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While throngs of visitors braved D.C.’s 100-plus-degree finest for America’s 250th, we were busy prepping for another, depending on your perspective, perhaps quieter July 4 celebration: “Made in the USA” (MUSA) Month at the Federal Trade Commission (FTC). That’s right, it’s that time again (now in its second year) when American consumers can celebrate their freedom from false or misleading MUSA claims.
In recognition of the occasion, the FTC (decidedly not celebrating its independence this year) issued a battery of firecrackers in the form of seven warning letters to companies making allegedly misleading claims.
The letters weren’t exactly shocking. MUSA claims are an obvious enforcement priority. But they were interesting. Why letters and not cases? Just a play for a reliably timed press release? Or does the choice tell us something important about the FTC’s Made-in-USA enforcement strategy?
Spoiler alert: it’s the latter. And it’s all about the Benjamins.
The Nature of Warning Letters
Before we get into the details, let’s pause for a minute to frame the conversation. A warning letter is one of the many regulatory tools in the FTC’s enforcement toolbox. What, exactly, is it?
The basics.
A warning letter warns a company of possible law violations. It’s not a formal enforcement action, and it may or may not lead to a lawsuit. FTC warning letters, like those issued this month, typically include an explanation of why a company is receiving the letter and examples of allegedly problematic claims. The letters then ask recipients to correct the problem and, in some instances, contact FTC staff to confirm that they made changes.
Sometimes the FTC publishes anonymous versions of letters it sent to various companies to serve as a general warning to industry participants. In other cases, as here, the FTC releases the full text of specific letters to companies that may have a problem.
If a warned company fixes the alleged issue, the FTC may leave it at that. But, if the company doesn’t respond or make changes, further action from the agency will almost certainly follow. Because once the FTC has gone on the public record saying you have a problem, letting you off the hook without fixing it is a bad look for everyone involved.
The 201.
Warning letters can be sent unilaterally by the FTC (as they were this month), or in concert with other agencies that may have an interest or overlapping jurisdiction. (Put a pin in this one; we’ll return to this in a minute.)
A policy point.
Because the FTC issues warning letters unilaterally, the FTC dictates the timing of their release without concern for discussions with the recipients. This makes warning letters a controlled way to introduce or emphasize policy initiatives on a prescribed timeline.
Here, the FTC is sending companies a wake-up call to review their claims, and providing some insights. For example, one of the letters makes clear that the agency intends to interpret “Made in [state]” claims under the general MUSA analysis. That matters because marketers often treat state-origin claims as softer, more local branding; the FTC may not.
The controlled timing of warning letters can also be a harbinger of things to come, including a signal that additional investigations with envisioned enforcement action may be on the horizon. As they say, where there’s smoke, there’s fire.
Okay, that’s all well and good. But, knowing the Administration’s strong push for more MUSA cases, why did these particular companies get warning letters instead of civil investigative demands (CIDs)?
The Right Tool at the Right Time
With so many enforcement tools to choose from, the FTC can be selective about when to initiate an enforcement action and when to send a warning letter. With limited resources, it’s an institutional necessity to know when to open a full investigation and when a “shot across the bow” is the better course.
In examining the letters, we noticed a clear theme that we think explains how BCP Director Chris Mufarrige decided to proceed: none of these matters was a clean candidate for monetary relief. Instead, they appear to fall into two buckets: cases involving products subject to labeling jurisdiction that overlaps with other agencies, and cases involving claims that appear to have lived in advertising rather than on Rule-covered labels.
Seven letters, two buckets, no easy money. In other words: sparklers, not dynamite.
Jurisdiction matters.
First, three of the seven companies sell vaping/e-cigarette products.
My Vape Order, Inc. allegedly promoted e-cigarettes using unqualified MUSA claims on its Air Factory website, social media accounts and posts, and product labeling, including that its products were “AMERICAN MADE” and were “Made in America.”
Lucky Bar Holdings LLC allegedly promoted e-cigarettes using unqualified MUSA claims on its Fifty Bar website, social media accounts and posts, and product labeling, including that its products were “BUILT IN THE USA,” “The Only Disposable Built in the USA,” “Proudly made in the USA,” “manufactured in U.S.-based facilities,” and “created by American workers, engineers, and innovators.”
NebTech Inc. allegedly promoted e-cigarettes using unqualified MUSA claims on its Reign Bar website, social media accounts and posts, and product labeling, including that its products were “Made in USA,” “#MadeinUSA,” and “Built in the USA.”
Why would the fact that the targets here were in the vaping industry cause the FTC to hold its fire, even though in each case there was a potential violation of the MUSA Labeling Rule? Politics may be part of the story, given the Administration’s deregulatory posture toward vaping products.
