FTC Bars Deceptive and Misleading Biodegradable Claims

Sculpture titled "Man Controlling Trade" outside FTC Headquarters

This week the Federal Trade Commission (FTC) announced it had preliminarily reached a settlement with Dyna-E International and its owner George Wheeler, which would bar the retailer of rayon towels from making false and misleading claims that dupe consumers into believing its paper towels are biodegradable. under a proposed settlement with the Federal Trade Commission. This preliminary settlement is now open for public comment, as is routine and customary when the FTC seeks to settle a complaint against individuals or companies charged with violations of law. Those wishing to comment have through September 25, 2009, after which the Commission will decide whether to make it final. While nothing can be certain, it is safe to say that in the vast majority of cases a preliminary settlement is made final. It is also worth knowing that a consent agreement is for settlement purposes only and does not constitute an admission of a law violation, but a final order does carry the force of law with respect to future actions and each violation of a final order may result in a civil penalty of $16,000.

This FTC settlement with Dyna-E International would resolve the third administrative complaint the FTC has issued this year relating to allegedly false and misleading claims regarding biodegradability. The complaint filed by the FTC charged the company with making false claims that its Lightload brand compressed dry towels are biodegradable. In June, the FTC settled similar cases against Kmart Corp. and Tender Corp., as part of a broad effort to ensure that environmental marketing is truthful and based on scientific fact. The fact of the matter, however, is that in reality everything is biodegradable. This scientific truth, however, does not allow individuals or companies to make such claims. The FTC is the government agency primarily responsible for protecting consumers, and they do not concern themselves so much with actuality, truth or science fact, but rather worry about what impressions a consumer may take away from claims and then test those claims against reality in light of the impressions that will be likely created in the minds of the relevant consuming public. In essence, the Federal Trade Commission seeks to prevent deception and unfairness in the marketplace.

The FTC Act gives the Commission the power to bring law enforcement actions against false or misleading marketing claims, including environmental or “green” marketing claims. The FTC Environmental Guides, often referred to as the “Green Guides,” were issued in 1992, and most recently revised in 1998. The Guides indicate how the Commission will apply Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, to environmental marketing claims.  FTC Guidelines, like guidelines from other agencies charged with criminal and civil enforcement of the law, are not the law in direct terms, but explain to the relevant regulated community how the agency will interpret the law.  This is absolutely necessary given that the laws passed by Congress are typically about as clear as mud, and leave all kinds of things open to interpretation.  In this case, the FTC explains how they interpret their general Section 5 authority to regulate in the specific context of environmental or green marketing claims.  This additional information allows the regulated community to better understand the present thinking of regulators and fashion their behavior in a way that will allow them, if they so choose, to steer well clear of any conduct that might be close to the line in terms of acceptability.

Since 1992, the Green Guides have advised marketers that to make unqualified biodegradable claims, they must have scientific evidence that their product will completely decompose within a reasonably short period of time under customary methods of disposal. In all three complaints filed by the FTC this year, the FTC alleged that the companies’ products typically are disposed in landfills, incinerators, or recycling facilities, where it is impossible for these products to biodegrade within a reasonably short time. Like Kmart and Tender, if this preliminary settlement is approved, which is extremely likely, Dyna-E and Wheeler will be barred from making deceptive “biodegradable” product claims and required to support all other environmental product claims with competent and reliable evidence.

With respect to the Green Guides, they explain that specific environmental claims are easier to substantiate than general claims and less likely to be deceptive. For example, frequently when specific claims are made there is direct and verifiable information provided, thereby creating far less chance the public would be confused or mislead.  A company could advertise that a product was environmentally friendly because it did not contain harmful chemicals like X, Y or Z, which other similar products do contain and which research shows to harm A, B and C.  Such a specific claim can be easily verified or shown to be false, and conveys concrete information that consumers can (or should) understand.  An unqualified general claim of environmental benefit may convey that the product has far-reaching environmental benefits, when the product does not.

Claims that a product is “degradable” or “biodegradable” must mean that the materials will break down and return to nature within a reasonably short time after customary disposal. What a “reasonably short time” is depends on where the product is disposed. For example, in landfills, where most garbage is taken, materials degrade very slowly. This is because laws required that modern landfills be designed to keep out sunlight, air and moisture. This helps prevent pollutants from the garbage from getting into the air and drinking water, but it also slows the decomposition of the trash. With materials like paper and food taking decades to decompose in a landfill, it is disingenuous to claim that a product normally disposed of in a landfill is “biodegradable” or “degradable,” as those terms would be understood by consumers.

For more information see:

In the Matter of Dyna-E International

If you are interested in commenting on this proposed settlement see:

How to File Public Comments