Glue manufacturer caught in sticky situation: $1.2 million fine for false Made in USA product labels

Introduction
2016 complaint and consent order
2020 consent order and $1.2 million fine
Takeaways

Introduction

The Federal Trade Commission (FTC) has issued a $1.2 million fine against glue manufacturer Chemence, Inc for violating a 2016 consent order requiring the company to qualify its Made in USA claims in its promotional materials and on its product packaging.

To date, this is the largest fine issued over a Made in USA claim.

2016 complaint and consent order

In 2016 the FTC brought charges against Chemence, alleging that it had made deceptive US-origin claims on its product packaging and associated marketing materials in violation of the Federal Trade Commission Act. Specifically, Chemence's website, product packaging and promotional materials included the statements "Proudly Made in the USA" and "Made in the USA" in close proximity to US flags. The FTC alleged that through these statements, Chemence had represented that its glue products, including the component raw materials, were all or virtually all made in the United States when imported chemical components comprised up to 80% of the product and accounted for up to 55% of the manufacturing costs.

Ultimately, Chemence was allowed to continue to make its US-origin claims only if these claims appeared immediately adjacent to a clear and conspicuous disclaimer accurately conveying the extent to which the product contained foreign parts, ingredients or processing. However, in 2020 Chemence was found to be in violation of this consent order and the FTC brought charges alleging deceptive US-origin claims once more.

2020 consent order and $1.2 million fine

In its 2020 complaint, the FTC alleged that Chemence and its CEO had once again included deceptive Made in USA claims on the company's product packaging and promotional materials. The FTC further alleged that these claims had been made without the qualifying language required by the 2016 consent order. The FTC also alleged that in a 2017 compliance report to the FTC, Chemence's CEO falsely declared under penalty of perjury that Chemence had changed its products' labels to read "Made in USA with US and globally sourced materials".

As a result of these charges, Chemence was fined $1.2 million – the largest monetary judgment to date for a Made in USA case. In addition to paying a fine, Chemence is subject to a new consent order that prohibits it from making:

• any unsubstantiated product origin claims; and
• any US-origin claims without a clear and conspicuous disclaimer noting the extent of foreign component parts and manufacture.

The order also bars Chemence from making any US-origin claims without demonstrating that the products meet US assembly standards, including, in part, that the products are substantially assembled and transformed in the United States and that the products' principal assembly takes place in the United States. The order further compels Chemence to file regular compliance reports with the FTC and to notify its customers of the FTC proceeding and of its misleading US-origin claims.

Takeaways

Made in the USA claims should be carefully scrutinised to ensure that they comply with key regulatory requirements. As this case makes clear, the FTC is closely monitoring these claims, including those made on product packaging, and has shown a willingness to pursue large fines against offenders.

For further information on this topic please contact Anthony V Lupo, Matthew Mills or Dan Jasnow at Arent Fox LLP by telephone (+1 202 857 6000) or email (anthony.lupo@arentfox.com, matthew.mills@arentfox.com or daniel.jasnow@arentfox.com). The Arent Fox LLP website can be accessed at www.arentfox.com.

Sarah Alberstein assisted in the preparation of this article.