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Paul Zimmerman
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Costco Takes Its Coffee with Cream and a Civil Penalty

The Federal Trade Commission doesn’t have a monopoly on consumer fraud claims – just ask the folks at Costco.

Recently, the District Attorney of Alameda County in California joined with 24 other DA’s in the state in settling a case against Costco Wholesale Corporation and JBR, Inc., a coffee company better known as San Francisco Bay Gourmet Coffee and the Rogers Family Company. Costco and JBR agreed to pay a total of $500,000 in civil penalties and costs stemming from untrue and misleading marketing claims made on plastic coffee pods sold by the companies.

The big problem for Costco and JBR: the coffee pods were improperly labeled as “97% biodegradable” and “biodegradable,” this despite a law in California that bans the sale of plastics with such labels because the identification of a product as “biodegradable” is inherently misleading without thorough disclaimers regarding how quickly it will biodegrade (plastic waste can take up to a thousand years to decompose). Of note, the California law also prohibits the sale of plastic products labeled “compostable” absent specified scientific testing.

That being said, the coffee pods were also unlawfully marketed as being “compostable” even though they did not meet required compostability standards. To make matters worse, so-called “OneCup” coffee pods were billed as not being plastic, yet the product’s ring, mesh, and part of the lid were – in fact – all made of plant-based plastic. This, of course, lent even more support for the action taken against the retail giant and supplier.

The most immediate lesson is to be truthful with consumers (including those seeking to reduce plastic waste in landfills) about biodegradability. But there’s a broader and more far-reaching moral to this story as well: to avoid scrutiny – be it from the FTC or any other federal, state or local governmental agency – company’s must ensure that their marketing and advertising claims are consistent with all applicable laws, not misleading in any way, and, when appropriate, backed by scientific evidence.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.