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ECM BioFilms, Inc. v. Federal Trade Commission

United States Court of Appeals, Sixth Circuit

March 16, 2017

ECM BioFilms, Inc., Petitioner,
v.
Federal Trade Commission, Respondent.

          Argued: July 28, 2016

         On Petition for Review of an Order of the Federal Trade Commission. No. 9358.

         ARGUED:

          Jonathan W. Emord, EMORD & ASSOCIATES, PC, Clifton, Virginia, for Petitioner.

          Theodore Metzler, FEDERAL TRADE COMMISSION, Washington, DC, for Respondent.

         ON BRIEF:

          Jonathan W. Emord, Peter A. Arhangelsky, EMORD & ASSOCIATES, P.C., Clifton, Virginia, for Petitioner.

          Theodore Metzler, FEDERAL TRADE COMMISSION, Washington, D.C., for Respondent.

          Steven J. Grossman, GROSSMAN, TUCKER ET AL, Manchester, New Hampshire, for Amicus Curiae.

          Before: WHITE and STRANCH, Circuit Judges; MICHELSON, District Judge [*]

          OPINION

          JANE B. STRANCH, Circuit Judge.

         ECM BioFilms, Inc. manufactures an additive that it claims accelerates the rate at which plastic biodegrades. In October 2013, the Federal Trade Commission (FTC) filed an administrative complaint against ECM, which alleged that several of ECM's biodegradability claims were deceptive. The full Commission ultimately found that three of ECM's claims were false and misleading under § 5 of the FTC Act (15 U.S.C. § 45). ECM appeals the Commission's decision with regard to only one of the claims, arguing that it was unsupported by substantial evidence. ECM also contends that the Commission violated its rights under the First Amendment, the Administrative Procedures Act (APA), and the Due Process Clause of the Fifth Amendment. We disagree and DENY the petition for review.

         I. BACKGROUND

         More than half of all plastic waste ends up in landfills, where it can take thousands of years to biodegrade. In recent years, some environmentally-conscious consumers have turned away from traditional plastics in favor of products that biodegrade at a more rapid rate. In response to this trend, manufacturers of plastic products have begun to look for ways to increase the biodegradability of their products. ECM BioFilms sells an additive that it claims will accelerate the biodegradation of plastics manufactured with the additive (which we will refer to as "ECM plastic").

         A. ECM's biodegradability claims

         ECM's claims regarding the biodegradability of ECM plastic have changed over the years. Before 2009, ECM did not market a specific time frame for biodegradation, but did represent that ECM plastic would biodegrade "in timeframes that would be similar to things like wood or pieces of sticks." Responding to industry demands for specific time frames, in 2009 or 2010 ECM began advertising that ECM plastic would "fully biodegrade" in a "landfill" within nine months to five years. ECM placed this representation on its marketing materials and website. The administrative law judge (ALJ) overseeing this case concluded this claim was false and unsubstantiated. As the ALJ observed, "All of the experts in this case agreed that ECM Plastics do not fully biodegrade in 9 months to 5 years in a landfill." The Commission also concluded that "the clear consensus among both parties' experts" was that "ECM lacks substantiation for its express and implied claims that ECM Plastics fully biodegrade in landfills within 5 years." ECM no longer contends otherwise.

         ECM also provided plastic manufacturers with material to market their products as biodegradable, including a logo marked "ECM Biodegradable" against a tree design. Millions of plastic products were manufactured with this representation or similar representations, including "plastic dinnerware, straws, and 'clam shell' carry-out containers, restaurant and grocery bags, trash bags, and shampoo and conditioner bottles." Some of ECM's plastic-manufacturer customers also advertised that their plastics would biodegrade in nine months to five years in a landfill.

         In 2012, the FTC revised its "Green Guides, " which are intended to "help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act." 16 C.F.R. § 260.1(a). The previous version of the Guides, issued in 1996, advised that an unqualified claim that a product is biodegradable "should be substantiated by competent and reliable scientific evidence that the entire product or package will completely break down and return to nature . . . within a reasonably short period of time after customary disposal." Guides for the Use of Environmental Marketing Claims, 61 Fed. Reg. 53311, 53318 (Oct. 11, 1996) (emphasis added). The 2012 Guides advised that "[i]t is deceptive to make an unqualified degradable claim 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) (emphasis added). Additionally, with regard to items customarily disposed of in landfills, the 2012 Guides advised that any unqualified biodegradable claim would be deceptive "because these locations do not present conditions in which complete decomposition will occur within one year." Id.

         After the FTC issued the 2012 Guides, ECM revised its marketing materials and logo. ECM placed an asterisk next to the word "biodegradable" and clarified that "[p]lastic products manufactured with [the ECM additive] will biodegrade in any biologically-active environment (including most landfills) in some period greater than a year." However, ECM continued to make the "nine months to five years" claim on its website until late 2013, and in direct communications with customers until January 2014.

