One of the key questions in the case is how consumers understand the “manufactured” claim. Bigelow argued that the claim refers only to the tea bags – not to the tea itself – and that the claim was truthful because the bags are, indeed, made in this country. In contrast, plaintiffs argued that consumers understand the claim to mean that the tea itself is processed in the USA, and they presented a consumer perception survey to support their argument. In 2023, the court allowed that survey, over Bigelow’s objections.
This week, the court granted partial summary judgment to the plaintiffs, rejecting Bigelow’s argument that the “manufactured” claim refers only to the tea bags. The court wrote that “the tea leaves inside are vital to the tea bags as consumers purchase tea bags for the tea itself. In fact, the tea leaves are not only a component part of the tea bag; they are the very essence of the tea bag.” Because the tea leaves are grown and processed abroad, the court found the “Manufactured in the USA” statement to be literally false.
Although the decision only mentions the FTC in passing, the analysis mirrors how the FTC would read Bigelow’s claims. In fact, the court notes that the FTC has determined that “consumers are likely to understand an unqualified U.S. origin claim to mean that the advertised product is ‘all or virtually all’ made in the United States.” For more details on how the FTC approaches these claims, see this week’s post about the FTC’s newly updated version of its Complying with the Made in USA Standard business guide.
]]>Here are a few things that are new in the guidance:
The FTC also updated some of its examples to better illustrate how the “all or virtually all” principles apply in different circumstances and made some of the examples more current. For example, an example that currently refers to a microchip used to refer to a “floppy drive.” (Younger readers may need look up that term.)
A blog post announcing the new guidance reminds readers that the FTC means business when it comes to “Made in the USA” claims. “That’s why we keep suing companies that don’t play by the rules, assessing penalties where appropriate, and returning money to consumers when we can.” If you haven’t reviewed your claims recently, now may be a good time to do that.
]]>According to undisputed evidence in the record, some of I Dig Texas’ products had been assembled in the United States, while others had been assembled in China. Even for the products that I Dig Texas had assembled in the United States, some components – such as a nitrogen power cell – had come from other countries. If you’ve followed our coverage of Made in USA claims and the FTC’s strict standard for supporting those claims, you might think you know how this case turned out. In this instance, though, you’d probably be 110% wrong (give-or-take about 10%).
The 10th Circuit noted that under the Lanham Act, “a statement can be literally false only if it is unambiguous” and that “a statement without objective meaning can’t be literally false.” The court then asked itself “what does it mean to make a product in the United States or in America” and didn’t come up with a clear answer to its question. The term “make” could refer “either to the origin of the components or to the assembly of the product itself.” The challenged ads “are thus ambiguous when they say that the products are made in the United States or in America” and cannot be literally false.
How does the 10th Circuit square its reading with the FTC’s Made in USA Rule? It doesn’t. In a short footnote, the court writes that “even if the FTC policy were otherwise instructive, it would not bind us when addressing false advertising under the Lanham Act.” The court then went on to say that given the absence of a “bright line” rule in the FTC’s policy, “it doesn’t remove the ambiguity of the phrase made in the United States or American-made.” The decision doesn’t go into more detail or discuss the FTC’s specific guidance on this issue.
If you want to know more about the FTC’s specific guidance on this issue and the consequences of ignoring that guidance, take a look at this post in which we covered a recent settlement over “Made in USA” claims that involved a $2 million penalty. The requirements in that settlement provide a good outline of what you should consider when making these types of claims. Even if you dig the 10th Circuit’s analysis, you should know that the decision is a probably an outlier. The FTC, NAD, and other courts are likely to have a much different view of what it means for a product to be “made” somewhere.
]]>The same year Kenny released his song, the FTC sued Kubota alleging that the company’s “Made in USA” claims were false because some models contained significant foreign parts. To settle the case, Kubota agreed not to advertise products as Made in USA unless “all, or virtually all, of the component parts of such product, or of all products in such product line” were made in the USA.
By 2021, Kubota’s order had expired and Kenny’s girlfriends seemed to be into different things, but the allure of a good American-made product never fades. Kubota labelled thousands of tractor parts as “Made in USA,” even though that wasn’t always accurate. For example, the FTC alleges that Kubota continued to use those labels even after it started to make some products outside of the country.
