Theodora McCormick, Jack Wenik, and Robert Lufrano, attorneys in the Litigation & Business Disputes and Health Care & Life Sciences practices, co-authored an article in FDLI’s Update magazine, titled “Businesses Beware: FTC Seeks to Codify “Made in USA” Enforcement Policy.”
Following is an excerpt (see below to download the full version in PDF format):
The COVID-19 pandemic has put unprecedented pressure on global supply chains, causing American policymakers and companies to rethink the benefits of globalization and consider bringing more manufacturing back to the United States. While not announced in direct response to the pandemic, a new rule proposed by the Federal Trade Commission (FTC) would both reward those American companies that manufacture their products in the United States and incentivize more companies to bring manufacturing and production back home. The proposed rule would do so by expanding the FTC’s enforcement authority and its ability to seek civil penalties against companies that make false or deceptive “Made in the USA” (MUSA) claims.
There is some debate regarding whether the proposed rule would simply codify a standard that has already been established by the FTC’s past enforcement history, or whether it expands the FTC’s authority to regulate MUSA claims. Of course, there is always the possibility that the proposed rule may not be adopted at all or that it may be modified before being finalized. In its current form, however, the proposed rule—if adopted—would broaden the scope of the FTC’s statutory enforcement authority to include both offline and online MUSA claims and would provide the FTC with the important and powerful tool of civil monetary penalties, which may lead to more frequent enforcement.
The Proposed Rule
Section 323.2 of the proposed rule contains a section entitled “[p]rohibited acts,” which reads as follows: “[i]n connection with promoting or offering for sale any good or service, in or affecting commerce, as ‘commerce’ is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act to label any product as Made in the United States 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.” The proposed rule also provides that “[t]o the extent that any mail order catalog or mail order promotional material includes a seal, mark, tag, or stamp labeling a product Made in the United States, such label must comply with § 323.2 of this part.” “Mail order catalog” and “mail order promotional material” are defined to include any materials “used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase” of such products or services. If the proposed rule is adopted, the FTC will be able to seek civil penalties from violators of up to $43,280 per violation.