It’s been almost forty years since Bruce Springsteen first celebrated being “born in the United States.” From the advertising industry’s perspective, the song’s enduring popularity is no surprise; as advertisers know, “Made in the USA” is often a selling point for American industries.
The FTC knows it too. In late 2021, the FTC finalized a new rule cracking down on unqualified or misleading U.S. origin claims. The new FTC rule, which went into effect August 13, 2021, does not create new substantive requirements for advertisers, but gives the FTC the ability to impose substantial new monetary penalties for violations of the rule.
Following the enactment of this rule, we have seen an increasing number of class actions targeting place of origin claims. This article discusses some of those class action lawsuits, as well as the FTC’s enforcement of its new rule.
FTC rule on unqualified “Made in USA” claims
The FTC rule prohibits marketers from doing without reservation Claims of US origin unless:
- Final assembly or processing of the product takes place in the United States;
- All major processing that goes into the product takes place in the United States; and
- All or nearly all of the ingredients or components of the product are manufactured and sourced in the USA
This rule differs from previous FTC guidelines because:
- The new rule allows the Commission for the first time to seek civil penalties of up to $43,280 per violation.
- The new rule includes full or partial exemption if marketers have evidence showing that their unqualified Made in USA claims are not misleading. This exemption was not part of the previous policy.
- Unlike previous guidelines, the new rule does not make exceptions for foreign ingredients not available in the United States. Under the new rule, an unqualified claim of U.S. origin can only be made if no more than one de minimis the quantity of the product is of foreign origin – without special accommodation if an ingredient of the product cannot be found in the United States
- Under previous guidelines, advertisers had greater flexibility for products containing raw materials that are “inherently unavailable in the United States.” In prior enforcement policy, the FTC stated that unless the non-indigenous imported material constitutes “the whole or essence of the finished product”, consumers are likely to understand that a “Made in the States” claim States” means that “all or substantially all of the product, except for materials not available hereoriginated in the United States” In the new rule, the FTC said it saw no support for this exception.
- According to the new rule (and the FTC press release announcing it), it only applies to labeling. But the rule also states that it encompasses “materials, used in the direct sale or direct offer for sale of any product or service, which are disseminated in print or by electronic means, and which solicit the purchase of this product or service by mail, telephone, e-mail or any other method without examining the product actually purchased” which include “a seal, mark, label or stamp labeling a product made in the United States”.
- It is unclear to what extent the FTC will interpret this definition. That said, Commissioner Christine S. Wilson, who disagreed with the rule, expressed concern that this language could be interpreted as covering stylized marks in online advertising or print catalogs. and potentially other advertising marks, such as hashtags, that contain Made in USA claims.
Note that qualified Claims originating in the United States are not covered by this new rule and are still subject to the previous FTC guidelines.
FTC Enforcement Efforts After Promulgation of Rule
Under the new rule, the FTC filed lawsuits against:
- Lithionics Battery LLC, a battery company that has labeled its batteries as “Made in USA” with an image of the American flag, often accompanied by the statement “Proudly Designed and Built in USA”. The FTC complaint, filed on April 12, 2022, alleged that the products included imported lithium-ion cells and incorporated other significant imported components. The parties agreed to a penalty of approximately $105,000, or three times Lithionics’ profits attributable to advertising. The settlement also required Lithionics to refrain from making unqualified “Made in the USA” claims unless it could prove that assembly or final processing of the product – and any significant processing – takes place at United States, and all or nearly all of the ingredients are manufactured and purchased. in the United States Under the settlement, the FTC also required that Lithionics notify affected customers and submit compliance reports to the FTC for the next ten years.
- Lions Not Sheep Products, LLC, an apparel company that advertised its apparel and accessories as “Made in the USA,” along with similar claims (including “Made in America,” “100% American Made,” and “Best Damn American Made Gear on the Planet”). The FTC alleged that, in most cases, the products advertised using these claims consisted of fully imported shirts and hats with limited finishing work done in the United States. The FTC complaint also named Lions Not Sheep owner Sean Whalen as a defendant.The FTC alleged that between May 10, 2021 and October 21, 2021, Whalen and Lions Not Sheep removed labels disclosing specific foreign country of origin information and printed “Made in USA” on the collar of the shirts.Whalen and Lions Not Sheep have not yet filed a response to the FTC’s complaint.
