FTC Enforcing Made in USA Labeling

Apr. 19, 2022
By: Chaney A. Finn

The Federal Trade Commission (FTC) is an independent government agency that facilitates competition while protecting and educating consumers. The agency implemented a rule in 2021 that would penalize marketers who improperly claim Made in USA on their product labels, seeking civil penalties up to $43,280 per violation. Narrowly passing by a 3-2 vote, the rule prohibits marketers from including unqualified Made in USA claims on labels unless: 1) final assembly or processing of the product occurs in the United States; 2) all significant processing that goes into the product occurs in the United States; and 3) all or virtually all ingredients or components of the product are made and sourced in the United States. The rule only applies to labeling claims and is unrelated to country-of-origin labels. The rule is intended to protect against product infringement for small businesses that lack the resources to protect themselves against imitators with Commissioner Rohit Chopra stating, “The final rule provides substantial benefits to the public by protecting businesses from losing sales to dishonest competitors, and protecting families seeking to purchase American-made goods.”

In the agency’s first enforcement action under the new rule, the FTC is alleging that Lithionics Battery falsely claimed their battery and battery module products were made in the U.S.A. since 2018. The products were consistently labeled with an image of the American flag with “Made in U.S.A.” along with the statement “Proudly Designed and Built in USA” for their batteries used in recreational vehicles, amusement park rides, and low-speed electric vehicles, among others. The products bearing this label were advertised on the company’s website, social media accounts, YouTube videos, and in mail-order catalogs. The FTC alleged that all of these products were primarily produced overseas, mostly in China, thereby violating the Made in USA labelling rule.

The FTC proposed a settlement that would require Lithionics to discontinue claiming the products are made in the U.S.A. unless the company can prove that the products meet the labelling requirements. Additionally, Lithionics and the founder are to pay $100,000 in civil penalties, which is three times the profits made from the alleged false claims. The founder, Steven Tartaglia, was also named as a defendant alongside the company as he had sole responsibility over the marketing and labeling decisions.

The enforcement from the FTC comes as automakers are transitioning to electric vehicles and ramping up efforts to secure domestic battery manufacturers to qualify for free-trade provisions and other domestic production incentives. Director of the FTC’s Bureau of Consumer Protection, Sam Levine stated, “As our country works to onshore production of lithium-ion batteries, it’s critical that honest businesses have a chance to compete, and that consumers can buy American. Falsely labeling batteries as made in the United States is against the law, and the FTC is using its new Made in USA rule to make sure this misconduct comes with a price.”

If you have any questions or would like more information about the Made in USA rule or labelling, do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.