‘Made in USA’ Settlement Divides FTC

Advertising Law

The Federal Trade Commission’s approval of a pair of settlements involving defendants accused of making deceptive “Made in USA” claims revealed a split among the commissioners with regard to the agency’s use of remedies.

Last September, the FTC filed two cases involving “Made in USA” claims: one against a New York-based company advertising American-made hockey pucks and a second against related recreational and outdoor equipment companies from California.

In the case against the puck company, the FTC said Patriot Puck and a corporate officer promoted the products as “Made in America,” “100% American Made!” and “The Only American Made Hockey Puck!” on the company’s website and in other online ads, when in fact the company had imported more than 400,000 pucks from China since 2016.

The second case involved Sandpiper of California and PiperGear, the makers of travel bags, wallets, backpacks, tactical gear and personal security items that purportedly were all or virtually all made in the United States. But despite the claims, approximately 80 percent of PiperGear’s products were either imported as finished goods or contained significant imported components, while 95 percent of Sandpiper’s products were imported as finished goods, the agency said.

To settle the claims, the defendants agreed to halt making false and unsupported country-of-origin claims, among other promises. When the FTC published the proposed orders for comment, Commissioner Rohit Chopra issued a separate statement to declare that the agency should modify its approach to resolving “serious” U.S.-origin fraud by pursuing tougher remedies, including restitution and disgorgement.

The vote to finalize the orders revealed an ever larger divide, with a 3-to-2 vote. Chopra again dissented, noting that the public comments “were unanimously opposed to the proposed settlement” in the Sandpiper/PiperGear case.

“The no-money, no-fault resolution reached in this case shows that the Commission needs to make significant changes to its approach in protecting and defending the integrity of the Made in USA brand,” he wrote. “The FTC should activate legal switches granted by Congress decades ago that will allow us to seek substantial fines against companies that abuse and cheapen the Made in USA brand.”

Congress authorized the agency in 1994 to codify rules that would trigger civil penalties for violators of the Made in USA standard, Chopra said. While the FTC has declined to turn on this penalty switch, the time has come, he wrote. “I intend to make a motion to pursue a Made in USA rule that would allow the Commission to seek meaningful penalties against those that harm law-abiding companies that make goods in America.”

Commissioner Rebecca Kelly Slaughter joined Chopra, explaining that she changed her vote “because I now believe that I got this wrong the first time around.” She said it is reasonable to question “whether more widespread compliance could be better achieved by the FTC’s seeking more aggressive remedies in egregious cases.”

FTC Chair Joseph Simons filed a concurring statement. “The approach taken in these cases is consistent with that taken by the Commission for the last several decades under different administrations,” he wrote, although he recognized it might be time for a “thoughtful review.”

To that end, he announced a workshop on “Made in USA” enforcement “to consider whether the Commission is using its legal authorities as effectively as possible to fairly and efficiently pursue vigorous enforcement against companies and individuals that make deceptive U.S.-origin claims in the marketplace.”

The workshop will serve as a vehicle to consider the prudence of the ideas raised by Chopra and Slaughter, Simons said.

“However, in considering new remedies and litigation strategies, it is important that the agency not do so in a vacuum,” he added. “It will be crucial for the Commission to understand whether pursuing an alternative approach may drain resources from or otherwise undermine the FTC’s other important enforcement programs without commensurate benefits to consumers.”

To read the decisions and orders in both cases, as well as the statements of all the commissioners, click here.

Why it matters: The contested settlements with the defendants could trigger the FTC to expand its authority and use more aggressive remedies with regard to country-of-origin claims, with a workshop to discuss the issue set for later this year.