Why it matters:

Wal-Mart Stores and its online affiliate Jet.com, Inc. have agreed to pay penalties and other costs of nearly $1 million to settle allegations by 23 California county district attorneys that the company sold plastic products with "biodegradable" or unsubstantiated "compostable" claims in violation of the State's plastics labeling law and deceptive trade practices laws. California law goes beyond federal standards for biodegradation claims for plastic products of any kind. Originally only applicable to plastic bags and food containers, the California plastics labeling law bans the sale of any plastic product or packaging with a "biodegradable" or other claim implying that the item will breakdown, fragment or decompose in a landfill or other environment. The only exception is for "compostable" claims where the seller can demonstrate that the plastic product or packaging fully meets particular ASTM plastic biodegradability standards. All companies in the distribution chain that sell in or into California are potentially strictly liable for mistaken biodegradability claims, including online and brick and mortar retailers. Like Wal-Mart in this case, violating companies are also subject to injunctive relief, which may significantly exacerbate the consequences of a repeat violation.

While most companies are aware of the Federal Trade Commission's (FTC) formal guidelines for environmental marketing claims ("Guides for the Use of Environmental Marketing Claims" or "Green Guides"), this case reminds us that individual States may have more particular restrictions on environmental marketing claims, and there are cost and reputational risks to relying solely on suppliers' due diligence for compliance.

Detailed discussion:

Federal Standards for Proper Biodegradability Claims

In the Green Guides, the FTC cautions marketers not to make unqualified "degradable" claims for a product unless they can have competent and reliable scientific evidence that the entire product or package will completely break down and return to nature within one year after customary disposal for the product. This will almost never be appropriate for items typically disposed of by landfill, recycling or incineration. For unqualified "compostable" product claims, FTC requires marketers to have competent and reliable scientific evidence that all the materials in the item will break down into, or otherwise become part of, usable compost in a safe and timely manner in a home compost pile or device. In general, claims must consider both the extent of degradation that will be achieved, and whether the circumstances of disposal assumed by the claims will be practically available to the consumer (e.g., existence of municipal composting facilities). Among other topics, the Green Guides present the FTC's enforcement position on "free-from," "recyclable," ozone-friendly, non-toxic, recycled content and source reduction claims, and use of eco-friendly seals and certifications.

Since issuing the Guides, the FTC has initiated numerous enforcement actions involving allegedly misleading environmental claims, including over a dozen cases concerning claims of plastic products being biodegradable to different extents. Additionally, the agency has closely scrutinized more cutting edge claims—where science and consumer expectations may be at a disconnect—such as in October 2014, when the agency sent warning letters to 15 marketers of "oxodegradable" plastic waste bags warning them that their oxodegradable, oxobiodegradable or biodegradable claims may be deceptive. The letters explained that the required setting for oxodegradable plastic to degrade, specifically a high-oxygen environment, is unlikely to be found in landfills, the place where the vast majority of these types of trash bags end up. Contrary to the marketing, therefore, these bags may be no more biodegradable than ordinary plastic waste bags when used as intended.