Proud that your products are “Made in the USA”? Before you wave the flag, know that an unqualified Made in USA claim means that your product must be “all or virtually all” made in the United States, and the Federal Trade Commission has bolstered its enforcement authority over deceptive Made in USA claims with a new proposal to allow civil penalties for violations of its Made in the USA standards.

We previously blogged about recent Made in USA actions and the FTC’s September 2019 Made in USA workshop to evaluate updates to the FTC’s long-standing Made in USA Enforcement Policy. The Enforcement Policy provides that to substantiate an unqualified Made in USA claim, a product must be wholly domestic or all or virtually all made in the United States — meaning that “all significant parts and processing that go into the product are of U.S. origin.” Qualified claims — for example, “Made in USA from imported leather” — may be acceptable if they include clear and conspicuous disclosure of the extent to which the product contains foreign parts, ingredients, components, and/or processing.

Continue Reading Proposed FTC Rule to Allow Civil Penalties for Deceptive “Made in USA” Claims

The use of country of origin claims in advertising, and in particular “Made in USA” claims, has been around for a long time — many companies want to showcase products that have been made in the United States by marking them with the phrase or using the Stars and Stripes in advertising. Before making claims like “Made in America” or “Built in the USA,” though, sellers must understand the strict federal and state laws and standards for making such claims. In September 2019, the Federal Trade Commission held a public workshop “to consider ‘Made in USA’ and other types of U.S.-origin claims and in particular sought comments from the public on whether it should update its “Made in USA” Enforcement Policy.[1] While the Commission has not yet updated its Policy, it recently took action on two “Made in USA” cases, FTC v. Williams‑Sonoma and J-B Weld Company; moreover, J-B Weld is entangled in an ongoing class action in California, which has its own “Made in USA” standard. These cases show that the “Made in USA” regulation continues to be something sellers should pay close attention to when it comes to compliance.

“Made in USA” Background

Under Section 45a of the FTC Act, a product that is advertised or offered for sale with a “Made in USA,” “Made in America,” or an equivalent label must have domestic origins that are consistent with orders and decisions of the FTC. See 15 U.S.C. § 45a. The FTC’s Enforcement Policy provides that, to substantiate an unqualified “Made in USA” claim, a product must be wholly domestic or all or virtually all made in the United States. Specifically, “[a] product that is all or virtually all made in the United States will ordinarily be one in which all significant parts and processing that go into the product are of U.S. origin.”

Departing slightly from the “all or virtually all” standard, California law provides that companies cannot advertise Made in USA “if the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” Cal. Bus. & Prof. Code § 17533.7. The statute also provides a 5% safe-harbor provision, providing that “[t]his section shall not apply to merchandise made, manufactured, or produced in the United States that has one or more articles, units, or parts from outside of the United States, if all of the articles, units, or parts of the merchandise obtained from outside the United States constitute not more than 5 percent of the final wholesale value of the manufactured product.”

Continue Reading “USA, USA, USA…” – Recent Updates on “Made in USA” Claims

In the wake of the COVID-19 pandemic, many small businesses and restaurants have been forced to close or to provide only limited services to customers. To ensure a sustained income stream, some businesses have been emphasizing the sale of gift cards or gift certificates—and the media have been encouraging consumers to support their favorites by pitching gift cards as the “war bonds” of the coronavirus pandemic. But while buying and selling gift cards can be a win-win for both consumers and the businesses issuing them, gift card issuers must remember to comply with federal and state gift card laws that impose restrictions on expiration dates and fees, require specific disclosures, and impose other regulatory requirements. With the upsurge in gift card activity, it’s a good time to review these laws and restrictions to ensure one does not end up as the target of a Federal Trade Commission or state attorney general inquiry or an expensive class action lawsuit.

Federal Regulation of Gift Cards

The Credit Card Accountability Responsibility and Disclosure Act (“CARD Act”) was signed into law on May 22, 2009. Although the name suggests this law pertains only to credit cards, it also applies to gift cards, stored value cards, and general-use prepaid cards that are sold or issued primarily for personal, family, or household use. Section 401 of the CARD Act requires specific disclosures regarding expiration dates and fees, limits dormancy, inactivity, and service fees, and establishes a minimum expiration date for these cards.

Continue Reading Are Gift Cards the War Bonds of the COVID-19 Era? Maybe So, but Issuers Still Need to Consider the Consumer Protection Laws

Times of national crisis tend to trigger an uptick in charitable solicitations and charitable giving. And for-profit businesses, including recognizable retail brands, want to do all they can to help as well. As the COVID-19 crisis unfolds, with its far-ranging economic and societal repercussions, many brands are engaging in coronavirus-related commercial co-venture (CCV) activities and cause marketing promotions, advertising to consumers that purchase or use of their product or service will benefit a charity or a charitable purpose.

