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Petition Asks FTC to Issue Made in USA Regulations, Allow Penalties for First-Time Violators

A recent petition filed with the Federal Trade Commission asks the agency to issue regulations that would allow it to hit first-time violators of Made in USA requirements with monetary penalties. TruthinAdvertising.org says the lack of any regulations on Made in USA claims means unscrupulous companies are able to falsely advertise with impunity, harming consumers and other companies that are honest about their products’ origins.

According to the Aug. 22 petition, the FTC is by law allowed to seek civil penalties for unfair or deceptive acts that are either knowing violations of an FTC rule, or a knowing violation of a cease and desist order. Because there is currently no regulation on the books for Made in USA claims, the FTC can’t directly seek penalties for violations. It has to first issue a cease and desist order, and can then proceed to penalties only if the order is violated. That’s despite laws dating back to the 1940s that currently prohibit Made in USA claims unless the product is “all or virtually all” made in the United States, the petition said.

As a result, the FTC is only able to issue “no-fault, no money” consent orders that threaten penalties for a second violation or, more commonly, “inform suspected violators of their transgressions, permit an opportunity for explanation and/or self-correction, take the companies’ word that the violation(s) has been remedied, and issue a closing letter,” the petition said. “Neither approach has proven effective over time.”

The current framework invites companies to violate Made in USA laws without fear of a penalty when they are caught, the petition said. That comes at the expense of honest competitors. In a recent case that drew scrutiny from FTC commissioners (see 1809130036), Sandpiper won exclusive contracts with the Army and Air Force Exchange system because it falsely purported its goods to be Made in USA, costing Advantus, a company that complied with the law. “The purpose of employing deceptive techniques is, above all, to steal sales from competitors,” the petition said.

“The FTC remains hamstrung in its ability to effectively enforce Made in the USA Claims” because it is not allowed “to seek civil penalties against first-time offenders,” the petition said. “But the Commission does not have to settle for this suboptimal outcome. By establishing a rule, the FTC can turn on the penalty switch, and have the option to seek penalties against select first-time offenders.”

The FTC administrative staff manual says agency staff should respond to the petition within 90 days of receipt. In that response, FTC staff will recommend to the commissioners whether it should be granted or denied based on certain criteria including whether the rule is in the FTC’s jurisdiction, whether it could be enforced and whether it would have greater beneficial than detrimental effects.