On October 29th, AMERPEN presented the second webinar in their three-part series, Legislative Pathway: State or Federal? Former Executive Director Dan Felton introduced the session and guest speaker Joe Dages, an Associate with Steptoe LLP, as well as recognized AMERIPEN鈥檚 Annual Partnership Program Sponsors and webinar sponsors.
Dages dove right into the topic by pointing out that there had been a lot of activity in the last few years at state level on environmental marketing claims, especially with those tied to packaging recovery鈥攊ncluding recyclable and compostable claims. Now, as a result, there are some emerging inconsistencies and tensions between how such claims are regulated at the federal level vs. the state level.
He said that when talking about conceptualizing the law around green claims, it is important to understand that the Agency with primary jurisdiction at the federal level is the FTC. Section 5 of the FTC Act prohibits unfair and deceptive practices in commerce, 聽and 聽the FTC has the authority to issue the Green Guides under Section 5 of the FTC Act.聽 The Green Guides appear in the regulations in 16 CFR Part 260, but they are an administrative interpretation of the law, without the force and effect of law.聽 Regardless, the Green Guides are nevertheless influential and important. If you can show that you are in compliance with the Green Guides, then you are unlikely to face any scrutiny from the FTC or under state law. Because Section 5 of the FTC Act does not preempt state law, states are authorized to have their own laws in place on deceptive marketing practices, and most states do have so-called 鈥渓ittle FTC Acts鈥� in place, or other state laws that are focused on preventing deception. Another factor to consider when making green claims can be international instruments, 聽like the U.N. Environmental Program鈥檚 Intergovernmental Negotiating Committee (INC) on Plastic Pollution Prevention.鈥擳he final round of negotiations for that proposed treaty are set to take place in South Korea later this year. Finally, Dages noted that there are voluntary programs to take into consideration. For example, the EPA administers the Safer Choice program, and there are elements of that program that relate to the environmental attributes of packaging that are used. Another example of a voluntary program that can have an impact on environmental marketing claims is the National Advertising Division of the Better Business Bureau, which essentially functions as an alternative dispute resolution forum to hear disputes between companies about environmental marketing practices. NAD decisions can be impactful because, if you lose and you do not make the changes suggested by the NAD, then the NAD can issue a press release that can function as a 鈥減ublic shaming鈥� exercise, and the NAD also can refer cases to the FTC. So, you really must look at the big picture when you are making environmental green claims.
With regards to federal and state legal posture and dynamic, Dages pointed out that, not only does the federal FTC Act not preempt state law, giving states the right to deviate, there also is no private right of action under Section 5 of the FTC Act, meaning that only the FTC can sue to enforce violations of the FTC Act. However, that is not the case with the little FTC Acts鈥攊n many cases, any private lawyer representing a consumer can sue under the little FTC Acts to enforce violations, and there is the potential for monetary damages and class action lawsuits, resulting in a dynamic where liability exposure can often be higher under state law as compared to federal law.
He said that, at their core, the federal FTC Act and the little FTC Acts are focused on preventing deception and promoting consumer protection. The FTC defines deceptive practices as those involving a material representation, omission, or practice that is likely to mislead a consumer, and specifically a consumer acting reasonably in the circumstances. Dages noted that the touchstone for deception is consumer perception, so one way to figure out if a claim is potentially deceptive can be generating consumer perception studies. Dages then presented the question of: what does a consumer acting reasonably under the circumstances think when they see the word 鈥渞ecyclable鈥�? Do they associate the word with a dictionary definition鈥攃apable of being recycled? Or do consumers gravitate towards another understanding of the word that is focused on the eventuality鈥攚hat are the odds that a material will actually be recycled? It is these differences in potential consumer interpretations that has led to some of the tensions in the law.
When it comes to the word 鈥渞ecyclable鈥�, the FTC Green Guides seem to be more focused on the dictionary interpretation鈥攚hether the material can be recycled, says Dages. FTC also says that, if you want to make an unqualified claim, then you must meet the following criteria: 1) recycling available to 60% of more of consumers or communities, 2) entire product or package, excluding minor incidental components, is recyclable, 3) shape, size, and components must be accepted by MRF. These provisions stand in contrast to what has happened in California with the law known as SB 343, which was adopted in October 2021, and which sets a much higher standard for recyclable claims. Recyclable claims under SB 343 are permissible only if the material is: 1) collected by recycling programs in jurisdictions encompassing at least 60 percent of the state鈥檚 population, 2) sorted into defined streams for recycling processes by at least 60 percent of the state鈥檚 large volume transfer/processing facilities, with the defined streams sent to and reclaimed consistent with the Basel Convention, 3) comprised of no components, inks, additives, or labels that prevent them from being recycled per APR Design庐 Guide, 4) designed to ensure recyclability, 5) not comprised of certain chemicals identified by California regulations, and 6) not made from plastic or fiber that contains PFAS meeting certain criteria. California SB 343 also changed the law around the way that Resin Identification Codes (RICs) can be used on plastic materials. Over 30 states require that the RIC be surrounded by chasing, triangulated arrows, but under California law it will be prohibited unless California鈥檚 recyclable criteria is met. This creates a situation where companies could find themselves in a situation where they could have to make separate packaging for different states, or risk facing being out of compliance in California.
