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Dunedin City Council waste manager Catherine Irvine said polylactide (PLA) disposable coffee cup lids were being sold as compostable when there were no facilities in New Zealand capable of composting them.
A spokeswoman for the Commerce Commission said companies selling the lids could be breaching the Fair Trading Act if they were being sold as compostable or biodegradable when they could not be composted here.
She pointed to a 2013 case in which a rubbish bag company was fined $60,000 for making misleading claims about its bags being biodegradable.
Ms Irvine, who said the coffee cups and lid claims were misleading, was keen to clear up confusion about the lids, which were becoming "more and more" common.
What added to the confusion was that PLA cups, made of a fibrous material, were compostable in household compost bins, just not the lids.
If the PLA product looked like plastic, like the lids, it could not be composted in New Zealand, and there were currently no recycling options either, Ms Irvine said. PLA cups belonged in the landfill.
Packaging companies argued councils should set up facilities where PLA cups could be composted, but such a move was "not going to happen" because of the logistical problems in sorting them and the length of time it took to compost them.
She believed the companies were guilty of "green-washing" their products.
The best option for coffee lovers was to take a commuter cup, which at some cafes meant they could get a discount.
"Any single-use product is a waste of resources."