FTC Announces a Proposed Rule for Made in the USA; Does It Go Beyond Its Authority?

As we previously reported, the Made in the USA claim, as a voluntary claim on consumer goods, including products under FDA jurisdiction such as foods, over-the-counter drugs, and cosmetics, continues to be a popular advertising claim.  Generally, FTC enforcement actions regarding unqualified Made in the USA claims have been limited to closing letters and orders enjoining companies from making false and misleading Made in the USA claims.  In these actions, the FTC relied on the standard for such claims laid out in FTC’s 1997 Enforcement Policy Statement on US Origin Claims.

Last year, the FTC received a Petition requesting that it  issue a rule for Made in the USA claims.  As the Petition pointed out, the FTC Act provides the FTC with the authority to issue a rule for “Made in the U.S.A.” product labels at 15 U.S.C. § 45a.  Importantly, violations of such a rule would be treated as a violation of a rule under 15 U.S.C. 57a, allowing the FTC to seek not only an injunction but also civil penalties.

In fall of 2019, the FTC held a public workshop and collected public comments covering three aspects of Made in the USA claims: (1) consumer perception of such claims; (2) concerns about the FTC’s current enforcement approach; and (3) potential changes to the FTC’s enforcement strategy.  A report of that workshop was published on June 19, 2020 and is available here.

Also on June 19, 2020, FTC announced a notice of proposed rulemaking for the unqualified Made in the USA claim.  Consistent with the 1997 Policy Statement and the various consent orders, the proposed rule will prohibit marketers from including unqualified Made in USA claims on product labels unless:

• final assembly or processing of the product occurs in the United States;
• all significant processing that goes into the product occurs in the United States; and
• all or virtually all ingredients or components of the product are made and sourced in the United States.

The proposed regulation would not preempt state law that sets higher standards.

The proposed rule does not apply to all advertising claims, as the FTC’s authority regarding Made in the USA claims is limited to claims on product labels.  Interestingly, the rule extends beyond claims made on product labels to Made in the USA claims appearing in “mail order catalogs or mail order advertising.”  That term is defined as “materials, used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase of such product or service by mail, telephone, electronic mail, or some other method without examining the actual product purchased” that “include[] a seal, mark, tag, or stamp labeling a product Made in the United States.”

Commissioner Phillips and  Commissioner Wilson issued statements, here and here, asserting that the scope of FTC’s authority under 15 U.S.C, § 45a does not extend to online and mail order claims as that provision refers to product labels, not to other labeling or advertising.

Comments may be submitted until 60 days after publication of the proposed rule in the Federal Register.