Order accompanying the Initial Decision would bar ECM

330 Pages·2015·4.62 MB·English

by  Federal Trade Commission

I. INTRODUCTION

A. SUMMARY OF THE COMPLAINT AND ANSWER

The Administrative Complaint in this case (“Complaint”), issued by the Federal Trade
Commission (“FTC” or “Commission”) on October 13, 2013 against Respondent ECM
BioFilms, Inc. (“Respondent” or “ECM”), alleges that Respondent, a manufacturer and seller of
a plastic additive known as “MasterBatch Pellets” (the “ECM Additive”), violated Section 5 of
the Federal Trade Commission Act (“FTC Act”) by misrepresenting the biodegradability of
plastics made with the ECM Additive (“ECM Plastics”). Specifically, paragraph 9 of the
Complaint alleges that:

9. Through [various marketing and promotional materials], respondent has
represented, expressly or by implication, that:

A. ECM Plastics are biodegradable, i.e., will completely break down and
decompose into elements found in nature within a reasonably short
period of time after customary disposal;

B. ECM Plastics are biodegradable in a landfill;

C. ECM Plastics are biodegradable in a stated qualified timeframe; and

D. ECM Plastics have been shown to be biodegradable, biodegradable in a
landfill, or biodegradable in a stated qualified timeframe under various
scientific tests including, but not limited to, ASTM D5511.

Complaint ¶ 9A-D.

The Complaint further alleges:

10. In truth and in fact:
A. ECM Plastics will not completely break down and decompose into
elements found in nature within a reasonably short period of time after
customary disposal;

B. ECM Plastics will not completely break down and decompose into
elements found in nature within a reasonably short period of time after
disposal in a landfill;

C. ECM Plastics will not completely break down and decompose into
elements found in nature within respondent’s stated qualified timeframe
after customary disposal; and

D. ECM Plastics have not been shown to completely break down and
decompose into elements found in nature within a reasonably short
period of time after customary disposal, after disposal in a landfill, or
within respondent’s stated qualified timeframe, under various scientific
tests, including, but not limited to, ASTM D5511.

Complaint ¶ 10 A-D. As discussed more fully infra, FTC Complaint Counsel (“Complaint
Counsel”) asserts that “a reasonably short period of time” for complete biodegradation is less
than one year, and “customary disposal” is disposal in a municipal solid waste (“MSW”)
landfill. In addition, as further addressed infra, the “stated qualified timeframe” for
biodegradation challenged by Complaint Counsel is the period of 9 months to 5 years.

The Complaint charges that the representations set forth in Paragraph 9 of the
Complaint, listed above, are false or misleading. Complaint ¶ 11. The Complaint further
charges that these representations are false or misleading because, at the time they were made,
Respondent did not possess and rely upon a reasonable basis that substantiated such
representations. Complaint ¶¶ 12-13. Moreover, the Complaint alleges, Respondent
distributed the false or misleading representations alleged in the Complaint, through its
marketing and promotional materials, to its customers and distributors, and thereby provided
those entities with the “means and instrumentalities” for the commission of deceptive acts and
practices. Complaint ¶¶ 14-15.

The Notice Order issued with the Complaint seeks to prohibit Respondent, inter alia,
from making any “unqualified” claim that ECM Plastics are “biodegradable” unless it can
substantiate, with competent and reliable scientific evidence, that ECM Plastics will biodegrade
completely, in a landfill, within one year. Notice Order, Part I.A.i. In addition, under the
Notice Order, any “qualified” claim as to the rate and extent of biodegradation of ECM Plastics
must also be substantiated by competent and reliable scientific evidence. Notice Order, Part
I.A.ii.

Respondent filed its Answer and Affirmative Defenses to the Complaint on November
15, 2013. Respondent denies that it misrepresented the characteristics of its product, or that it
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lacks substantiation for its biodegradable claims. Answer ¶¶ 11-13. Specifically, Respondent
maintains that it provides its customers, who Respondent alleges are highly sophisticated, with
accurate and non-misleading information concerning the nature and characteristics of the ECM
Additive. In addition, Respondent avers, competent and reliable scientific testing proves that
ECM Plastics will fully biodegrade, including in landfills. Answer ¶ 9A-D. Respondent also
challenges the definition of “biodegradable” employed by the FTC and by Complaint Counsel
in this case, derived from the October 2012 Revised Guides For The Use Of Environmental
Marketing Claims (“Green Guides”), which requires items claimed to be “biodegradable” to
completely biodegrade in a landfill within one year. According to Respondent, this definition
conflicts with the representations made by ECM and with the understanding of ECM’s
customers and the scientific community; is unworkable; and is arbitrary and capricious.
Answer ¶ 10A-D. Respondent further denies that it engaged in any deceptive trade practices,
or provided others with the means and instrumentalities to do so. Answer ¶¶ 14-15.

Respondent further interposes a number of defenses, including that the Complaint does
not serve the public interest; the Notice Order barring biodegradable claims, unless such item is
demonstrated to completely biodegrade in a landfill within one year, if implemented, will
violate the First Amendment to the United States Constitution by suppressing truthful speech;
the alleged misrepresentations were not material to ECM’s customers; the Complaint
constitutes arbitrary and capricious agency action; and these administrative proceedings violate
the due process protections of the Constitution by failing to properly separate the FTC’s
prosecutorial and adjudicative functions. Answer at 1-2, 13-16.

B. PROCEDURAL HISTORY

The administrative trial in the instant case began on August 5, 2014, and concluded on
August 29, 2014. By Order dated September 4, 2014, the hearing record was closed. Over
1,760 exhibits were admitted into evidence, 29 witnesses testified, either live or by deposition,
and there are 3,006 pages of trial transcript. The parties’ proposed findings of fact, replies to
proposed findings of fact, post-trial briefs, and reply briefs total 1,782 pages.

Rule 3.51(a) of the Commission’s Rules of Practice states that “[t]he Administrative
Law Judge shall file an initial decision within 70 days after the filing of the last filed initial or
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