Made in USA Labeling Rule

Labeling

 

Made in USA Labeling Rule

 

U.S. Origin Claims

 

Section 5 of the FTC Act

 

Consumer Law

 

Import

 

 

 

FTC Enforces New Made in USA Rule against Lithionics and Owner Steven Tartaglia for Falsely Labeling Foreign-Made Batteries as American

 

April 13, 2022

Republication

 

 

Order Requires Lithionics Battery LLC And Tartaglia To Pay Civil Penalty, Notify Consumers, and Stop Making Bogus Made in USA Claims.

The Federal Trade Commission (FTC) (…) used its authority under the Made in USA Labeling Rule, which took effect on Aug. 13, 2021, to bring a complaint against Lithionics Battery LLC and its owner, Steven Tartaglia for illegally misrepresenting that its lithium ion cells are made in the United States. The FTC’s complaint alleges that, since at least 2018, Lithionics has falsely labeled its battery products with an American flag image surrounded by the words “Made in U.S.A.,” often accompanied by the statement “Proudly Designed and Built in USA,” when these products are primarily made overseas. The Commission is asking the court to order Lithionics and Tartaglia to stop making deceptive Made in USA claims and pay a penalty for Lithionics’ past claims.

"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,” said Sam Levine, Director of the FTC’s Bureau of Consumer Protection. “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."

Florida-based Lithionics designs and sells battery products for recreational vehicles, amusement park rides, marine applications, and low-speed electric vehicles. Although the defendants have repeatedly represented that their battery, battery module, and battery management system products are all or virtually all made in the United States, in fact all Lithionics battery and battery module products incorporate imported lithium ion cells, and all Lithionics battery management systems incorporate significant imported components.

Photographs of products bearing this label and other Made in USA claims appeared on the company website, on its social media accounts, and in mail order catalogs, according to the complaint. YouTube videos featured Tartaglia and other employees printing Made in USA labels and putting them on Lithionics products. Lithionics published a chart in its marketing materials juxtaposing its own products with “imports,” and highlighting “advantages of Lithionics battery systems” over imported competing products. Lithionics also misrepresented in mail order catalogues that its products were made in the United States.

Under the Made in USA Labeling Rule, marketers are prohibited from labeling products as “Made in USA” unless the final assembly or processing, and all significant processing that goes into the products occur in the United States; and unless all or virtually all ingredients or components of the products are made and sourced in the United States. The rule also requires all “Made in USA” labels appearing in mail order catalogues to be truthful and non misleading.

The complaint also alleges that Tartaglia and Lithionics also violated Section 5 of the FTC Act since 2018 by misrepresenting that their goods are all or virtually all made in the United States.

Enforcement Action

The proposed order settling the FTC’s complaints against Lithionics and Tartaglia prohibit the conduct alleged in the complaint. Lithionics and Tartaglia must:

• Shut down bogus Made in USA claims.  Stop claiming that products are made in the United States unless they can show that the product’s final assembly or processing—and all significant processing—takes place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States.
• Pay civil penalties: Tartaglia and Lithionics must pay civil penalties of over $100,000, equal to three times Lithionics’ profits attributable to the illegal activity.

The FTC’s Enforcement Policy Statement on U.S. Origin Claims provides further guidance on making non-deceptive “Made in USA” claims. 

The Commission vote to authorize the staff to refer the complaint to the DOJ and to approve the proposed consent decree was 4-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Middle District of Florida.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when approved and signed by the District Court judge.

 

Related Cases

Lithionics Battery, LLC, In the Matter of

 

 

 

 

 

Hansen v. Newegg.com Americas, Inc., Docket B271477

Competition law: Unfair competition: Advertising: Consumer protection: Price: Origin: Geographic origin: Labeling of origin: Demurrer:

The complaint alleged that Newegg’s website advertised fictitious former price and discount information that was intended to induce customers to purchase its products (…) Hansen further asserted that he would not have purchased the products had he known the “true nature of the discounts.”

Newegg filed a demurrer arguing that Hansen lacked “standing to . . . assert any claim under the FAL, UCL or CLRA” because he had “suffered no loss of money or property as a result of Newegg’s actions.” According to Newegg, Hansen’s complaint showed he had received the “products he wanted for the prices he agreed to pay”; he had not alleged that “the products were different than what he wanted, were unsatisfactory in any way, or were worth less than what he paid for them.” Accordingly, he had suffered no form of “economic injury.”

Summary of Applicable Law:

Unfair competition law (Bus. & Prof. Code, § 17200) (UCL):

“The UCL’s purpose is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.) “In service of that purpose, the Legislature framed the UCL’s substantive provisions in “broad, sweeping language” and provided ‘courts with broad equitable powers to remedy violations’.” (Kwikset, 51 Cal.4th at p. 320.)