The FTC recently announced that Kubota agreed to settle the case. Here are some highlights from the order:
As we’ve noted before, different people are turned on by different things. Regardless of how you feel about tractors and tractor parts, this case holds some important lessons for any company that makes “Made in USA” (or similar) claims. If you’re making these types of claims, consider how your practices stack up against the requirements outlined above.
For more coverage on Made in USA issues, click here.
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Starting in October 2017, Bigelow included “Manufactured in the USA” claims on packaging for certain teas. Plaintiffs allege that because the tea was neither grown nor processed in the USA, Bigelow’s “manufactured in the USA” claim constituted false advertising.
Bigelow claims that “manufactured” referred only to the blending and packaging of the tea, both of which occurred in the USA. Plaintiffs, on the other hand, contend that “manufactured” means “processed” (including growing, picking, rolling, oxidizing, drying, and sorting), which allegedly occurred, at least in part, outside of the USA.
Plaintiffs relied on a consumer perception survey to demonstrate consumer understanding of the word “manufactured” and support their argument that “Manufactured in the USA” conveyed that the teas were processed in the USA. The consumer survey found that 84% of consumers understood “manufactured in the USA” to mean that the tea was “processed” in the USA.
No surprise that Bigelow took issue with the survey. They asserted that the survey: (1) did not define what “processed” meant for the purpose the survey; (2) did not ask respondents to describe what “processed” meant to them in the context of bringing tea to market; and (3) used only leading and closed-ended questions.
The Court disagreed with Bigelow and allowed the survey to come in, concluding that the word “processed” was not as inherently ambiguous as Bigelow suggested, and that, despite the closed-ended questions, the survey included sufficient contrasting options. The Court relied in part on the survey in granting class certification, determining that the meaning of “manufactured in the USA” is not so ambiguous as to create individual questions defeating predominance.
This decision makes clear that being technically correct may not be enough – in the context of survey evidence, consumer impressions may outweigh technical accuracy. Companies should think critically about how to substantiate domestic origin claims and consider whether the product undergoes processing outside of the USA. To avoid implying that more of the product was manufactured in the USA than actually was, companies can refer to the specific process or part of the product that was manufactured in the USA instead of referring to the general manufacture of the product.
]]>Here are a few highlights from FTC’s complaint:
Here are a few highlights from the settlement:
In addition, the companies have to pay a monetary judgment of $191,481 and inform certain customers about the FTC action. This case demonstrates that the FTC continues to take “Made in USA” claims seriously. If you make claims about domestic origin, be sure to take a close look at the FTC’s Made in USA Labeling Rule and assess how well you’re complying. In the meantime, enjoy the Fourth of July holiday.
]]>Last year, MPS challenged various claims that 4Patriots made about its food kits at the NAD, and this year, 4Patriots filed its own challenge against MPS. Although much of what’s in NAD’s decisions may not be relevant to companies outside of this niche market, the most recent decision address at least three issues that regularly come up across a broad range of industries.
Made in USA
The MPS website included various claims that products were “Made in USA” alongside patriotic imagery. Because 4Patriots sells similar products, it knows that some of the ingredients in the MPS kits are likely to be imported. NAD summarized the requirements for “Made in USA” claims – which we’ve also summarized here – and recommended that MPS qualify its claims with a clear and conspicuous disclosure explaining that some of the ingredients in its kits are imported.
False Sense of Urgency
4Patriots argued that MPS creates a false sense of urgency by suggesting that sales are about to expire, when that’s not true. MPS provided evidence showing that various sales ended as advertised, and NAD agreed that those examples were not misleading. However, 4Patriots submitted examples of two sales that allegedly continued past their advertised end date.
NAD noted that it “is well-established that when an advertiser represents an offer to be for a limited time, that offer must, in fact, be available for only a limited time, and a reasonable amount of time must pass before the advertiser can make similar claims again.” NAD recommended that MPS “take appropriate steps to ensure that its time-limited claims are in fact limited.”
