Has it really been five years since we discussed the Federal Trade Commission’s enforcement action against Chemence, Inc. for improper Made in USA claims? Yes, five years and a few days, in fact, and the sad saga is finally over: Chemence and the FTC have resolved the case, with the details set forth in the agency’s Consent Order.
Our earlier post summarized the FTC’s allegations and their factual underpinnings, and these are pretty much the same as those adopted in the Consent Order. What is new is the FTC’s showing some teeth in addressing false origin claims. The Consent Order prohibits Chemence from making such claims in the future. It also requires the company to provide the FTC with a compliance report, submit to agency compliance monitoring, and notify its customers about the misleading claims.
On top of that, the Consent Order applies to both Chemence and its president, in his individual capacity, and requires them to pay $1.2 million to the FTC.
Any companies claiming their products are made in the United States should be aware of the FTC’s requirements. As set forth in the Consent Order, it is improper to “make any representation, expressly or by implication, that a product is Made in the United States unless:”
A. 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; or
B. A Clear and Conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients or components, and/or processing; or
C. For a claim that a product is assembled in the United States, the product is last substantially transformed in the United States, the product’s principal assembly takes place in the United States, and United States assembly operations are substantial.
One Commissioner remarked that the Chemence case outcome shows the FTC is “turning the page on our permissive policy of the past” toward violations. The proposed new regulation concerning the Made in USA standard will mark another step in the enhanced enforcement effort. Parties that fail to heed the Chemence case’s warning may find themselves named and shamed in a future FTC action.