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No Penalty Assessed in Settlement of “Made in USA” Claims

Thursday, February 01, 2018
Sandler, Travis & Rosenberg Trade Report

The Federal Trade Commission has announced a proposed settlement under which a U.S. company has agreed to stop making false claims that the hats and other products it sells are all or virtually all made in the U.S. and to halt deceptive use of its “American Made Matters” certification and marketing materials. Each violation of this settlement could result in a civil penalty of up to $40,654. Comments are due by Feb. 23, after which the FTC will determine whether to make the settlement final.

According to an agency press release, the FTC alleged that this company and its subsidiary marketed hats with claims such as “American Made Matters,” “Choose American,” and “Made in USA since 1868.” However, more than 70 percent of the companies’ hat styles are wholly imported as finished products and many of the rest contain significant imported content.

The FTC also alleged that the two companies made deceptive claims for their own and third-party products through a U.S.-origin seal they introduced in 2010 known as “American Made Matters.” For example, the FTC said, the companies licensed this seal to any company that claimed it had a U.S-based manufacturing factory or one product with a U.S.-origin label and met several membership requirements, including self-certifying that at least 50 percent of the cost of at least one of its products was incurred in the U.S., with final assembly or transformation in the U.S., and paying an annual licensing fee of $99. According to the FTC, this seal falsely represents by implication that the companies and products using it have been endorsed or certified by an independent third party and that the two companies possess competent and reliable evidence that products carrying the seal are all or virtually all made in the U.S.

Under the terms of the settlement, the two companies are prohibited from making unqualified U.S.-origin claims for their products unless they can show that the final assembly or processing – and all significant processing – take place in the U.S. and that all or virtually all ingredients or components of the products are made and sourced in the U.S. Any qualified “Made in USA” claims must include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing.

The two companies are also (a) required to disclose any material connection they have with any certification they use to tout their products, (b) prohibited from claiming that a product or service meets their certification standard unless an entity with no material connection to them independently and objectively evaluates the product or service, or they disclose that certified products or services meet the standard through self-certification, (c) prohibited from making untrue, misleading, or unsubstantiated country-of-origin claims in their marketing materials about any product, and (d) prohibited from providing to others the means to make deceptive origin or certification claims about their products.

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