Reviews
Because the MPS site includes a higher percentage of 5-star reviews than other sites have for MPS products, 4Patriots suggested that MPS manipulates reviews. MPS explained that it posts all verified reviews, as long as they don’t contain offensive language, regardless of whether they are positive or negative. It suggested that some negative reviews on other sites may be related to products sold by unauthorized resellers, who may be selling outdated or sub-standard products.
NAD did not appear to take a side on the dispute about whether MPS had manipulated its reviews – something it likely couldn’t determine based on the record – but it did recommend “that when the advertiser’s website appears to publish all product reviews, that the advertiser post all reviews on its website, subject to its policy preventing reviews with vulgar or offensive language.”
Lessons
There aren’t any surprises in the decision, but there are a few points worth noting:
For more advertising and privacy law survival tips, be sure to check out our blog, our podcast (where you can hear our posts read by our talented host in her mellifluous voice), and other resources.
]]>For about ten months between 2021 and 2022, Instant Brands shifted the production of some of its measuring cups to China. The company did not, however, shift its marketing strategy, and some ads still suggested that its products were made in the USA. According to the FTC, though, more than 110,000 customers who ordered measuring cups that were advertised as “Made in USA” on Amazon received products that were labeled as “Made in China.” That’s clearly not where apple pie originated.
(Incidentally, there are some who allege that apple pie actually originated in England, rather than America, but the FTC side-stepped that debate, and so will we.)
The FTC questioned whether Instant Brands could support its “Made in USA” claims. Even if the company could support the claims most of the time, the FTC argued that the change in the supply chain rendered claims during that ten-month period misleading. Ultimately, Instant Brands decided to settle the FTC’s investigation by agreeing to pay $129,000 and to make several changes to its marketing practices.
This settlement is an important reminder that advertisers have a continuing obligation to ensure they can support their claims at all times they are in the market. That’s true not only of “Made in USA” claims, but also of any other objective claims. If you’re no longer able to support a claim – even if you could at the time you first made it – you must generally change it or take it down. Click here for an extreme example of how that principle can apply to comparative claims.
“Made in the USA” claims are going continue to be a hot topic for the FTC. Click here for more posts related to those claims. And click here for more posts related to baking.
Update: On February 6, 2023, a plaintiff filed a class action lawsuit against Instant Brand over the same claims that were challenged by the FTC.
]]>The requestor acknowledged that jewelry returned for recycling is often of unknown origin, but asserted that significant time and resources go into collecting recyclable material, delivering it to refiners in the United States, and processing it to a purity level of almost 100%, equating this to a “new life cycle” that resets the origin of the recycled material. Consumer perception testing submitted with the request found that 57% of respondents agreed that “Made in America” means that all parts of a product, including any natural resources it contains, originated in the United States. It also found that 33% of consumers think 100% of a product must originate in a country for that product to be designated as “Made in” that country.
In concluding that the origin of the product, prior to recycling, should be considered in the Made in USA analysis, Staff pointed to the consumer perception evidence and noted that it is highly likely that the jewelry recycled in the United States might contain components or natural resources that originated outside the United States, especially given that gold and precious minerals are often mined internationally. With that context, Staff advised that an unqualified U.S.-origin claim may deceive a significant number of consumers.
We would expect the FTC to apply a similar analysis to any recycled content, not just gold and precious minerals used for jewelry. So when making a Made in USA claim about recycled content, marketers should not only substantiate the recycled content portion of the claim consistent with the Green Guides, but also look beyond the recycling process to determine the origin of the product and its inputs before it was recycled. Unless the final assembly or processing occurred in the United States, all significant processing that went into the original product occurred in the United States, and “all or virtually all” ingredients or components of the product were made and sourced in the United States, an unqualified Made in USA claim would not be appropriate. As a reminder, the FTC has requested comments on the current Green Guides, including what they say about the use of recycled content claims. Comments are due February 21, 2023.
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Sassy Baby makes toys and other products for babies. Up until recently, the company claimed that some of the products were “Made in USA” based, in part, on assurances it had received from its supplier. When the company learned that it had been misled by the supplier, it stopped making the claims and voluntarily reported the issue to the FTC. The FTC decided not to pursue the investigation – presumably because Sassy Baby had done initial due diligence and quickly fixed the problem when they discovered it – but the staff took the opportunity to discuss whether companies can generally rely on their suppliers.
