The Federal Trade Commission issued a staff report on the "Made in USA" Workshop that the FTC held last fall. (At the same time, the FTC also proposed a new "Made in USA Labeling" rule, which we previously reported on.)
In 1997, the FTC published its Enforcement Policy Statement on U.S. Origin Claims, which gives marketers guidance about how to make proper claims that a product is made in the United States. The policy statement advises marketers that before making an unqualified "made in USA" claim about a product, the marketer should substantiate that the product was "all or virtually all" made in the United States.
Here are some key take-aways from the report:
- The FTC's current "made in USA" enforcement program consists of monitoring, counseling, and targeted enforcement. The FTC currently receives several hundred complaints a year, and FTC staff "typically works with companies to bring them into compliance and then sends closing letters, without the need for litigation." The FTC said that it has closed more than 150 matters using this process.
- When the FTC brings enforcement action, "the vast majority of the Commission’s previous enforcement actions consist of administrative orders containing injunctive relief buttressed by the threat of significant civil penalties for violators." The FTC said that of the 24 orders that the FTC has entered into in the past 20 years, the FTC has only had to go back to two companies to seek civil penalties. Notwithstanding this, the FTC acknowledged that, "recent settlements have generated questions about whether it is time to consider new remedies or a different approach to enforcement in this area."
- The FTC said that no one at the workshop presented consumer perception evidence that supported updating its current enforcement policy statement. In fact, one participant submitted research that 33% of consumers think that 100% percent of a product must originate in a country for the product to be called "made" in that country.
- While participants at the workshop agreed that the FTC should maintain its practice of informal staff counseling and issuing closing letters to companies that unintentionally violate the law, the FTC said that "most also argued that the FTC should consider expending additional resources to impose stricter penalties on egregious violators."
- The FTC said that, of the hundreds of complaints that the FTC receives per year, very few of those matters involve intentional deception. The FTC said, "the vast majority relate to companies that either make overly broad claims on websites or in social marketing (e.g., 'Made in USA' or '#madeinusa' when the company sells a mix of MUSA, imported, and assembled in USA products), or companies that make unqualified claims for products that, though substantially transformed in the USA, incorporate imported content."
- The FTC said that the comments that it received expressed nearly "universal support" for a rule addressing "made in USA" claims.
- The report also discussed fraudulent "made in USA" claims that are made by overseas marketers who are promoting to directly to U.S. consumers. The FTC said that many of these marketers are beyond the FTC's reach and that the CDA presented challenges to enforcement against platforms selling such products in the U.S.
The big news coming out of this report is that the FTC is proposing a new "made in USA" rule, which will allow the FTC to seek civil penalties for violators. That will be a big change in the enforcement landscape.
The other big news -- or lack of news, really -- is that the FTC clearly isn't going to give marketers more guidance about what "all or virtually all" means. For marketers that were hoping that the FTC might give a safe harbor percentage, that's clearly not happening. In fact, the FTC's discussion of consumer research reporting that some consumers think that "made in USA" means it was 100% made here should certainly serve as a warning to marketers that, at least to the FTC, "virtually all" is a very high bar to meet.
"neither workshop participants nor commenters offered any evidence to support changing the 'all or virtually all' guidance"