Petition for Formal Rule re Made in USA Claims

On August 22, 2019, the consumer advocacy organization Truthinadvertising.org (“TINA.org”) submitted a Petition to the Federal Trade Commission (“FTC”), requesting that FTC promulgate regulations for Made in the USA claims.  As further explained in the Petition, a formal rule purportedly would facilitate FTC enforcement by making it easier for FTC to seek civil penalties.

Made in the USA claims have gained in popularity.  TINA.org alleges that many products marketed with unqualified Made in the USA claims violate the standard set by FTC, i.e., all or virtually all components must be made (or sourced) in the USA.  The standard is set by guidance.

Currently, FTC uses two enforcement mechanisms to regulate Made in the USA claims, neither of which allows FTC to seek civil penalties.  In more than 90% of the cases, FTC enforcement constitutes of a closing letter whereby the alleged offender promises to correct violations.  In the remaining limited cases, FTC enforcement action against first-time offenders results in a no-money settlement.   Because FTC has not promulgated a rule, its authority to seek civil penalties is limited to cases in which a company violates a cease and desist order.  In other words, the FTC has no authority to seek civil penalties against first-time offenders.  According to Petitioner, the lack of the option to seek civil penalties means that “marketers know they can reap the benefits of deceptively marketing products as Made in the USA and face only the prospect of a slap on the wrist if they are caught.”  Petitioner argues that the underenforcement hurts both businesses as well as consumers.

The FTC Act authorizes FTC to seek civil penalties for a “knowing violation of a rule.”  Thus, a formal rule will turn on the FTC’s penalty switch and provide the FTC with the option to seek a civil penalty against first-time offenders.  Petitioner posits that the possibility of civil penalties would “provide a deterrent effect by changing the risk-benefit analysis of deceptive marketers.”

Coincidentally, on August 23, 2019 (one day after the Petition was submitted), FTC announced its plans to host a public workshop on September 26, 2019.  The workshop is intended to enhance FTC’s understanding of consumer perception of “Made in the USA” and other U.S.-origin claims, and to consider whether it can improve its “Made in USA” enforcement program.  The agenda is posted here.

The comment period for written comments closes on October 11, 2019.

We will be monitoring further developments regarding Made in USA claims.