Although the COVID-19 pandemic has resulted in a delayed federal income tax filing deadline, mortgage relief programs, and other types of suspended governmental requirements, the regulations applicable to charitable sales promotions and the commercial coventurers who carry them on remain fully in place. In some ways, compliance with these rules—particularly disclosure requirements—is more important than ever given the increased desire to act now and do good. There is no “pandemic exception” for compliance with states’ CCV laws, or state and federal truth‑in-advertising laws. Indeed, while states may accommodate reasonable filing or registration delays caused by COVID-related business interruptions and the FTC similarly has acknowledged the strain on all businesses right now, these regulators will also crack down on marketing abuses that take advantage of consumers’ generosity or fear during the pandemic. For brands wanting to capitalize on the moment, keep in mind the following basics when it comes to conducting a compliant campaign:

Continue Reading Charitable Sales Promotion Rules and Best Practices: Be Sure to Cross Your T’s and Dot Your I’s During the Pandemic

Following the Trump administration’s declaration of a public health emergency at the end of January, numerous states have successively declared states of emergency due to the coronavirus health crisis.  These declarations triggered many states’ price gouging laws, which typically outlaw the sale or rental of essential goods and services, for example, water, toilet paper, protective masks, hand sanitizer, fuel, power, etc., at an unconscionable or unreasonably high price.  In states without price gouging laws, lawmakers are drafting legislation prohibiting similar acts and are using state consumer protection laws to prosecute price gouging behavior in the interim.  Nationwide, state attorneys general are aggressively enforcing price gouging laws.  Moreover, on March 25, 33 state attorneys general sent letters to the CEOs of Amazon, Craigslist, and several other online platforms calling on the companies to take measures to prevent price gouging on their online platforms.

While the concept of price gouging is not a new one — many of these laws have been on the books for years and were used to prosecute bad actors after events such as 9/11, hurricanes, and even particularly bad flu years — what is unusual now is the national scope of the coronavirus emergency and the level of involvement of the federal government.  On Monday, March 23, the president signed an executive order to prevent hoarding and price gouging of crucial medical supplies. It authorizes criminal prosecution of anyone whose purchases exceed reasonable limits. Attorney General Barr concurrently announced that the Justice Department has already launched hoarding investigations to carry out the order.  Add this to the (majority of) states pursuing the issue along with the online platforms, and the risk that accompanies violation of the price gouging laws increases significantly — particularly if you sell medical supplies and equipment. 
Continue Reading Caveat Venditor: Coronavirus Emergency Declarations Trigger Patchwork of Price Gouging Laws, Executive Order, Investigations

We’ve all seen the COVID-19 fall-out in the past few weeks—indeed, we’ve all lived the fall-out.  But the promotions, events, and hospitality industry has been particularly hard-hit by the recent restrictions on public gatherings and travel. From Coachella to SXSW to the Olympics, events around the globe have been cancelled, rescheduled, or postponed —sometimes indefinitely—due to the pandemic.  These postponements and cancellations have put companies sponsoring promotions such as sweepstakes and contests, events, and ad campaigns linked to these postponed events in a difficult position.  How do companies protect themselves from potential liability associated with the postponement or cancellation of a sponsored event?  Can one change the terms and conditions of sweepstakes associated with an event to when the event is postponed or cancelled?  Those of us familiar with contract law understand how important a well-drafted Force Majeure clause can be in this situation.  But one doesn’t always have a well-drafted Force Majeure clause when dealing with a new pandemic.  And, as is often the case, sweepstakes and prize promotions rules (and related documents) are a form of contract, but they are a type of agreement that is regulated a bit differently from a standard commercial contract between sophisticated business entities that have negotiated in good faith.  Let’s unpack that.

Continue Reading Coronavirus Cancellations: How Do They Affect My Promotion?

The FTC has issued a Proposed Notice requesting public comment on whether to make changes to its Endorsement Guides (“Guides”) as part of the agency’s periodic retrospective review. This review will serve as a key opportunity for industry participants to shape what happens next by showing what they are seeing in the marketplace when it comes to endorsements and testimonials, consumers’ understanding of them, and the effects of new technology and platforms.

