FTC Announces Largest Ever Civil Penalty for Made in USA Labelling Violation

PDF

On April 26, 2024, the FTC announced the largest ever civil penalty for the improper labelling of products as “Made in USA.” The FTC announced that Williams Sonoma will pay a record civil penalty of $3.17 million for deceptively labelling products as “Made in USA” or otherwise of U.S. origin when those products were, in reality, wholly imported or contained significant imported components.

The FTC’s civil penalty arises from alleged violations of a 2020 FTC Order. In 2020, the FTC sued Williams-Sonoma, alleging that the company labelled multiple product lines as Made in USA when, in reality, they were made elsewhere. Williams-Sonoma agreed to the entry of an FTC administrative order requiring the company to follow Made in USA labelling requirements. Several years later, the FTC allegedly learned that the company was marketing mattress pads as “Crafted in America from domestic and imported materials” when the mattress pads were actually made in China. The FTC also found that six other products the company advertised as Made in USA were, in reality, made elsewhere.

The Department of Justice, on behalf of the FTC, filed a civil penalty action in the United States District Court for the Southern District of California. Williams Sonoma and the FTC subsequently agreed to the entry of a Court Order. That Order requires Williams Sonoma to pay the record civil penalty, submit annual compliance reports, and comply with the FTC’s Made in USA labelling regulations.         

This latest settlement continues the FTC’s recent pattern of robust enforcement actions against companies believed to be falsely labelling products as Made in USA. To ensure accurate use of Made in USA claims, and protect themselves from possible enforcement actions, companies should:

• Review the FTC’s Made in USA labelling regulations, which were issued in 2021. See 16 CFR Part 323. Under the regulations, it is considered a deceptive act or practice within the meaning of Section 5 of the Federal Trade Commission Act for any products to be labeled as “Made in the USA” unless: “the 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.”
• Refrain from making unqualified U.S. origin claims absent clear evidence that the product’s final assembly or processing, and other significant processing, takes place in the United States.
• When using qualified Made in USA claims, clearly and conspicuously disclose the extent to which the product contains foreign parts, ingredients, components, or processing.
• When making claims that a product was “assembled” in the U.S. should ensure that the product was last substantially transformed in the U.S., its primary assembly takes place in the U.S., and U.S. assembly operations are substantial.

Violations of the Made in USA Rules may be punished with civil penalties of up to $51,744 per violation, with violations counted liberally. Over the past several years, the FTC has pursued increasingly larger civil penalties from companies alleged to have deceptively labelled products as Made in USA. Accordingly, if businesses have any concerns as to whether they can properly label their products as “Made in USA,” they should consult counsel. With Made in USA labelling, the old adage is true: an ounce of prevention is worth a pound of cure.