Notably, companies should not just assume that the components they obtain from suppliers are all or virtually all made in the USA. Instead, they should ask their suppliers for information about the percentage of US content in those components. The letter notes that, depending on context, supplier-provided certifications may constitute a “reasonable basis” for an advertiser to make a “Made in USA” claim. In a footnote, FTC staff point to a 1998 guidance document that actually includes sample language that companies can use in purchase orders with suppliers.
Although this case seemed to stem from the company’s voluntary report, rather than from the FTC’s own investigation, “Made in USA” claims are still a hot topic for the FTC and the agency is likely to continue its own investigations. If you make claims about domestic origin, be sure to take a close look at the FTC’s new Made in USA Labeling Rule and assess how well you’re complying. With the enactment of the new Rule, companies can find themselves paying steep penalties for failure to comply.
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The FTC disagreed on the US origin claims (but stayed largely silent on the possibility of living like a lion). According to its complaint, the company took clothing that was made in another country, removed tags showing the country of origin, and printed “Made in the USA” on the items. The FTC alleged that in most cases, goods that were advertised as “Made in USA” were wholly imported with limited finishing work performed in the United States.
Whether or not a product is made in the USA is usually not readily apparent, so when these cases come out, many of us wonder what caught the FTC’s attention. In this case, it’s less of a mystery. In 2020, the company’s owner posted a video on social media explaining that in order to make “Made in USA” claims, marketers should substantiate that products are “all or virtually all” made in the USA. So far, so good. He then explained that he could hide the fact that shirts are made in China by ripping off those tags and replacing them with other tags. No longer good.
To settle the case, the company and its owner agreed to pay $211,335 and to change their marketing practices. For example, they can’t make “Made in USA” claims unless:
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The FTC regularly investigates Made in USA claims, but private actions have been less frequent. New Balance, however, has faced at least two class action lawsuits alleging it falsely advertises its footwear products as “Made in the USA.” The most recent complaint , proposing a nationwide class, was filed in the U.S. District Court for the District of Massachusetts and alleges violations of California’s False Advertising Law, Unfair Competition Law, and Consumers Legal Remedies Act, as well as fraud and breach of warranty. New Balance has filed a motion to dismiss, asserting that plaintiffs are trying to re-litigate the same legal theories and the same conduct involved in a case that New Balance previously settled. In the previous case, without admitting liability, New Balance agreed to take additional steps (operative by the 2019 settlement date) to disclose that its shoes have “domestic value of 70% or greater” and to pay $750,000.
Plaintiffs assert that New Balance continued to make false and misleading “Made in the USA” claims. According to the complaint, New Balance features “Made in USA” claims along with an American flag on several models of its footwear products, including on the tongues of the shoes and on its shoe boxes.
Although plaintiffs acknowledge that New Balance discloses on its website and packaging that the products “contain a domestic value of 70% or greater,” they assert that the term “domestic value” is not clear and that consumers are not likely to see the disclosures. Plaintiffs cite the Federal Trade Commission’s standard for unqualified claims that all or virtually all ingredients or components of the product must be made and sourced in the U.S., and that any qualifying language must be clearly and conspicuously disclosed. In addition, plaintiffs cite a 2020 survey to argue that had consumers known that the sneakers were not “Made in USA,” they would have paid less or would not have purchased the sneakers at all.
In its motion to dismiss, New Balance asserts compliance with the previous injunction and argues that plaintiffs fail to address that injunction and its legal effects. For example, plaintiffs do not allege that New Balance failed to comply with the previous injunction, implicitly conceding that New Balance makes all required disclosures to qualify the claim. In addition, plaintiffs do not allege that the qualified claims are actionable.
Subscribe to our Made in USA Tracker to stay up-to-date on relevant issues and for our comprehensive summary of FTC closing letters relating to Made in USA matters. To subscribe, please email [email protected] or sign up here. ]]>Our colleagues have just published an advisory that summarizes recent amendments made by the Federal Acquisition Regulation (FAR) Buy American Act requirements. The amendments implement the Biden Administration’s Executive Order “Ensuring the Future Is Made in all of America by All of America’s Workers.” See the advisory for the full details.We carefully monitor Made In USA issues at the Federal Trade Commission and maintain a tracker of Made In USA closing letters. If you want to subscribe to Kelley Drye’s Made In USA Tracker email [email protected]. Additional Made In USA information can be found in our Advertising and Privacy Law Resource Center.
