FTC Compliance Lawyer on Agency Settlement of Deceptive “Made in USA” Claims

The Federal Trade Commission has announced that that companies selling hockey pucks and recreational and outdoor equipment have agreed to cease making bogus “Made in USA” claims. According to the Commission, four related New York-based companies, and two commonly controlled California companies, falsely represented that all, or virtually all, products sold are made in the U.S.

In one mater, which named a corporate officer, the FTC alleges that the company website – and other media – made various representations to consumers, to wit, that its advertising, packaging and promotional materials include “Made in America,” “Proudly Made in the USA,” “100% American Made!” and “The only American Made Hockey Puck!”.

The FTC alleges that, in fact, some products wholly imported from China.

In the matter involving the California companies, the FTC alleges that the companies claimed in advertisements, product labels and promotional materials, and on company websites and social media, that their backpacks, travel bags, wallets, and other products are all or virtually all made in the United States.

As alleged by the FTC, however, more than 95 percent of the products are imported as finished goods, and approximately 80 percent of are either imported as finished goods, or contain significant imported components. According to the complaint, in some wallets imported as finished goods, the companies hid truthful country-of-origin information on the back of tags, and inserted cards that prominently displayed false U.S.-origin claims.

The FTC has stated that the California companies market their products — which also include tactical gear and personal security items — throughout the United States and promotional materials appeal to consumers’ patriotism.

Under the terms of the proposed settlement orders, all of the companies are prohibited from making unqualified U.S.-origin claims, unless they can substantiate 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 orders, any qualified Made in USA claim must include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing. To claim that a product is assembled in the United States, the respondents in both cases must ensure that it is last substantially transformed in the United States, its principal assembly takes place in the United States, and United States assembly operations are substantial.

The orders also prohibit the companies from making untrue, misleading, or unsubstantiated country-of-origin claims in their marketing materials about any product or service.

In a related matter, following a public comment period, the Federal Trade Commission has approved a final consent order settling charges that another California companies made false claims that its Chinese-made mattresses are assembled in the United States. In fact, according to the Commission, the mattresses are wholly imported from China, with no assembly taking place in the United States.

Commissioner Chopra commented that enforcement remedies should be aggressive, and include redress, admissions, refunds and corrective advertising, especially for knowing violations. Chairman Simons and Commissioner Slaughter believed that the settlement terms were fair, but noted that future matters may not be resolved with the same degree of leniency, especially if consumers are shown to have paid more for purchases believing that they were receiving products with made in the United States-type benefits.

The FTC’s Enforcement Policy Statement on U.S. Origin Claims provides guidance on the Made in USA standard. If you are interested in learning more about this topic, consult with an experienced FTC compliance lawyer. The FTC’s Made in USA page features cases, instructive closing letters, and the brochure Complying with the Made in USA Standard.

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