On June 26, 2023, the Federal Trade Commission (FTC) announced an Agreement Containing Consent Order (Proposed Order) against a group of leather and other clothing accessories companies — Chaucer Accessories, Bates Accessories and Bates Retail Group — and their owner, Thomas Bates.
The FTC’s complaint alleges that the companies and Bates improperly marketed products online and in print materials using unqualified Made in USA claims. The complaint also claims the companies used inaccurate qualified Made in USA claims on product labels — a situation that the U.S. Customs and Border Patrol (CBP) brought to the FTC’s attention.
The announcement is the latest in a series of actions brought by the FTC against improper Made in USA claims, though this is only the second recent enforcement action that does not involve a violation of the FTC’s Made in USA Labeling Rule. FTC officials recently have highlighted the FTC’s Made in USA work and reinforced that this string of enforcement actions will continue.
Section 5 Violations — Unqualified Claims in Marketing and Qualified Claims in Labeling
The complaint alleges that the companies and Bates improperly marketed their belts, shoes and other products using unqualified claims of “Made in USA” or “Hand Crafted in USA.” This included online advertisements such as banners that were visible on every page of the companies’ websites, which the FTC alleged stated or implied that all their products were all or virtually all made in the United States. The complaint also targeted “Made in the USA” marketing in catalogs and third-party online platforms. Finally, the FTC said the companies represented to third-party trade customers that the companies’ private-label belts and accessories were made in the United States and provided those trade customers with labeling and promotional materials featuring U.S.-origin claims for use in the marketing and sale of the products when they contained significant imported content.
The FTC alleged that this marketing and advertising constituted unfair or deceptive actions or practices under Section 5 of the FTC Act because, in numerous instances, the companies’ products were wholly imported or contained a significant amount of imported content.
The FTC’s complaint alleges that the companies and Bates also violated Section 5 by making improper qualified Made in USA claims. The companies labeled their belts as “Made in USA from Global Materials” even though the belt straps were imported from Taiwan and the companies only affixed the buckles to the straps in the United States. CBP determined that these belts were not “Made in USA from Global Materials” because attaching a buckle to a belt strap is a minimal assembly operation that does not change the name, character or use of the product. Therefore, the companies could not support a qualified Made in USA claim even if they identified that the materials were imported. Notably, this labeling was not a violation of the FTC’s Made in USA Labeling Rule because the Labeling Rule applies only to unqualified claims.
Nonetheless, the FTC alleged that these claims violated Section 5 of the FTC Act, and the companies and Bates agreed with the FTC to a Proposed Order under which they would pay monetary relief of $191,481, agree to stop making deceptive Made in USA claims, and notify past purchasers of their products at issue in the FTC’s investigation — specifically, that the products were, in fact, imported.
FTC Says “Made in USA” Means What It Says
Recent statements from FTC officials reinforce the FTC’s active enforcement in the Made in USA space and indicate that the enforcement trend will continue.
The FTC’s press release in the Chaucer Accessories case quotes Samuel Levine, Director of the FTC’s Bureau of Consumer Protection as saying, “‘Made in USA’ means what it says. Falsely labeling products as ‘Made in USA’ hurts consumers and competition, and the FTC will continue to aggressively enforce the law to stop deceptive claims and hold violators accountable.”
Additionally, FTC Chair Lina Khan provided written testimony to the House Judiciary Committee on July 13, 2023, highlighting the FTC’s enforcement work in many areas. One section of the testimony was titled “Ensuring Domestic Manufacturers Can Compete Fairly” and described the FTC’s recent enforcement of its Made in USA Labeling Rule and other Made in USA enforcement. The testimony describes that “[t]he FTC continues to carefully monitor the market for false ‘Made in America’ claims and will use all available tools to ensure scammers who cheat consumers, honest businesses, and American workers face heavy consequences for their lawbreaking.”
- The FTC will enforce deceptive or misleading Made in USA claims even if they do not fall under the Made in USA Labeling Rule. This may include Made in USA claims on websites, social media, or in print advertising that is not product-specific. It also may include qualified Made in USA claims on product labels. Companies must be careful anytime they use a Made in USA claim, regardless of the context.
- The FTC is working together with CBP on Made in USA enforcement. This is the second enforcement action in which the FTC has disclosed its collaboration with CBP. The FTC likely will continue to work with CBP and other agencies to identify improper Made in USA claims, which could result in quicker succession of enforcement actions.
- The FTC seeks and obtains six-figure settlements for Made in USA violations. This is the eighth enforcement action related to Made in USA claims in the past two years, and in each, the violator has paid monetary relief in the six figures. These penalties have been in addition to required changes in product labeling and/or marketing and other remedies.
Attorneys at McGuireWoods have extensive experience counseling and representing clients that label and market their products as Made in USA. Companies with questions about the FTC’s rules surrounding Made in USA are encouraged to reach out to the authors of this alert.
For background on this issue, see previous McGuireWoods alerts:
- FTC Issues Largest Fine in Made in USA Enforcement, Stopping Motocross Parts Company in Its Tracks, McGuireWoods Legal Insights, April 27, 2023
- FTC MUSA Labeling Rule Enforcement, One-Stop Shop, April 12, 2023
- Made in USA? FTC and USDA Stand Ready to Check, McGuireWoods Legal Insights, March 8, 2023
- FTC Brings Fourth Enforcement Action Under Made in USA Labeling Rule, McGuireWoods Legal Insights, August 16, 2022