Browse and subscribe to other Kelley Drye communications here.
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As we’ve noted in other posts, an FTC rule prohibits companies from stating or implying that a product is made in the USA unless: (1) the final assembly or processing of the product occurs in the USA; (2) all significant processing that goes into the product occurs in the USA; and (3) all or virtually all ingredients or components are made or sourced in the USA. It can be a challenge to figure out whether a product you make meets that standard, but it’s even harder to figure that out for products you didn’t make.This month, the FTC published a closing letter in an investigation about “Made in USA” claims that Crate and Barrel made about various products that were made by other companies. Although the case doesn’t break new ground, the steps that Crate and Barrel promised to take related to “Made in USA” claims on its site could provide some helpful guidance about what the FTC expects retailers to do when making claims about other companies’ products.
Crate and Barrel promised to:
With an unprecedented attack on policies the Federal Trade Commission had long embraced, the new majority of Democratic Commissioners revealed a bold enforcement agenda that would circumvent Supreme Court decisions and avoid Congressional limits.
It was a meeting like none the Federal Trade Commission has ever held. On one week’s notice, the Commission adopted new rules to impose civil penalties on substandard Made-in-USA claims, removed judges and safeguards from rulemaking proceedings, rescinded its 2015 enforcement policy statement on unfair methods of competition, and granted staff more authority to issue subpoenas and civil investigative demands. The vote on every issue followed party lines. Republican Commissioners, Noah Phillips and Christine Wilson, voted against all, and the Democratic Commissioners, Chopra, Khan, and Slaughter, rejected all amendments. Chair Khan announced that public meetings will become regular events at the FTC.
Made in USA Claims
Commissioner Chopra took the lead on the Made-in-USA (MUSA) rule, which would impose civil penalties on claims that do not meet FTC standards for domestic content, whether those claims appear on labels or in marketing. He criticized the Commission for years of allegedly allowing deceptive claims to persist and wrongdoers to escape fines. Imposing fines, he said, was one way of recovering the power the Commission was denied in the Supreme Court’s decision in AMG Capital Management v. FTC, which held that Section 13(b) of FTC Act did not authorize the Commission to obtain monetary relief.
Phillips opposed the rule, saying that Congress had not given FTC the authority to cover off-label claims; it had authorized MUSA rules only for product labels. Unless and until Congress granted authority for expedited rulemaking on advertising claims, which Congress is now considering, he insisted that the FTC was bound to use the more restrictive Magnusson-Moss procedures. Wilson objected to the short notice announcing the meeting, objected to the exclusion of staff from the meeting, and warned that it was unwise to disregard a unanimous Supreme Court that had just admonished the Commission for exceeding its authority to obtain money in consumer protection cases.
Expediting Rulemaking
Foreshadowing an ambitious regulatory agenda was a motion to streamline new rules under Section 18 of the FTC Act. The motion would remove the chief administrative law judge from the role of presiding officer in rulemakings. The FTC Chair would preside. The motion also proposed eliminating the requirement of a staff report to accompany a rule recommendation. Slaughter said these were unnecessary “self-imposed” limits. Chopra praised the proposal for helping end the era of “perceived powerlessness” at the FTC
Phillips and Wilson objected, citing concerns that removing the judge would threaten the independence of the rulemaking process – an extensive fact-finding exercise – and lend support to challengers who claim that FTC rules are politically motivated. As for staff reports, Phillips remarked that these gave the Commissioners and the public some confidence that a rule would not inflict unnecessary harm on the economy. Wilson reminded her colleagues that zealous rulemaking in the 1970s precipitated an existential crisis for the agency. It closed its doors after public resistance and widespread ridicule prompted Congress to defund the FTC. Not until the Commission promised a return to responsible enforcement was it allowed to reopen. The FTC delivered on that promise with a series of policy statements clarifying unfair acts and practices, illegal deception, and necessary substantiation for advertising claims.
