additionally, ECM’s survey, which was designed and conducted in accordance with principles of survey research, led Chief Judge Chappell to the conclusion that the term “biodegradable” did not imply a one year term for decomposition.
ECM filed a notice of appeal on February 6, 2015. The initial decision will be reviewed by the Full Federal Trade Commission.
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