FTC Settles Claims Over Deceptive “Made in USA” Ads By Haberdasher That Wore Two Hats

When you tell consumers that your product is made in the United States, you are not just giving them the manufacturing location. You are invoking their national pride, their concern about their country’s place in the world, and their anxieties about their own jobs. It’s a powerful marketing toolbox. Perhaps for that reason, some advertisers loudly tout their products as “Made in USA” even when it’s not true.

To combat such tactics, the Federal Trade Commission (“FTC”) maintains an Enforcement Policy Statement on U.S. Origin Claims and Made in USA Standard guidelines. This guidance has several nuances, but ultimately the rule is simple: if you are going to use a term like “Made in USA” without further qualification, you better be sure that “all or virtually all” of the product so advertised is in fact manufactured in the United States. In other words, all significant parts and processing that go into the product must be of U.S. origin, with zero or negligible foreign content. Otherwise, the ad might be considered deceptive and in violation of Section 5 of the FTC Act.

“American Made Matters”

The Bollman Hat Company of Adamstown, Pennsylvania, which claims to be the oldest hat company in America, sells haberdashery products under a variety of different brand names. Bollman’s advertising and labels heavily touted the American-made quality of its headgear, using terms like “Choose American,” “Buy American,” and “Made in USA since 1868.” Bollman even had an “American Made Matters” seal of approval from Save an American Job LLC. Save an American Job LLC was conveniently located in the same town: Adamstown, Pennsylvania.  Actually, it was even more convenient than that: Bollman and Save an American Job were located in the same building. You can probably see where this is going: Bollman was wearing two hats.

The FTC alleged that Bollman created Save an American Job LLC (a wholly owned subsidiary of Bollman) so it could give itself the “American Made Matters” seal and create the false impression that its “Made in USA” claims were certified by an independent third party. According to the FTC, Bollman had no business making any “Made in USA” or similar claims, whether certified or not, because more than 70% of its hats were wholly imported from abroad, and the remaining products contained significant amounts of imported content.

To make matters worse, according to the FTC, Bollman also decided to share its “American Made Matters” seal with the world. Bollman licensed the seal to other companies for $99 a year. To be eligible, these companies had to show, not that they met the FTC’s “Made in USA” standards, but that they met Bollman’s far less exacting standards, specifically that at least 50% of the cost of at least one of their products was incurred, and final assembly occurred, in the United States. Apparently, over 375 companies took advantage of the deal, thus multiplying many times over the potential reach of Bollman’s allegedly deceptive claims.

The FTC Settlement

The FTC first announced its administrative complaint against Bollman in January, and the final consent order and settlement was approved on April 17, 2018. The order prohibits Bollman and its subsidiary from making additional deceptive and unqualified “Made in USA” claims and from providing others with the instrumentalities to do so through the American Made Matters seal.  Other terms include compliance reporting and monitoring.

The American Made Matters seal website is still open for business, but now has a disclaimer explaining that the “standards for American Made Matters and the Federal Trade Commission are different.” Members who meet the relatively lax American Made Matters standard, but not the FTC standard, are directed to use a seal with qualifications explaining that the company is “self-certified” and that “at least 50% of the cost is incurred in the U.S.” The old seal (sans qualification) will still be used by the organization “to promote [American Made Matters] and its mission only.”

During the comment period before the settlement became final, the American Apparel & Footwear Association suggested that the FTC use the opportunity to further clarify its guidance to allow companies to make unqualified “Made in USA” claims if they can substantiate that their products are “substantially transformed and undergo a 51% value-add in the United States.”  The FTC rejected this suggestion on the grounds that, based on current research, consumers assume that “Made in USA” means something more a 51% value-add.

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