While the FTC’s standard practice is to review its rules and guides every 10 years, this review promises to be anything but standard. This is particularly true considering that FTC Commissioner Chopra weighed in with a separate statement, noting that he hopes that the Commission will consider taking steps beyond the issuance of voluntary guidance, including codifying elements of the existing Endorsement Guides into formal rules that could trigger civil penalties and damages. He also suggested that the FTC develop requirements for technology platforms that facilitate and profit from influencer marketing and specify the requirements that companies must adhere to in their contractual arrangements with influencers. The Guides were first issued in 1980, and the Commission last sought public comment on them in 2007. Since that time, endorsement-related practices (and the media where they appear) have changed dramatically, with new platforms and apps emerging that provide new ways for companies and their endorsers to reach consumers. In an attempt to keep up with the changing times, the FTC issued an FAQ-type of document, Endorsement Guides: What People are Asking, and has modified it multiple times over the years.

Continue Reading FTC Aims to Shake Up Endorsements, Seeks Public Comment on Its Endorsement Guides

The Federal Trade Commission held a workshop yesterday in Washington, D.C., to discuss possible updates to the COPPA Rule, which implements the Children’s Online Privacy Protection Act (“COPPA”). COPPA was originally enacted in 1998 and regulates the way entities collect data and personal information online from children under the age of 13. The Rule hasn’t been updated since 2013, and the intervening years have produced seismic technological advances and changes in business practices, including changes to platforms and apps hosting third-party content and marketing targeting kids, the growth of smart technology and the “Internet of Things,” educational technology, and more.

For the most part, FTC staff moderators didn’t tip their hand as to what we can expect to see in a proposed Rule revision. (One staff member was the exception, whose rapid-fire questions offered numerous counterpoints to industry positions, so much so that the audience would be forgiven for thinking they were momentarily watching oral argument at the Supreme Court.) Brief remarks from Commissioners Wilson and Phillips staked out their positions more clearly, but their individual views were so different that they too offered little assistance in predicting what a revised Rule may look like. Commissioner Wilson opened the workshop by sharing her own experience as a parent trying to navigate and supervise the games, apps and toys played by her children, and emphasized the need for regulation to keep up with the pace of technology to continue protecting children online. Commissioner Phillips also referred to his children at one point, but his remarks warned against regulation for regulation’s sake, flagged the chilling effect on content creation and diversity when businesses are saddled with greater compliance costs, and advocated a risk-based approach.

Continue Reading FTC’s COPPA Rule Workshop: A Summary of Priorities from Advocates and Industry, and the FTC’s Poker Face

Many in the industry are familiar with the following scenario. A young gamer, grinding tirelessly for untold hours perfecting her skill, honing her strategy, finally qualifies for an esports tournament. For that gamer, the true hard work begins after qualification. She now has to try to convince her parents to agree to let her participate, which may include travel (though compensated) to a far off location. In many cases, the first time the parents become aware that their child even entered a tournament (much less won an all-expense paid trip to an esports tournament) is this conversation—after the child has already been offered compensation to travel to and compete in the tournament.

If you are a game publisher, tournament organizer, or otherwise involved in the logistical chain of events described herein, there may be a big problem. The collection and use of data provided by children is regulated in the United States by the Children’s Online Privacy Protection Act (“COPPA”). COPPA is designed to protect the privacy of children by establishing certain requirements for websites that market to children. Most notably, COPPA requires website operators to obtain “verifiable parental consent” before collecting personal information from children. The FTC operates under the assumption that if children are the target demographic for a website, the website must assume that the person accessing the website is a child, and proper consent must be obtained. This assumption exists even if the website did not start with children as the target audience.

Continue Reading Update Required for Youth Esports

The 2019 National Advertising Division (“NAD”) closed out its Annual Conference with an update from Laura Brett, the Director of the NAD, and Alexander Goldman, an attorney with the NAD. The update focused on three main points: NAD statistics from the past year, NAD practice pointers, and the future of the types of cases being brought at NAD.

Statistics

First, competitor challenges are trending toward a one third growth for 2019 as compared to 2018, while simultaneously decreasing the time to decision on challenges from 113 days on average to 100 days. Needless to say, the NAD is committed to promptly moving cases through the process. Ms. Brett made a point to bestow some well-deserved praise on her team for their hard work throughout the last year.

Major product categories subject to NAD challenges continue to be: appliances/consumer electronics/household products, drugs and dietary supplements, food and beverage, and telecom/entertainment. Whereas some categories are noticeably absent from NAD proceedings including automobiles, clothing and cosmetics, industrial products/office supplies, and travel/lodging. In addition, Mr. Goldman made the point that there remains a noticeable lack of service-based challenges at NAD despite services accounting for a large part of the U.S. economy.

Continue Reading An NAD Update