Wilson proposed posting the procedural changes for comment. It failed 3-2. Phillips proposed retaining the chief judge and the staff report. It also failed to attract a Democratic vote. Rulemakings without a judge and without a staff report passed without a Republican vote.
Rescinding the Competition Policy Statement
In a sweeping departure from a bipartisan antitrust policy, the Commission rescinded its 2015 Policy Statement on Unfair Competition. Khan argued that the FTC should not have to show a likelihood of harm to competition in order to declare conduct unfair. In her view, the FTC Act was intended to circumvent the Supreme Court’s adoption of the Rule of Reason in antitrust cases – a requirement that condemned restraints of trade only when their anticompetitive effects outweighed the procompetitive benefits. The Rule of Reason made it too hard to prove violations, said Khan, and the FTC’s policy statement improperly confined the agency to an enforcement policy indistinguishable from the standards that DOJ applied.
Wilson regarded the rescission as an abandonment of the consumer welfare standard, the framework of antitrust analysis for half a century. She expressed fears that if competition policy were not designed to benefit consumers, it could be coopted by special interests. She added that when the FTC had failed to apply a standard consistent with the antitrust laws in the past, its decisions had often been reversed on appeal. (The FTC lost a string of appeals in the 1980s when it attempted to prohibit refusals to deal, price discrimination that might be competitive, supplier-distributor pricing policies, and practices that could facilitate collusion.) Phillips noted that the Supreme Court’s decision in NCAA had just applied the Rule of Reason in holding for plaintiffs, so it was hardly a bar to successful prosecution. Of concern to the Republicans was a proposal in Congress that would eliminate the FTC’s competition authority altogether.
Proposals to seek comment on the rescission were voted down on party lines. Competition policy at the FTC will depend on future Commission actions.
Targeting Sectors and Suspects
Finally the FTC identified seven areas in which it would adopt omnibus resolutions authorizing compulsory process – civil investigative demands and subpoenas enforceable in court. The Commission typically authorizes compulsory process when it identifies specific companies or conduct – like a merger or a deceptive practice – warranting intensive and urgent investigation. These resolutions covered broad sectors of the economy and authorized investigations under practices any law the FTC enforces. As explained in its press release, the Commission’s crosshairs are focused on these sectors and individuals:
Priority targets include repeat offenders; technology companies and digital platforms; and healthcare businesses such as pharmaceutical companies, pharmacy benefits managers, and hospitals. The agency is also prioritizing investigations into harms against workers and small businesses, along with harms related to the COVID-19 pandemic. Finally, at a time when merger filings are surging, the agency is ramping up enforcement against illegal mergers, both proposed and consummated.
https://www.ftc.gov/news-events/press-releases/2021/07/ftc-authorizes-investigations-key-enforcement-prioritiesWith these resolutions, the FTC delegated the decision to issue compulsory process to the staff and a single commissioner. In the past, an investigation into a new area could not use compulsory process until the commission voted on the resolution. These omnibus resolutions dispensed with that procedure. Khan hailed the move as cutting “red tape bureaucracy.” Wilson countered that the Commissioners were abrogating their sworn responsibilities of supervision. This last comment reveals the import of the change. If Chopra departs to the Consumer Financial Protection Bureau, which he has been nominated to direct, the Democrats will lose their majority. These resolutions will allow staff to open investigations, demand documents, and conduct depositions without the approval of the Commission. All the staff will need is the approval of a commissioner.
The Future of FTC Enforcement
In short, July 1, 2021 was an extraordinary day in the history of the FTC. It is an unmistakable harbinger of a Commission that is aiming to ramp up enforcement beyond the levels it sought to achieve in the 1970s. None of the supporters of the agenda had answers to the dissenters’ repeated questions: How will the agency overcome the obstacles that stymied its unbridled ambitions in the past? How will it respond to the resistance it will face from Congress, the courts, and the public it is supposed to serve? The public at this meeting, Phillips noted, was scheduled to comment after the Commission had made its decisions, so that their testimony would not be taken into account before the votes.
