Updated: FTC Targets Misleading Environmental Advertising Claims | Practical Law

Updated: FTC Targets Misleading Environmental Advertising Claims | Practical Law

As part of its program to fight false and misleading environmental advertising claims, the Federal Trade Commission (FTC) has annouced six enforcement actions against companies that allegedly violated the FTC Green Guides.

Updated: FTC Targets Misleading Environmental Advertising Claims

Practical Law Legal Update 5-547-5585 (Approx. 5 pages)

Updated: FTC Targets Misleading Environmental Advertising Claims

by Practical Law Commercial Transactions
Published on 20 Oct 2015 • USA (National/Federal)
As part of its program to fight false and misleading environmental advertising claims, the Federal Trade Commission (FTC) has annouced six enforcement actions against companies that allegedly violated the FTC Green Guides.
On October 29, 2013, the FTC announced enforcement actions against six companies that allegedly made misleading and unsubstantiated environmental advertising claims and violated the FTC's Guides for the Use of Environmental Marketing Claims (Green Guides).
In five of the enforcement actions, the FTC is for the first time addressing biodegradable plastic claims. These enforcement actions include:
  • A complaint against ECM Biofilms, Inc., a company that markets an additive it claims makes plastic products biodegradable.
  • Four separate complaints and proposed consent orders against American Plastic Manufacturing, CHAMP, Clear Choice Housewares, Inc. and Carnie Cap, Inc., companies that market various plastics with allegedly false and unsupported claims that their products were biodegradable.
The FTC charged ECM with violating the FTC Act by misrepresenting that:
  • Plastics made with ECM additives are biodegradable:
    • in a landfill;
    • in a stated qualified timeframe; and
    • will completely break down within a reasonably short period of time after customary disposal.
  • Various scientific tests prove ECM's biodegradability claims.
The FTC similarly charged the other four companies with misrepresenting that their additive treated plastics are biodegradable and for lacking reliable scientific tests to substantiate their claims. The four proposed consent orders prohibit the four companies from making biodegradability claims unless the representations are both:
  • True.
  • Supported by competent and reliable scientific evidence.
Finally, in the sixth enforcement action, the FTC filed a complaint against AJM Packaging Corporation for violating a 1994 FTC consent order that barred the company from representing that any product or package is degradable, biodegradable or photodegradable unless it had competent and reliable scientific evidence to substantiate the claims. The FTC complaint alleges that AJM violated this consent order by failing to have competent and reliable evidence to substantiate claims that its:
  • Products will biodegrade within one year when disposed in a landfill.
  • Products will compost in a safe and timely manner in a home composting pile.
  • Paper plates are recyclable.
AJM has already settled this action with the FTC and agreed to a new consent order, which:
  • Requires AJM to pay a $450,000 civil penalty for violating the 1994 order.
  • Prohibits AJM from making unsubstantiated claims that a product or package is biodegradable, compostable, recyclable or offers an environmental benefit.
  • Requires AJM to disclose information needed to qualify certain green claims.
These enforcement actions should serve as a reminder that businesses must comply with the Green Guides and other FTC rules and only make environmental marketing claims that are substantiated and accurate. Specifically, if a company makes a claim that a product is:
  • Biodegradable, the company should have proof that the product will completely break down and return to nature within one year.
  • Compostable, then all the materials in the product should safely turn into usable compost in a home compost pile.
  • Recyclable, then the entire item must be able to be recycled.

Update

On February 6, 2015, the FTC announced that FTC Chief Administrative Law Judge D. Michael Chappell issued an Initial Decision ruling that ECM Biofilms, Inc. violated the Federal Trade Commission Act (FTC Act) by deceptively claiming that:
  • Plastics treated with ECM additives would completely biodegrade in a landfill within nine months to five years.
  • Various scientific tests prove ECM's biodegradability claims.
The Initial Decision:
  • Bars ECM from representing that any product or package will completely biodegrade within any time period or that tests prove such a representation, unless:
    • the representation is true and not misleading; and
    • at the time ECM makes the representation, it possesses and relies on competent and reliable scientific evidence that substantiates the representation.
  • Contains numerous compliance and reporting provisions that expire in 20 years.

Update II

On October 19, 2015, the FTC issued an opinion affirming Chief Administrative Law Judge Chappell's January 28, 2015 decision that ECM:
  • Deceptively claimed that plastics treated with its additive would completely biodegrade in a landfill within nine months to five years and that scientific tests supported this claim.
  • Encouraged its customers, companies that manufacture plastics, to pass on these deceptive claims to their customers and end-users.
The FTC additionally found (unlike Judge Chappell) that ECM made false and unsubstantiated implied claims that plastic products treated with its additive will biodegrade in a reasonably short period of time or within five years.
Under the FTC's Final Order, ECM is barred from:
  • Representing that a plastic product or package is degradable or that any product or service affects a plastic product's degradability, unless the representation is true, not misleading and substantiated by competent and reliable scientific evidence.
  • Providing others with the means and instrumentalities to make any false, unsubstantiated or otherwise misleading representations of material fact or environmental benefits.
  • Misrepresenting the existence, contents, validity, results or conclusions of any test, study or research.
For more information on the FTC's rules for environmental advertising claims, see Article, The Revised Green Guides: New Standards for Environmental Marketing Claims and Legal Update, It's Not Easy Being Green: The Challenges of Green Marketing in the Wake of the Updated Green Guides.