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31 July 2020
'Made in the United States' defined
Authority to assess monetary penalties clarified
Media and claims covered by standard expanded
Public comment period
Proposal to repeal apparel care labelling rule
On 16 July 2020 the Federal Trade Commission (FTC) published a proposed rule for Made in the USA (MUSA) claims for labels in the United States.
The proposed rule would codify the FTC's current standard that unqualified MUSA claims for a product should, at the time of the representation, have a reasonable basis for asserting that all or virtually all of the product is made in the United States. Further, it would authorise the FTC to assess monetary penalties on unsubstantiated claims. Controversially, the proposed rule would also extend the FTC's enforcement authority to labels, mail-order catalogues and online advertising. Comments on the proposed rule are due by 14 September 2020.
According to the FTC, the proposed rule would prohibit marketers from making unqualified MUSA claims on labels unless:
The current standard is found in the FTC's Enforcement Policy Statement on US-Origin Claims 1997. The proposed rulemaking follows the publication of a staff report on the FTC's Made in the USA workshop.
The FTC has pushed for significant penalties in recent years. In the past two years alone, it has imposed monetary penalties as high as $1 million.
The proposed rule defines 'made in the United States' to mean:
any unqualified representation, express or implied, that a product or service, or a specified component thereof, is of US origin, including, but not limited to, a representation that such product or service is 'made,' 'manufactured,' 'built,' 'produced,' 'created,' or 'crafted' in the United States or in America, or any other unqualified US-origin claim.
According to the FTC, the proposed rule would not pre-empt federal or state statutes or regulations relating to country-of-origin labels, except and to the extent that such laws or regulations are inconsistent with the rule. States whose protections are greater than the provisions of the proposed rule would not be considered inconsistent with the rule.
The FTC routinely receives trade complaints regarding allegedly unsupported MUSA claims. The complaints are usually settled with consent agreements and closing letters.
However, the proposed rule would authorise the FTC to seek civil penalties of $43,280 per violation. With this change, the FTC will be able to obtain monetary penalties more quickly and easily, which would likely lead to an increase in the volume and amount of penalties.
The proposed rule also expands the definition of 'labels' to include unqualified MUSA claims appearing in mail-order catalogues or mail-order advertising.
The FTC proposes to include MUSA claims appearing in mail-order catalogues or 'mail-order advertising', which it defines to include online advertising within the scope of the rule. However, the commissioners disagreed on this scope in the staff report. For example, Commissioner Noah Phillips issued a dissenting statement and Commissioner Christine Wilson issued a statement dissenting in part, arguing that the proposed rule exceeds the scope of the FTC's authority because Section 45a references only "labels on products" rather than online advertising.
Advertisers which make MUSA claims and have concerns about the proposed rule's language or scope should consider filing public comments. Comments on the proposed rule can be submitted online until 14 September 2020. Instructions are provided in the proposed rule.
The FTC is also proposing to repeal its trade regulation on apparel care labelling. The proposed repeal was published on 23 July 2020. The FTC has said that the apparel care labelling may be unnecessary because manufacturers would likely continue to provide care information to consumers. The care labelling rule requires apparel manufacturers and importers to attach labels to their products that describe appropriate care for ordinary use of their product, including by use of approved care symbols instead of words. Comments on the proposal may be submitted online until 21 September 2020.
For further information on this topic please contact Teresa Polino or David Salkeld at Arent Fox LLP by telephone (+1 202 857 6000) or email (firstname.lastname@example.org or email@example.com). The Arent Fox LLP website can be accessed at www.arentfox.com.
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