Is Increased/Intensified FTC Enforcement of “Made in USA” Claims on the Horizon?

Dear Friends,

There have been some recent developments with regard to the Federal Trade Commission’s enforcement of the “Made in USA” guidelines that we wanted to bring to your attention.

A theme of “America First” trade enforcement activity under the current administration is protecting/promoting U.S. manufacturing.  This is evident in the Section 301 tariffs on Chinese-made goods, the Section 232 tariffs on steel and aluminum, the renegotiation of NAFTA and the pending Section 232 investigation contemplating duties on autos and auto parts.  It is now also visible in significant changes to “Made in USA” enforcement at the FTC.

Since taking office, President Trump has appointed a full contingent of new FTC Commissioners (5 of 5).  This is uncommonly quick (Commissioners are appointed for limited terms; Presidents Bush, Obama and Clinton each only appointed all five FTC commissioners once they reached their second terms in office.)  The effect of the new appointees is already being seen.

As you may know, the FTC enforces a stringent definition of what qualifies as “Made in USA” for labeling and advertising purposes. Only products manufactured or assembled in the United States with “all or virtually all” U.S.-origin content (generally viewed as 95%+ U.S. content) meet this standard.  While the FTC has engaged in regular enforcement actions over the last 20 years, it has rarely sought to impose penalties greater than a public censure in the form of a consent order.  Most consent orders do not even involve an admission of guilt by the named party (just an agreement to change the offending behavior going forward).

A trio of recent cases suggest that this may be about to change.  In each case, the facts were clear cut—companies plainly (even enthusiastically) advertising Chinese-made products as “Made in USA” (for example, in one case, Chinese-made hockey pucks were labeled as “Proudly Made in the USA,” “MADE IN AMERICA,” “100% Made in the USA!,” “100% American Made!”, and sold as “The Only American Made Hockey Puck!”).  What was noteworthy about these cases, was that three Commissioners issued (or joined in) separate opinions addressing the settlements.

Commissioner Slaughter (D) and Chairman Simons (R) took the unusual step of issuing a concurring statement, supporting the cases’ resolution by consent decree, but emphasizing that the FTC should make “strategic use of additional remedies” such as “monetary relief or notice to consumers” to enhance effectiveness going forward, and noting that the FTC has begun a “broad review of whether we are using every available remedy as effectively as possible” to pursue “vigorous enforcement.”

Commissioner Chopra (D), on the other hand, was the lone vote against the three consent settlements.  He argued, quite simply, that “no-money, no-fault settlements” are an insufficient remedy for extreme cases of consumer fraud.  In cases like these, he argued, the FTC should insist that companies admit to fraud before accepting a settlement.  Doing so could make it easier for such companies to be exposed to lawsuits by competitors under the Lanham Act.

Although the current FTC commissioners were all appointed by President Trump, these enforcement developments do not seem to be partisan (or may actually be bipartisan. . .).  Earlier this week, three Democratic Senators (Sens. Brown, Baldwin and Murphy) wrote to the FTC that “no-fault no-money” settlements of “Made in USA” cases are indicative of “lackluster enforcement”, and urged that the FTC begin assessing fines and making wrongdoing companies “admit they lied to the public” when the FTC determines that has been a violation of the guidelines.

As a result, all companies that label, advertising or otherwise market goods in the United States as “Made in USA” (or with any other type of U.S.-origin claim) should be mindful of these developments and appreciate that such claims are likely to face greater scrutiny going forward.  In addition, to the extent you are aware of competitors who may be violating these rules to gain an unfair competitive edge, the FTC appears more receptive than ever to complaints.

We have advised many businesses on these issues in the past, and would be happy to answer any questions you may have.

We hope this his helpful.

Best regards,
Ted

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