Hat Company Settles FTC Charges of Deceptive “Made in USA” Claims

On January 23, 2018, the Federal Trade Commission announced that a Pennsylvania-based company has agreed to cease making allegedly false claims that the hats and other products it sells are all or virtually all made in the United States, and to stop its alleged deceptive use of its “American Made Matters” certification and marketing materials.

See the settlement with the Federal Trade Commission.

In its complaint, the FTC alleges that defendants deceived consumers with “Made in USA” claims for its hats and third-party products.   According to the complaint, the defendants also marketed hats with claims such as “Choose American.”  According to the Commission, more than 70 percent of their hat styles are wholly imported as finished products.  Of the remaining styles, the FTC charges, many contain significant imported content.  The products are advertised through websites and social media accounts and in stores.

In its complaint, the FTC also alleges that defendants licensed an “American Made Matters” seal to any company that claimed it had a United States-based manufacturing factory or one product with a U.S.-origin label, and met several membership requirements, including self-certifying that at least 50% of the cost of at least one of their products was incurred in the United States, with final assembly or transformation in the U.S., and paying an annual licensing fee of $99.  The FTC alleges that defendants and its subsidiary have represented to consumers that the seal was “for consumers looking to shop for American made products directly from our members and sponsors.”

According to the FTC, the seal falsely represents by implication that the companies and products using it have been endorsed or certified by an independent third party, and that defendants possess competent and reliable evidence that products carrying the seal are all or virtually all made in the United States.  The complaint alleges that, in fact, defendants do not have this evidence and have used the seal to promote their own products that contain significant imported content.

Under the terms of the proposed settlement, defendants are prohibited from making unqualified U.S.-origin claims for their products unless they can show that the products’ final assembly or processing – and all significant processing – take 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.  Under the order, any qualified Made in USA claims must include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing.

Defendants also are required to disclose any material connection they have with any certification they use to tout their products.  They also are prohibited from claiming that a product or service meets their certification standard unless an entity with no material connection to them independently and objectively evaluates the product or service, or they disclose that certified products or services meet the standard through self-certification.

The order also prohibits defendants from making untrue, misleading or unsubstantiated country-of-origin claims in their marketing materials about any product, and it prohibits them from providing to others the means to make deceptive origin or certification claims about their products.

According to reports, this is the third case involving deceptive Made in USA claims that the FTC has brought in the last 12 months.

The FTC’s Enforcement Policy Statement on U.S. Origin Claims and its Endorsement Guides provide further guidance.

Email the author at rnewman@hinchnewman.com if you are interested in learning more about this topic, or if you are the subject of a regulatory investigation or enforcement action.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

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