This week, the FTC filed a lawsuit against Chemence, Inc., alleging that the company is misleading consumers by claiming that many of their glues are made in the USA.

In order for a company to make an unqualified “Made in USA” claim, a product must be “all or virtually all” made in this country. Although Chemence advertised that its glues were “proudly made in the USA,” the FTC alleges that a significant proportion of the Chemencecosts of the chemical components of the glues – approximately 55% – are attributable to imported chemicals that are essential to the glues’ function. Therefore, the company has fallen far short of the “all or virtually all” standard.

Chemence doesn’t just make its own products, though. The company also makes glues that are sold under retailer brand names, and it provides those retailers with marketing materials to help promote those glues. Because those marketing materials also include “Made in USA” claims, the FTC alleges that Chemence has provided others with the “means and instrumentalities” to deceive consumers.

As we’ve noted in previous posts – all of which were proudly written in the USA – the FTC has been actively investigating these types of claims. Most of those investigations, though, have ended in closing letters, with the companies agreeing to make modifications to their claims. This case demonstrates that there can be more serious consequences for failing to comply with the FTC’s standards.  

Today, California Governor Jerry Brown signed SB633 into legislation allowing manufacturers to carry the label “Made in America”, even if their products were not entirely made in the United States. This is similar to the federal standard used in the 49 other states. Specifically, SB633 stipulates that a “Made in USA” claim may be used in a product’s marketing in California provided no more than five percent – or in certain instances, ten percent – of the product’s component inputs originate from outside of the United States.

Introduced by state Sen. Jerry Hill (D-San Mateo/Santa Clara Counties) and Assemblyman Brian Jones (R-Santee), variations of the bill have weaved their way through Senate and Assembly over the last four years. The bill was passed by the Senate on May 22, 2015 and Assembly on July 16, 2015. SB633 replaces a strict California Business and Professional Code (CBPC) regulation instituted in 1961, which was intended to protect consumers from being misled into thinking they were purchasing products made in America. The CBPC statute has been widely criticized as making very little sense in today’s marketplace, and it is also different from the federal standard. Unlike California’s standard, which required 100% U.S. production, the Federal Trade Commission requires “all, or virtually all” of the product to be made in the United States in order for the manufacturer to make a “Made America” claim.

This bill is likely deter consumer class action lawsuits that have alleged that manufacturers and sellers improperly labeled a product as Made in America. From our point of view, this is a positive development for U.S. manufacturers, whose diligent compliance with the federal standard wasn’t enough to guard against suits under the California law. SB633 provides long sought-after transparency and clarity for companies wanting to use the ‘Made In America’ label in accordance with FTC guidelines, which would have been difficult to achieve through federal legislation. Additionally, it will stem the glut of class action suits filed in California that have taken advantage of the disparity between the state’s consumer protection law and the Federal Trade Commission’s “Made in USA” policy.

If you have any questions about this bill or its implications, please contact Kelley Drye & Warren, LLP attorneys Lee Brenner, Jennifer McCadney and Dustin Painter

This past Monday, October 21, the FTC issued a press release announcing a settlement that the agency reached with Utah-based E.K. Ekcessories, which resolved allegations that E.K. Ekcessories falsely advertised that iPhone accessories, bottle holders, lens cleaners, dog collars, leashes, and other products were “Made in the USA” or “Truly Made in the USA” when, in fact, the products contained a substantial amount of foreign content.

A copy of the FTC’s complaint and the Consent Decree are available here. The Consent Decree prohibits E.K. Ekcessories from advertising any product as being made in the United States unless the product is “all or virtually all made in the United States.” E.K. Ekcessories also may not make any “misleading claims about a product’s country of origin”, nor is it permitted to provide “deceptive marketing materials to third-party retailers”, such as Amazon or REI.

This settlement is significant given that most FTC “Made in USA” investigations over the past five years have resulted in closing letters, not settlements.

Kelley Drye attorney John Villafranco discusses “Made in the USA” claims in more depth in the most-recent issue of Inside Counsel magazine.  Click here to read the full article.