The ink was barely dry on our Monday blog when a new skirmish broke out (both on Twitter and in official records) in the FTC’s long-brewing remedy wars. This time the battle took place in another unlikely location – three Made in USA settlements.
First to set the scene. The FTC generals announced that they had accepted surrenders from three combatants who were attempting to sell products allegedly mislabeled as Made in USA. In one instance there were hockey pucks, “Patriot Pucks” that were patriotic if you happened to be a citizen of China and that were marketed as “The Only American-Made Hockey Puck.” In another instance, mattresses that were wholly imported from China were labeled as “designed and assembled in the USA.” And finally, backpacks and wallets were sold on websites that claimed to feature “American-Made Products” and the wallets were specifically promoted as “American Made.”
General Chopra protested that the victors had been too gracious in requiring nothing more than that the opposing sides lay down their arms and promise not to take up arms again. He noted that battles against deceptive Made in USA claims can be costly. Such products might be sold at a premium, consumers might purchase the products with a sense of false assurance that they may be of higher quality or safer than imported products, and companies that are legitimately making products in the U.S. and perhaps incurring higher costs to do so may find it harder to compete. General Chopra acknowledged that sometimes Made in USA combatants take up arms by mistake and quickly lay them down. And as we have written previously, Made in USA can be a trap for the unwary who mistakenly believe that because they manufacture their products in the United States they can label them as Made in USA. However, he argued that these foes were far from innocent and had a lot of blood on their hands. In these cases he believes that the surrender terms should be made of sterner stuff and that there should be a strong presumption against simply requiring combatants to cease and desist. Specifically, additional terms could include consumer redress, giving consumers the option to request refunds, and corrective advertising. Finally, in extreme cases, General Chopra suggested, the Commission should require an admission that the conduct had been unlawful (typically, admissions are not required). Admissions, General Chopra noted, can provide a powerful tool for other generals such as class action attorneys or competitors to seek the broader remedies that the Commission currently cannot, such as punitive relief.
Supreme Commander Simons along with General Slaughter argued that the surrender terms had been fair. They noted that if the combatants do take up arms again, the penalties would be severe and that in over twenty successful Made in USA battles, only one combatant had ever been accused of taking up arms again. They noted that consumer redress under the current rules of combat is difficult to achieve unless there is clear evidence that consumers paid more for the deceptively labeled products (this has been an issue in Made in USA class action litigation as well). But they noted that future combatants may not receive such merciful surrender terms. The current battle had begun with different generals leading the FTC and under different policies and so imposing more severe terms would be more difficult and might have required lengthy renegotiation. In the future, Made in USA combatants should likely expect the FTC to look more closely at whether consumers paid more or made their purchase decision believing that they were getting a product with perceived quality, health or environmental benefits because it was made in the United States. In such cases the FTC may look more creatively at remedies. For example, if the company has a generous return or refund policy, requiring the Company to give notice to consumers of the violation might spur consumers to take advantage of these policies.
Perhaps of greater significance, Supreme Commander Simons and General Slaughter noted that the FTC has already begun a “broad review of whether we are using every available remedy as effectively as possible” and that the FTC may well provide forward-looking guidance as to what new or previously infrequently used remedies the FTC intends to deploy. All of this is perhaps the clearest signal yet that companies should expect that when it comes to resolving consumer protection matters at the FTC, it is definitely not business as usual.