On Friday, the Federal Trade Commission announced that it reached a settlement with iSpring Water Systems over claims that the company violated a 2017 FTC consent order by making false "made in USA" claims. As part of the settlement, the company and two of its principals agreed to pay a $110,000 civil penalty, admitted liability, and also agreed to notify affected consumers.
In 2017, the FTC alleged that iSpring made false claims that its water filtration systems were “Built in USA" and “Proudly Built in the USA.” The FTC said that, in fact, the company's products were either wholly imported or included significant foreign materials. In the FTC's 2017 consent order, the company agreed not to make unqualified claims that its products were made here unless it could substantiate those claims.
In the current case, the FTC alleged that iSpring violated the consent order by falsely claiming that its products were "designed" and "crafted" in the United States. The FTC said that many of the company's products were still made of imported material. According to the FTC's Enforcement Policy Statement on U.S. Origin Claims, a marketer should not make an unqualified claim that a product is made here unless the product is "all or virtually all" made in the United States.
The case highlights the FTC's continuing interest in "made in USA" claims and is a good reminder to marketers that, once you sign a consent order with the FTC, the agency is going to keep an eye on you to make sure that you comply with it.
What is most significant about the case, however, is that the settlement include a rare admission of liability. Typically, when settling with the FTC, advertisers don't admit that the FTC's allegations are true. Not only do advertisers almost always want to maintain their position that they didn't do anything wrong, they also don't want to make admissions that could be a problem for them in other litigation. Where did this admission of liability come from? Well, there has been some talk recently at the FTC about the possibility of obtaining tougher relief from marketers when they've crossed the line. Here's an example of the FTC doing just that.
Interestingly, though, Commissioners Noah Joshua Phillips and Christine S. Wilson expressed concerns, in a separate statement, that this remedy may not have been appropriate here. They wrote, "While the facts of this case -- the defendants deliberately misled and then were deliberately contumacious -- support an admission of liability, from a policy perspective we are still concerned that the Commission is sanctioning use of an admission of liability before fully contemplating the ramifications of this policy change."
Noting that the defendants were not represented by counsel, Commissioners Phillips and Wilson also questioned whether other defendants, who are represented, would agree to the same relief. They wrote, "As a result, we may end up penalizing only those that do not have the wherewithal, representation, or funding to negotiate."
“People should be able to trust a company’s claim that its products are made in the United States. This company is paying the price of abusing that trust and violating an FTC order" -- Andrew Smith, Director, FTC Bureau of Consumer Protection