Dages then discussed why this dynamic exists, with a focus on the underlying policy issues. He explained that the policy reasons that led to this dynamic are multi-fold, but include:
- China鈥檚 National Sword policy from 2018, which has resulted in a situation where China is not accepting as much U.S. waste and recyclables;
- the Basel Convention Amendments from 2019, which has made it a lot harder for those countries that have ratified the Basel Convention to engage in the trans-boundary shipment of plastic waste;
- COVID, which impacted the way that curbside waste and recyclables are collected; and
- A general public perception, coupled with perhaps some frustration directed at the federal government and a wiliness of state policy makers to act.
Taking all of this into account, Dages discussed potential policy solutions, and organized the discussion into three basic options.聽 These include:
- Do nothing, and allow the current framework to persist and continue to evolve, which can put companies in challenging compliance positions, and which also can contribute to consumer confusion since 聽since consumers move around from state to state, and are at risk of having to interpret different claim standards;
- Attempt to amend current state laws to try and seek consistency and to prevent a patchwork. This would require working with each state legislature to try and effectuate the change that is wanted, but this can be a long and challenging process; or
- Seek a federal solution. Dages noted that, because it is questionable that the FTC or another federal agency can, under their existing authority, adopt regulations that would preempt state law on this topic, it is likely that an act of Congress is needed.
Dages next discussed the question of which agency or agencies should have jurisdiction at the federal level. He said one agency to consider is the FTC, which already has decades of experience interpreting deception, and has already developed the Green Guides. However, Dages noted that there is an argument that the EPA ought to have a role, especially since these claims and issues also relate to packaging recovery, and EPA has experience with waste management and issued tied to recycling. He also said that other agencies, such as the USDA, with their bio-preferred program and experience with compostable issues, also could have some jurisdiction, and there also could be arguments for joint jurisdiction, where multiple federal agencies have a role at the same time.
Dages also addressed options relating to the role of definitions in a federal law, and how such a law could define key terms like 鈥渞ecyclable鈥� and/or 鈥渃ompostable.鈥� He mentioned that one can glean definitions from the Green Guides, but another option may be to adopt definitions that are more detailed, like some of the compostable definitions under state law. One 聽benefit of more detailed definitions is that they are more explicit, but they also 聽leave less room for an agency to interpret them, which can be a potential downside since many of these concepts are fairly complicated.
Dages noted that there are many potential options for how to set up the framework for how a law like this would work, and that would relate to how the law could be administered by the agency that鈥檚 given jurisdiction. To simplify the discussion, Dages presented three general options:
- Option 1 might entail a situation where an agency is given authority to promulgate general regulations that set out criteria to make claims. This option could provide maximum flexibility in making claims, however also could result minimum compliance clarity.
- Option 2 could involve a third-party certification system, where an agency is given responsibility for recognizing accreditation bodies, and those accreditation bodies then proceed with a accrediting third party certifiers, like How2Reycycle or BPI. This option could result in improved clarity for companies, but some companies may not want to use third-party programs.
- Option 3 could be some kind of mandatory premarket review for all claims. Dages noted that, while this option does offer maximum compliance clarity, it would result in minimum flexibility to make claims and would put a lot of burdens on participants in the marketplace and the agency responsible for reviewing the claims.
Another topic that was discussed was the issue of preemption in a federal solution.聽 Dages discussed the fact that the US is a national market, and that consumers do not stand still.聽 Rather, they move around from state to state, and see different types of claims on packaging. 聽If a dynamic exists where there are different standards for claims in different states, then there is an argument that consumers could be more confused when seeing claims, which could actually promote, rather than prevent, deception. Dages then provided an overview of different types of preemption, beginning with express preemption, which is where language is expressly included in a statute that provides state laws cannot deviate from federal law. Implied preemption consists of several different doctrines, and Dages noted that, for implied preemption to arise, it ordinarily requires some kind of litigation activity which results in a court finding it to exist. For example, Dages noted impossibility preemption can arise where it is impossible to comply with federal law and state law at the same time and, under the supremacy clause of the constitution, the federal law takes precedent.
Finally, Dages said there are other issues to keep in mind when contemplating a potential federal solution.聽 For example, these might include whether there should be a clear legal distinction and difference between instructions on how to handle packaging at the end of its first lifecycle versus claims, how state EPR laws might function alongside a federal claims law, whether the law should make a distinction between non-consumer product packaging versus consumer product packaging, how RICs should be handled, what appropriate penalties and enforcement might look like, and the need for potential delayed compliance deadlines. Dages鈥� webinar was followed by a great Q&A session, where he was able to go into more detail and clarification about specific points made in the webinar.
The final webinar in this series, 鈥淩ecommendations for Applying On-Pack Claims and Labels in 2025 and Beyond鈥�, questions that with all of the legislative proposals examining packaging claims and labels, what does the mean for labeling programs like How2Recycle and Smart Label? Featuring a panel of experts, listen in on how to learn more about using these programs and how they anticipate some of the pending legislation proposals may interplay with them. The webinar will take place on November 12 at 1pm.