Product or Packaging? Advertiser to Appeal NAD Decision on Origin Claims

Advertising Law

J-B Weld Company said it plans to appeal to the National Advertising Review Board (NARB) after the National Advertising Division (NAD) recommended that it discontinue “Made in USA” claims that were posted on its product packaging and website for its epoxy and adhesive products.

Competitor Illinois Tool Works challenged the claims that J-B Weld’s products “have always been made in the USA” and argued that to support an unqualified country of origin claim, the products must be “all or virtually all” made in the United States. But it alleged that various components of J-B Weld’s products—including the tubes, caps and applicators—came from other countries, as evidenced by the markings of a Chinese company on its epoxy syringes.

The advertiser countered that its products fully complied with the Federal Trade Commission’s (FTC) “Made in USA” standard. No claims were made about the tubes, caps and syringes used to contain its products, J-B Weld told the NAD, and since the tubes, caps and syringes were part of the product packaging and not the actual product, the claims did not apply to those pieces.

In the alternative, the company submitted confidential information to demonstrate that the percentage of the average selling price attributed to the packaging was minimal.

Pursuant to FTC guidance to support an unqualified “Made in USA” claim, “all or virtually all” the significant parts and processing that go into a product must be of U.S. origin, such that the product contains only a negligible amount of foreign content. Several factors should be considered in the analysis, the NAD explained, including how much of the total manufacturing cost can be assigned to U.S. parts and processing and how far the finished product is removed from any foreign content.

However, the NAD acknowledged that the FTC guidance is silent on the question of whether the specific components at issue (tubes, caps and syringes) should be considered part of the product’s packaging or part of the product itself. Emphasizing that the NAD, the FTC and numerous other regulators understand “that consumers care a great deal about Made in USA claims,” the self-regulatory body recommended that the advertiser discontinue the origin claims.

“NAD determined that consumers viewing the Made in USA claim on J-B Weld packaging are likely to believe that the glue, tube, cap and any additional components of the challenged products contain little to no foreign content,” according to the decision. “There is simply nothing about the claim or the context in which it is presented that indicates otherwise.”

These components can prevent the glue from drying out between uses, for example, or allow for a precise application of the product. Similarities between the tubes and caps used by J-B Weld and competitors would not necessarily cause consumers to change their expectations about the advertiser’s origin claims.

“Consumers choosing between similar bonding products with similar applicators, whether on a store shelf or online[,] may give more weight to claims like ‘Made in USA’ in making a purchasing decision, as that may be the only differentiating factor,” the NAD wrote.

The claim “they have always been made in the USA” further implies that the products are wholly made in the United States, the NAD added. “There is no additional information or context that limits this claim to the ingredients and processing of the adhesives but not its containers.”

Concluding that the caps and tubes “are integral to the use of the product,” the NAD was not persuaded by J-B Weld’s argument that the components were too insignificant to have any meaningful influence on the consumer’s purchasing decision. Considering the advertiser’s confidential information showing the percentage of the average price paid by its direct customers for the entire packaged product attributable to the tubes, caps and applicators, the NAD found the numbers “irrelevant to the issue at hand.” The FTC has explained that companies seeking to support an unqualified “Made in USA” claim should analyze their own manufacturing costs, not the cost to consumers.

“Because the advertiser did not provide the NAD the aforementioned information about its manufacturing costs, NAD was not able to determine whether its claims were supported,” according to the decision. “Therefore, NAD determined that the advertiser had not provide[d] a reasonable basis for the claims ‘Made in USA’ and ‘they have always been made in the USA’ and recommended that they be discontinued.”

To read the NAD’s press release about the decision, click here.

Why it matters: Standing behind the accuracy of its origin claims, the advertiser said it plans to appeal the decision to the NARB and will “demonstrate that the confidential cost information J-B Weld presented shows that ‘the product [contains] no—or almost negligible—foreign content’ as required by the FTC.” In the interim, the NAD decision should remind advertisers to ensure their “Made in USA” claims are in compliance with the FTC guidance.