Consumer Class Actions
The consumer class action space has seen challenges to similar “Made in the USA” claims, including in recent cases against New balance sneakers (Cristostomo vs. New Balance Athletics, Inc.no. 21-cv-12095 (D. Mass. 20 Dec. 2021)), Genfoot America boots (Jackson vs. Genfoot America, Inc.no. 22-cv-00036 (DNH 28 Jan. 2022)) and Reynolds plastic film (Shirley v. Reynolds Consumer Products, no. 22-cv-00278 (ND Ill. January 17, 2022)). A class action lawsuit was recently filed against American Tuna Inc. for its claims that tuna products are “caught and canned” in the United States. Craig vs. American Tunano. 22-cv-00473 (SD Cal. April 8, 2022). Land Air Sea Systems, Inc. is facing a similar lawsuit for marketing its GPS devices as “Made in USA.” Pinter vs. Land Air Sea Systemsno. 22-cv-00185 (EDNY 12 Jan. 2022).
Other lawsuits in progress on the “place of origin”
Place of origin claims, of course, are not limited to “Made in the USA”. Recent cases have challenged advertising claims that products are made in other locations, such as:
- “English” breakfast tea. Mangels vs. Twiningsno. 21-cv-04138 (WD Mo. Jul. 19, 2021)
- “Icelandic” yogurt. Steinberg v. Icelandic Provisions, Inc.No. 21-cv-05568 (ND Cal. January 25, 2022)
- Himalayan sea salt. Brown vs. Morton Salt, Inc.No. 21-cv-06855 (ND Cal. Sept. 2, 2021)
- “The No. 1 pasta brand in Italy”. Sinatro vs. Barilla America, Inc.No. 22-cv-03460 (ND Cal. June 11, 2022)
- “El Sabor de Mexico!” Hardy vs. Ole Mexican Foods, Inc.#21-cv-01261 (WDNY Dec 3, 2021)
In deciding whether complaints make a plausible allegation that reasonable consumers are misled by such advertising, courts tend to distinguish between claims explicitly touting that a product was “made” in a certain place and claims which simply tend to evoke a certain place. For example, in a recent case involving King’s Hawaiian rolls, the court found that a simple reference to “Hawaii”, even when combined with images evoking Hawaiian references, did not mislead reasonable consumers by making them believe that King’s Hawaiian made its rolls in Hawaii. . Hodges c. King’s Hawaiian Bakery W. Inc., no. 21-cv-04541-PJH, 2021 US Dist. LEXIS 215707 (ND Cal. Nov. 8, 2021). The court in Steinberg v. Icelandic Provisions, Inc., no. 21-cv-05568, 2022 US Dist. LEXIS 13478 (ND Cal. Jan. 25, 2022) made a similar ruling, finding that “ancestral Icelandic skyr cultures” and advertisements created in Iceland did not mislead consumers into believing that yogurt was made in Iceland , especially since the product label indicated so. was made in New York.
When evaluating product claims for litigation risk, advertisers should keep in mind this distinction between claims that refer to or conjure up images of a location and claims that state that the product is from. ‘a place. We will continue to monitor this space for new developments.
Other Developments in U.S. Origin Labeling
The new FTC rule isn’t the only significant development regarding US origin claims. Immediately following the FTC’s decision to tighten regulations surrounding these claims, Agriculture Secretary Tom Vilsack issued a statement indicating that the USDA intends to “complement” the FTC’s efforts by “initiating a top-down review of the “Product of USA” label to “determine what this label means to consumers”. The review appears to be in progress. Last February, the USDA announced “an online survey/experiment to help gauge consumer awareness and understanding of current ‘Product of USA’ labeling claims on meat products (beef and pork) and consumers’ willingness to pay (WTP) for meat products labeled as ‘Product of the United States’ using current and potentially revised definitions of the claim.” And more recently, the House and the Senate considered a bill that would limit “Product of USA” labels to beef products born, raised and slaughtered in the United States.
Last year, President Biden issued an executive order directing the federal government to “maximize the utilization of goods, products, and materials produced and services offered in the United States,” and advising that “[t]The United States government should, whenever possible, procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help American workers thrive. Therefore, “Made in the USA” claims may now be more important than ever to marketers. But given the new FTC rule, its potential effects on consumer class action lawsuits, and recent developments in USDA law and regulation, the consequences of an unsubstantiated “Made in USA” claim and unqualified may also be more important than ever.