FTC Crack Down Continues Against False Made in USA Claims
FTC Enforcement Action and Settlement
On June 27, 2023, the FTC publicly announced its draft complaint and Agreement Containing Consent Order against clothing accessory companies based in Massachusetts and New Hampshire, as well as their owner Thomas Bates, for knowingly making false advertisements and promotions, either expressly or by implication, that their products are all or virtually all made in the United States. The respondents have agreed to the terms of the FTC order, resulting in settlement of the FTC’s claims. Among other requirements of the order, the respondents will not be able to make unqualified US-origin claims unless they can meet the legal standard for doing so, and qualified claims must include clear and conspicuous disclosures about the foreign parts, ingredients, or components, or processing. Additionally, claims regarding assembly in the United States must comply with requirements related to substantial transformation.
The FTC order, which will be in place for 20 years, includes a civil penalty in the amount of $191,481 to be paid by the respondents for falsely claiming its products were Made in the USA, and a required notice of the FTC’s lawsuit alleging false claims must be mailed to all consumers of the respondents’ products purchased from January 2018 through November 30, 2022.
In the complaint, the FTC alleged the respondents represented that their products were “Made in USA from Global Materials,” and that the companies’ websites featured banners reading “Made in USA” or “Hand Crafted in USA.” According to the complaint, the previously described items were wholly imported from other countries, having only de minimis finishing touches in the United States, evidencing non-compliance with the legal requirements for such claims.
The FTC pointed to particular examples as illustrations of the alleged wrongful marketing tactics engaged in by the respondents. One notable example cited in the FTC’s complaint involved the importation of belt straps from Taiwan, which were attached to buckles in the United States, and subsequently labeled as “Made in USA from Global Materials.” Affixing belt buckles to straps, per a determination by the US Customs and Border Protection, is a “minimal assembly operation that does not change the name, character, or use of an imported belt strap.” There were additional allegations that the respondents made their representations when the products labeled as “Made in USA” were of wholly imported components with finishing of a de minimis level in the United States.
Next Steps for Advertisers
Reduce the risks to your brand by paying close attention to the Made in USA Labeling Rule and substantiating any such express or implied claims. It is always a good practice to take inventory of your existing claims to ensure compliance with this rule and advertising rules generally. When in doubt, err on the side of not advertising your products as “Made in the USA,” “Made in America,” or the equivalent unless you can fully substantiate your claim. Advertising counsel’s review is a useful tool in assuring compliance with FTC advertising guidelines and rules related to claim substantiation.
Our team will be monitoring current and future FTC enforcement actions as they arise. Please contact your ArentFox Schiff LLP attorney or an author with any questions or concerns.