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 2 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 3
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