FTC Commissioners Call for Tougher 'Made in USA' Enforcement After No-Guilt Settlements With Two Importers

The Federal Trade Commission has begun a “broad review” of its enforcement actions for false “Made in USA” claims, which could take a stronger enforcement stance in the future, including monetary penalties and admissions of wrongdoing, said FTC Commissioner Rebecca Kelly Slaughter and Chairman Joe Simons in a statement released Sept. 12 in the wake of settlements with two importers.

Consumers may have paid a premium for products marked "Made in USA" based on perceived quality, safety, health or environmental benefits, and in such instances “monetary relief or notice to consumers may be warranted,” Slaughter and Simons said in their statement. “Requiring law violators to provide notice to consumers identifying the deceptive claim can help mitigate individual consumer injury -- an informed consumer would have the option to seek a refund, or, at the very least, stop using the product,” they said.

FTC Commissioner Rohit Chopra in particular argued for harsher penalties for Made in USA violations in a statement issued the same day. Rather than issue cease-and-desist orders, the FTC “should consider remedies tailored to the individual circumstances of the fraud, including redress and notice for consumers, disgorgement of ill-gotten gains, opt-in return programs, or admissions of wrongdoing,” he said.

“Some general principles can inform our approach to tailoring remedies,” he said. “For firms that built their core brand identity on a lie, full redress or the opportunity for opt-in refunds may be appropriate, given the centrality of the false claim and its widespread dissemination. When refunds are difficult to administer or the firm lacks ability to pay, the Commission should at least seek notification to consumers or corrective advertising -- especially in markets where country of origin bears on health or safety. Finally, if firms’ misrepresentations are undisputed and clear, the Commission should strongly consider seeking admissions -- a form of accountability that is explicitly contemplated by our rules of practice,” Chopra said. Neither of the two settlements announced Sept. 12 included admissions of guilt.

Chopra said he hopes that the FTC “will reexamine its approach to tackling Made-in-USA fraud." The FTC "should seek more tailored remedies that vindicate the important goals of the program and send the message that Made-in-USA fraud will not be tolerated,” he said.

Following the FTC’s review, if the commission finds “that there are new or infrequently applied remedies that we should be seeking more often, the Commission will act accordingly -- and, where appropriate, signal to the public how we intend to approach enforcement,” Slaughter and Simons said in their statement. “In our view, a thoughtful review and forward-looking plan is a more effective and efficient use of Commission resources than re-opening and re-litigating the cases before us today,” they said.

The two settlements that prompted the statements involved importers in New York and California, the FTC said in a press release. Patriot Puck, an importer of hockey pucks, and Sandpiper, which sells recreational and outdoor equipment, agreed to bans on improper labeling, as well as compliance monitoring and record-keeping agreements in their settlements.

According to the FTC, Patriot Puck claimed in its advertising, packaging and promotional materials that its products were Made in USA, including by making claims like “100% American Made” and “The only American Made Hockey Puck.” The pucks were actually imported from China, the FTC alleged. Meanwhile, Sandpiper claimed in advertisements, labels and promotional materials that its backpacks, wallets and other products were “virtually all made in the United States,” the FTC said. But more than 95% of its products were imported as finished goods, the FTC said.

As part of their settlements, both companies will be prohibited from making “unqualified” Made in USA claims unless they can show that the products’ final assembly or processing took place in the U.S., and all components were also sourced in the United States, the FTC said. Any qualified Made in USA claims from the companies must include a clear and conspicuous disclosure of the extent of foreign components or processing, the FTC said. The settlements also mandate compliance reports and 20 years of record-keeping.