In an era where “Made in USA” claims carry significant weight for consumers, the Federal Trade Commission (FTC) recently took action against Massachusetts and New Hampshire-based clothing companies for deceptive labeling practices as reported by Above the Law. The “Made in USA” label is often associated with quality and adherence to stringent American manufacturing standards. It also appeals to consumers desiring to support local economies and job creation.
However, this label can sometimes result in deceptive claims when only a portion of a product’s components or assembly take place domestically. The FTC, aware of this potential misrepresentation, enforces regulations to ensure companies accurately depict the origins of their products.
In its drive for more transparency, the FTC finalized the Made in USA Labeling Rule in August 2021. Under this rule, a product can only carry a “Made in USA” claim if the final assembly or processing occurs in the United States, all significant processing related to the product takes place in the United States, and virtually all ingredients or components of the product are domestically sourced. Violations of this rule can lead to substantial financial penalties, with fines potentially reaching as high as $46,517 per violation.
In August 2023, the FTC found Chaucer Accessories, Bates Accessories, Bates Retail Group, and their owner, Thomas Bates, liable for deceptive practices regarding “Made in USA” claims. The FTC contended that Bates and his companies had misleadingly marketed their leather and fabric products as entirely made in the United States.
The FTC’s resolution to this case provides important guidance for companies making both qualified and unqualified “Made in USA” claims. Going forward, companies must meet comprehensive criteria to justify a “Made in USA” claim and need to provide clear, conspicuous qualifications to claim that a product consists of foreign parts or has undergone processing outside the US.
This legal episode marks the eighth enforcement action related to U.S. origin claims in the past two years, each resulting in substantial monetary penalties. Therefore, companies should be mindful of the legal implications when making “Made in USA” claims.
Beyond FTC prosecution, companies also run the risk of class-action lawsuits for misleading consumers. For instance, New Balance faced a class-action lawsuit in December 2021 for marketing its footwear as “USA Made” despite up to 30% of its sneakers allegedly consisting of imported components.
In conclusion, the enforcement of “Made in USA” claims is an increasingly significant area for businesses and legal professionals alike to monitor.