         B. Scientific tests of ECM plastic

         Scientists disagree on the precise definition of the term "biodegradable." Most commonly, scientists define biodegradable material as material that can be broken down by biological agents, such as bacteria or fungi. Biodegradability is a property of a material, similar to color, weight, or density. A material's rate of biodegradation depends on the environment in which biodegradation occurs. Because biodegradation occurs at different rates in different environments, in evaluating the biodegradability of a material, scientists focus on its "intrinsic biodegradability." That is, they do not estimate the time for complete biodegradation, but instead evaluate the material's rate of biodegradation in various environments, as well as how this rate compares with other biodegradable materials.

         The most practical and widely-used scientific method for measuring the intrinsic biodegradability of a material is gas evolution testing. Of the available gas evolution tests, the D5511 protocol provides the best approximation of plastic biodegradation in landfill conditions. Landfills are predominantly anaerobic environments, and the D5511 method measures "the degree and rate of anaerobic biodegradation of plastic materials." The D5511 protocol provides, however, that claims of performance are to be limited to the numerical result obtained in the test and are "not be used for unqualified 'biodegradable' claims." It also provides that results are not to be extrapolated past the actual duration of the test.

         A number of different laboratories performed D5511 biodegradation tests on plastics manufactured with ECM's additive. ECM points to nineteen laboratory tests that, it claims, demonstrate that ECM plastic biodegrades at a faster rate than traditional plastic. In one test, for instance, ECM plastic biodegraded 49.28% over 900 days, whereas traditional plastic biodegraded just 0.1152% over the same time. The FTC, in turn, points to thirteen tests that, it alleges, indicate that ECM's additive does not accelerate biodegradation.

         C. Consumer understanding of biodegradability claims

         Both ECM and the FTC rely on consumer surveys to establish consumer understanding of biodegradability claims. The FTC's survey was conducted by Dr. Shane Frederick, a professor of marketing at Yale University's School of Management.[1] Using an online survey tool available through Google Consumer Surveys, Dr. Frederick asked respondents one of 60 different questions, collecting nearly 29, 000 responses.[2] Dr. Frederick found that, at a minimum, adding a "biodegradable" label to a plastic bottle increased the percentage of respondents who believed the bottle would fully decompose within five years from 13% to between 44% and 49%. Similarly adding a "biodegradable" label to a plastic "Tupperware" container increased the percentage of respondents who believed the container would fully decompose within five years from 16% to 44%; and adding a "biodegradable" label caused an additional 20% of respondents to believe that a plastic bag would fully decompose within five years (increasing the percentage from 21% to 41%).[3] This data led the Commission to conclude that adding the biodegradable label leads a "significant minority of reasonable consumers to believe that the plastic product will biodegrade within five years."

         ECM's survey was conducted by Dr. David Stewart, a professor of marketing and business law at Loyola Marymount University. Dr. Stewart surveyed 400 respondents by landline telephone asking five questions, some of which contained one or more sub-questions. In one question, respondents were asked, "If something is biodegradable, how long do you think it would take for it to decompose or decay?" Of the respondents who provided an answer to this question with a number and unit of time, 64% said that it would decompose within five years. By Dr. Stewart's own calculations, these respondents represented 23% of the survey's 400 respondents.[4]

         D. Procedural history

         In October 2013, the FTC filed an administrative complaint alleging that ECM's biodegradability representations were false and misleading, and thus violated § 5 of the FTC Act. The complaint asserted that ECM's express representation that ECM plastic would completely biodegrade within nine months to five years was unsupported by scientific evidence. It also alleged that "[c]onsumers likely interpret unqualified degradable claims to mean that the entire product or package will completely decompose into elements found in nature within a reasonably short period of time after customary disposal." Because ECM plastic does not fully biodegrade within a reasonably short time, the complaint alleged, this implied claim was misleading.

         An ALJ held a three-week trial in August 2014. The ALJ concluded that ECM's express claim that ECM plastic would completely biodegrade in a landfill within nine months to five years was false and unsubstantiated. He also determined, however, that the FTC had failed to prove that ECM's remaining biodegradability claims were misleading because the FTC failed to prove ECM had made an "implied one year claim." The ALJ's decision was based, in part, on perceived methodological problems with Dr. Frederick's survey.

         The parties then filed cross appeals to the Commission. In October 2015, the Commission affirmed the ALJ's decision with regard to ECM's express claim that ECM plastic would fully biodegrade within five years. The Commission reversed on the other biodegradability claims, finding that ECM had made implied claims that ECM plastic would fully biodegrade within a reasonably short period of time, i.e., within five years. Commissioner Maureen K. Ohlhausen partially dissented from the Commission's order.

         The Commission's order prohibits ECM from making biodegradability claims "unless such representation is true, not misleading, and, at the time it is made, respondent possesses and relies upon competent and reliable ...


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