But a more subtle reason may be that there are jurisdictional questions surrounding an enforcement action brought by the FTC against the labeling of an FDA-regulated product. The FDA has federal jurisdiction over the labeling of e-cigarettes and other Electronic Nicotine Delivery Systems (ENDS). Through its Center for Tobacco Products, FDA regulates their manufacture, packaging, and labeling.
Although the FTC has jurisdiction over the advertising and marketing of e-cigarettes, labels are generally the purview of the FDA. And the MUSA Labeling Rule just doesn’t apply if a different agency has authority over a particular product’s labeling. Indeed, this was discussed extensively when the MUSA Labeling Rule was promulgated, and the Federal Register Notice specifically acknowledged that “USDA and FDA have primary jurisdiction over labeling issues for the food products within their purview.” Given that enforcement against an FDA-regulated product would surely invite a jurisdictional defense, a warning letter may have been a more prudent approach. FDA-regulated labels make for messy FTC penalty cases.
Money matters too.
The other four letters had a simpler problem: the claims appear to have been made on websites, social media, brochures, or trade-show materials, not on product labels. That matters because Section 5 can address deceptive advertising, but the MUSA Labeling Rule is the money hook.
Helmel Engineering Products Inc. allegedly promoted coordinate measuring machines using unqualified MUSA claims on its website, social media accounts and posts, and product brochures, including that its product was “made in USA”; “Precision Built in the USA”; and “designed and manufactured in the USA….”
A&F Drum Company LLC allegedly promoted drums using unqualified MUSA claims on its website and social media accounts, including claims that its drums were “handmade in Austin, Texas”; “handmade in Austin by local drummers and artisans using locally sourced and exotic materials…”; “made in Texas”; and similar claims.
Vtron Inc. d/b/a Vtron Lasers allegedly promoted laser machines used for engraving, welding, and cutting jewelry and precious metals using unqualified MUSA claims on its website, social media accounts and posts, and at trade shows, including claims that the laser machines were “MANUFACTURED IN THE U.S.A.”; “Made in the USA”; and “Proudly built in the USA, our solutions incorporate the highest quality components to deliver exceptional performance and reliability.”
Z-Tech Advanced Technologies, Inc. allegedly promoted laser machines and related accessories used for engraving, welding, and cutting jewelry, precious metals, industrial parts, and plastics using unqualified MUSA claims on its website and social media accounts and posts, including claims that the laser machines were “Proudly made in the USA from the finest quality components”; “…Built with Excellence in USA”; “the finest US made laser engraving, cutting, and welding systems”; and “#americanmadeus,” “#madeinUSA,” and “#madeincali.”
In these cases, there aren’t any obvious issues involving overlapping authority with other agencies, but there’s a different Rule-related issue. The allegedly violative claims do not seem to have appeared on labels.
The MUSA Labeling Rule is exactly what it says it is: a labeling rule. It was authorized by 15 U.S.C. § 45a, which specifically addresses “Labels on products,” and it simply does not cover most MUSA claims in non-label advertising. Indeed, the debate over whether the Rule could be applied more broadly was ground zero for explosive disagreement between the Democrats and the Republicans on the Commission at the time of its promulgation. Although the Democratic Commissioners pushed for a broad reading of the statute, the Republicans were equally adamant that 45a says what it says, and the Rule should not cover anything beyond the four corners of a label. The Trump-Vance FTC isn’t going to be the Commission to push the boundaries.
The FTC can still challenge deceptive U.S.-origin claims in advertising under Section 5, but monetary relief is highly unlikely, if not completely unavailable. It’s just not the same as a Rule case with civil penalties on the table. And where’s the fun in that?
So the FTC got its public MUSA moment without spending its best ammunition on messy money cases.
Key Takeaways
Now that the fireworks and flyovers are complete, we are left with a few takeaways:
MUSA claims are a priority. The FTC’s message was public, patriotic, and pointed. MUSA claims remain in the crosshairs as the agency continues to follow through on a major component of the Administration’s domestic agenda: promoting domestic manufacturing. That means we’re going to see enforcement in many different forms tailored to the specific circumstances and reflecting the various tools at the Commission’s disposal.
The FTC’s watching a broad range of claims. The FTC will challenge allegedly deceptive MUSA claims in many forms, including city- or state-origin claims and hashtags.
Keep jurisdiction in mind. If you’re on the receiving end of some form of governmental enforcement activity regarding MUSA claims, consider whether there may be jurisdictional limitations that could enhance your negotiating position.
Risk is different for non-label advertising. Factor the placement of your claims into your risk analysis.
No money this time doesn’t mean no money next time. These letters likely are not the finale for MUSA Month. They may just be the opening salvo.
We can help. Promoting the good work your business does in the USA is important, and consumers want to hear about it. We can help you figure out how best to do that, without turning patriotic marketing into an enforcement trap.