How far the Commission can take this agenda will be difficult to predict until the inevitable allegations of unauthorized investigations, arbitrary and capricious rules, unpredictable decisions, and deprivations of due process make their way to higher authorities. Safer predictions: We will see the fruits of yesterday’s decisions in the form of CIDs, subpoenas, proposed rules, and new interpretations of a century-old competition statute. Businesses and citizens will face the first engagement. Then Congress and the courts will join the fray. For a preview of potential outcomes, there is no better place to start than the rich literature of FTC history.
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]]>Critics of the legislation have concerns about potential inconsistency with other regulatory requirements and the burden associated with identifying and tracking the origin of a specific product, particularly for products that may be sourced from different countries or that may be purchased through an intermediary.
The FTC, not Customs, would enforce the act and certainly has experience with other statutes that require country of origin disclosures in advertising. We will continue to track the legislation.
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Subscribe here to our Ad Law News and Views newsletter and visit the Advertising and Privacy Law Resource Center for update information on key legal topics relevant to advertising and marketing, privacy, data security, and consumer product safety and labeling.
According to the newest complaint, in spite of the 2016 Order, Chemence continued to falsely label its products with an unqualified “Proudly Made in USA” claim, despite foreign materials accounting for more than 80 percent of the materials costs and more than 50 percent of the overall manufacturing costs. The complaint also alleges that Chemence’s president, James Cooke, falsely declared under penalty of perjury that Chemence had modified its labeling to read “Made in USA with US and globally sourced materials.”
The resulting Order again requires Chemence to refrain from making misleading “Made in USA claims,” including unqualified claims unless they can show that the product’s final assembly or processing and all significant processing takes place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States. To the extent that Chemence makes qualified “Made in USA” claims, the company must provide a clear and conspicuous disclosure regarding which product contains foreign parts. If Chemence claims that a product is assembled in the United States, the company must ensure that it is last substantially transformed in the United States, its principal assembly takes place in the United States, and the United States assembly operations are substantial. The Order also prohibits Chemence from making any misleading county-of-origin claim about a product unless they have a reasonable basis that substantiates their claim. Moreover, Chemence must notify all customers with a letter detailing the FTC allegations and the proper labeling for purchased products.
Chemence’s historic settlement with the FTC suggests that the Commission is heeding Commissioner Chopra’s calls to “mov[e] away from lax enforcement” concerning “Made in USA” claims.
This most recent enforcement action also comes as the FTC has proposed its Made in USA Labeling Rule. Last summer’s NPRM includes the possibility for civil penalties for violations of the rule, and would give the FTC authority over all “Made in USA” claims, including those made online.
In spite of dissent from Commissioners Phillips and Wilson, comments in response to the proposed rule have been largely positive. Supporters cited the current pandemic, noting that consumers are now more likely to buy goods online, resulting in the need for increased oversight of online advertising.
Even still, the NPRM met some pushback from several industry organizations and consumers who question the consistency of the proposed rule with respect to FTC precedent, trade agreements, and, echoing Commissioner Phillips’ dissent, FTC jurisdiction. In particular, comments flag that the proposed rule conflicts with USDA precedent, which currently holds that cattle raised in a foreign country and imported for slaughter and processing can qualify for a Made in USA or Product of USA label. It is not clear how this conflict between the two regulatory agencies would play out in practice.
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The FTC has not released a revised rule in response to the comments, though we anticipate that some version of the rule will likely come into effect. “Made in the USA” enforcement has been a high-priority for the FTC in recent years, and with the potential for a new Democrat chair leading the Commission, we expect this trend to continue. Please contact any of the attorneys in Kelley Drye’s Advertising Group if you would like assistance with Made in USA compliance.
Plaintiffs assert that they purchased Bigelow Tea products “because they reasonably believed, based on the packaging and advertising, that these products are American-made.” Though Bigelow owns a tea plantation in South Carolina, none of the company’s packaged teas are domestically sourced, according to the complaint. Plaintiffs allege that all of the Company’s black, green, and oolong teas are grown in tea plantations and processed abroad in places such as Sri Lanka and India. The plaintiffs seek economic and injunctive relief, along with other equitable remedies.