False advertising law (Bus. & Prof. Code, § 17500 et seq.) (FAL):

“Any violation of the false advertising law . . . necessarily violates the UCL.” (Kasky, supra, 27 Cal.4th at p. 950.) Section 17500 “proscribes not only advertising which is false, but also advertising which, although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public.” (Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, 679.) Section 17501 specifically limits the use of advertisements that purport to convey the former price of a product: “No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price . . . within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.” As used in section 17501, the term “‘former price’ . . . includes but is not limited to the following words and phrases when used in connection with advertised prices; ‘formerly –,’ ‘regularly –,’ ‘usually –,’ ‘originally –,’ ‘reduced from ___,’ ‘was ___ now ___,’ ‘___% off.’” (4 Cal. Code Regs., § 1301.) (…) Our Legislature has adopted multiple statutes that specifically prohibit the use of deceptive former price information and misleading statements regarding the amount of a price reduction. (See § 17501; Civ. Code, § 1770, subd. (a)(13).) These statutes make clear that, contrary to Newegg’s assertions, our Legislature has concluded “reasonable people can and do attach importance to a product’s former price in their purchasing decisions.” (Kwikset, supra, 51 Cal.4th at p. 333 [statutory prohibition on use of deceitful “Made in U.S.A.” labels shows that reasonable consumers do rely on that form on information]; see also id. at p. 329 [Legislature’s prohibition on deceitful Made in the U.S.A. labels demonstrates “the materiality of this representation”].) As noted in Hinojos, this conclusion is supported by empirical research showing that the presence of a higher original price affects consumers’ perceptions “about the product’s worth,” and increases their willingness to buy the product. (Hinojos, 718 F.3d at p. 1106.)

Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.) (CLRA)

The CLRA makes unlawful . . . various “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” The CLRA sets forth 27 proscribed acts or practices. (Civ. Code, § 1770, subd. (a)(1)-(27).) (Veera v. Banana Republic, LLC (2016) 6 Cal.App.5th 907, 915 (Veera).) One of those “proscribed acts” is “making false or misleading statements of fact concerning . . . the existence of, or amounts of, price reductions.” (Civ. Code, § 1770, subd. (a)(13).)

(Examples: are prohibited: To some consumers, processes and places of origin matter.  In particular, to some consumers, the ‘Made in U.S.A.’ label matters. (Kwikset, supra, 51 Cal.4th at pp. 328-329.) The Court noted that the “Legislature had recognized the materiality of this form of representation by specifically outlawing deceptive and fraudulent ‘Made in America’ representations.” (Id. at p. 329 (citing § 17533.7) [prohibiting deceitful representations that a product was “Made in the U.S.A.”] and Civ. Code, § 1770, subd. (a)(4) [prohibiting deceptive representations of geographic origin].) (…) the Legislature has also specifically prohibited false former price advertising, as it did false labeling of origin. (See § 17501, Civ. Code, § 1770, subd. (a).)

(…) Kwikset, however, held that a consumer’s decision to pay more for a product than he or she would have but for the misrepresentation is itself a form of economic injury: In the eyes of the law, a buyer forced to pay more than he or she would have is harmed at the moment of purchase.

(…) The Supreme Court has concluded that to establish standing under California’s UCL and FAL, a consumer need only allege that he or she relied on a misrepresentation when purchasing the product, and that he or she would not have purchased the product but for the representation. (Kwikset, supra, 51 Cal.4th at p. 317.)

(California Court of Appeal, Second Appellate District, July 31, 2018, Hansen v. Newegg.com Americas, Inc., Docket B271477, Certified for Publication, Acting P.J. Zelon)

Le demandeur soutient que le site Internet de l’entreprise défenderesse contenait des prix avant rabais qui ne correspondaient pas à la réalité, dans l’intention d’inciter le consommateur à l’achat. Il allègue en outre que sans cette publicité, il n’aurait pas acheté de produits à la défenderesse.

Celle-ci soutient pour sa part que la demande doit être rejetée d’entrée de cause, le demandeur n’ayant pas subi de dommage économique : les allégués de la demande démontreraient que le demandeur aurait reçu les produits qu’il voulait pour des prix qu’il avait consenti à payer, sans prétendre avoir reçu d’autres produits, des produits défectueux, ou de moindre valeur que la somme effectivement payée.

Cette affaire est jugée en application du droit californien, et les dispositions topiques sont les suivantes :

Loi contre la concurrence déloyale (Bus. & Prof. Code, § 17200) : il est rappelé ici que la loi utilise des formulations non restrictives, attribuant ainsi aux Tribunaux des compétences de décision étendues.

Loi contre la publicité mensongère (Bus. & Prof. Code, § 17500 et seq.) : toute violation de dite loi implique nécessairement violation de la loi contre la concurrence déloyale. Dite loi proscrit non seulement la publicité mensongère, mais aussi la publicité qui ne l’est pas mais qui a la capacité, la possibilité, ou la tendance de tromper ou d’induire en erreur le public. La Section 17501 de la loi limite spécifiquement la publicité d’un ancien prix : un ancien prix ne peut pas apparaître, sauf si cet ancien prix correspondait au prix du marché dans les trois mois antérieurs à la publicité, ou sauf si la publicité indique clairement la date à laquelle l’entreprise pratiquait effectivement cet ancien prix.

Le législateur a considéré que dans sa décision d’achat, le consommateur attachait de l’importance à l’ancien prix.

La loi « consumers legal remedies » (Civ. Code, § 1750 et seq.) : dite loi consacre l’illicéité de diverses méthodes déloyales ou trompeuses, soit avec l’objectif de vendre (biens ou services), soit qui résultent effectivement en une vente (biens ou services). La loi décrit 27 pratiques illicites. L’une de ces pratiques consiste à déclarer de manière fausse ou trompeuse des faits relatifs à l’existence ou au montant d’une réduction de prix. D’autres pratiques consistent notamment à tromper quant à l’origine géographique d’un produit.