Although the FTC has been the primary watchdog for “Made in USA” claims (with over 30 enforcement actions in the last 12 months), this case demonstrates that private plaintiffs are also watching and can seek options under state laws prohibiting unfair and deceptive acts and practices (state UDAP laws). Advertisers must stay vigilant to ensure that Made in USA claims are adequately substantiated and, when appropriate, qualified. As a reminder, the FTC guidelines state that “all or virtually all” of the product must be made in the United States to support an unqualified “Made in USA” claim.
We will continue to monitor this case as it develops.
Selling Online: How to Avoid Flattening the Curve of an Uptick in Website Traffic July 22, 2020
COVID-19 has increased the already dizzying amount of online sales, making the rules governing how to sell online increasingly important. These rules affect not just how companies advertise and promote products and services online, but also how they bill and otherwise interact with consumers before, during, and after a transaction.
This webinar will include practical tips to help companies minimize risk of enforcement and litigation and provide practical guidance. Topics include:
• Endorsers and Influencers • Promotions and Pricing • Subscription Plans and “Free” Trials • Shipping and Delivery • Consumer Reviews and the Consumer Review Fairness Act • Customer Service Considerations – how timely refunds and responsiveness can help reduce legal risks
Who Should Attend Anyone who is currently or plans to conduct business online with consumers or otherwise facilitates online transactions should join us for this webinar.
FTC Chairman Joseph Simons joined Commissioners Rohit Chopra and Rebecca Slaughter in support of the proposed rule, which would prohibit marketers from including unqualified Made in USA claims on product labels unless they can show that:
The proposed rule explicitly covers unqualified Made in USA claims appearing in seals, marks, tags, or stamps in mail order catalogs or mail order promotional materials, defined in the proposed rule as “any materials, used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase of such product or service by mail, telephone, electronic mail, or some other method without examining the actual product purchased.”
Commissioner Phillips wrote in his dissent that this scope is broader than the FTC’s statutory authority to issue a Made in USA labeling rule, which refers only to “labels on products.” Commissioner Wilson similarly warned that going beyond the statutory text would mean the rule applies to online advertising or even hashtags, which she warned could be outside the FTC’s jurisdiction. “Expansive interpretations of our rulemaking authority will not engender confidence among members of Congress who have already expressed qualms about the FTC’s history of frolics and detours,” Wilson wrote.
The Staff Report reflects findings from its workshop reviewing Made in USA labeling policy and enforcement. In particular, Staff cited a 2013 consumer perception study that indicates that Americans “agree that ‘Made in America’ means that all parts of a product, including any natural resources it contains, originated in the United States.” Another study from the University of Chicago cited in the report found that consumers were willing to pay as much as 28 percent more for U.S.-made products. Panelists reported that consumers prefer American made goods due to the “qualify of goods, promotion of U.S. jobs, social responsibility, and, to a lesser extent, general patriotism.”
Although the FTC gained rulemaking authority over Made in USA labeling in the early 1990s, the FTC has relied solely on its Section 5 authority to bring enforcement actions for violations of the law. For example, the FTC has announced several settlements and, in the last two years, the Staff has issued over 40 closing letters regarding Made in USA claims. The FTC’s new rulemaking effort reflects renewed interest among the commissioners to add deterrence through the threat of penalties for even first time offenses. As Commissioner Chopra added, “the rule eliminates the perceived litigation risks associated with Section 13(b),” the FTC’s basis for obtaining consumer redress which has been scrutinized as covered extensively on this blog.
Companies making claims about the U.S. origin of their products and services should closely watch these developments. At a minimum, that should involve a review of existing claims, and some companies may choose to file comments in response to the proposed rule.
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“Made in the USA” claims have taken on an even greater importance as American manufacturing has captivated the political discussion. Recently FTC Commissioner Chopra released a statement calling for more stringent enforcement of the agency’s “Made in USA” advertising policies.
The podcast discusses how to substantiate “Made in USA” claims on the latest episode of the Ad Law Access Podcast, Making it in the USA – When Product Origin and Origin Marketing Claims Matter.
During the podcast, references are made to a commercial, John Villafranco's podcast on Challenging Competitors' Claims, and our webinar Buy American and Hire American: Is Your (Or Your Competitor’s) Product Really “Made in the USA”.
You can find the Ad Law Access podcast on Apple Podcasts, Spotify, Google Podcasts, SoundCloud, and other podcast services.
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