Where's It From? Manufacturers Face Suits for Deceptive 'Made In' Claims

Although consumers may not notice how much their perception is altered by country-of-origin labels, research shows that shoppers’ purchases are largely affected by their beliefs about the countries where items are said to originate. Four out of five Americans, for instance, notice “Made in the USA” labels, and a majority of these shoppers will purchase items after seeing that America is the country of origin, according to a survey from Perception Research Services International. In contrast, the same survey found that more than 60 percent of Americans were less likely to purchase items after noticing “Made in China” labels, citing concerns over the safety and quality of the products.

Recognizing that these labels influence shoppers’ purchases, manufacturers often use “made in” labels to communicate the quality of their items, as well as the company’s values, and to ultimately entice consumers. But, there are multiple laws that manufacturers must follow when placing country-of-origin labels on their products. If a company lies about its products’ country of origin or suggests that its products are made elsewhere – either through labels or images of, say, the American flag – it may end up at the center of a lawsuit.

Now, some may think that these class actions are frivolous – and it’s true that some are. For instance, Chobani is currently facing a class action lawsuit that alleges its Greek yogurt misleads consumers because it isn’t made in Greece. Similarly, Beck’s brewery is accused of charging a premium for its beer, even though it’s no longer imported from Germany or made with German ingredients.

On the other hand, there are large corporations being targeted over their country-of-origin labels because they are allegedly attempting to take advantage of shoppers who want to support certain industries. Lawsuits targeting “Made in the USA” claims specifically touch on this deception, as many Americans strive to support the country’s job force in a post-recession economy.

Under federal law, “virtually all” of the components in products with “Made in the USA” labels must come from the United States. This means that “all significant parts, processing and labor that go into the product must be of U.S. origin. Products should not contain any – or should contain only negligible – foreign content,” according to the Federal Trade Commission (FTC).

While federal law gives companies some leeway when labeling their products, certain states have stricter regulations. California, for instance, has the Business & Professions code, which mandates that:

“It is unlawful for any person, firm, corporation or association to sell or offer for sale in this state any merchandise on which merchandise or on its container there appears the words ‘Made in the USA,’ ‘Made in America,’ ‘USA,’ or similar words when the merchandise or any article, unit or part thereof, has been entirely or substantially made, manufactured or produced outside of the United States.”

Essentially, this means that all parts of a product sold in California and labeled “Made in the USA” must come from America.

In June 2014, a shopper in California filed a class action lawsuit against the clothing company Citizens of Humanity, alleging that it is violating this state law by labeling some of its jeans “Made in the USA.”

Not far from the heart of the premium denim industry in Los Angeles, Citizens of Humanity turns out roughly one million pairs of jeans per year, which can be found in upscale stores, including Nordstrom and Macy’s, and often retail for between $168 and $258 per pair. When speaking with the LA Times in 2011, Citizens of Humanity founder and chief executive Jerome Dahan commented on the quality, prices and origin of the company’s jeans. According to Dahan, the company would be able to cut its costs by 30 to 40 percent if it were able to make the same jeans, with the same fabric and washes, elsewhere; however, the LA Times noted that “Dahan’s experience has convinced him that it’s just not possible to manufacture with his exacting specifications in China, Mexico or Malaysia, where labor and sourcing costs are lower.”

Yet, some of the company’s “Made in the USA” jeans allegedly contain fabric, thread, buttons and/or zipper components that are made outside of the United States, according to the class action. The plaintiff claims that this not only violates California law, but also deceives shoppers who want to support the American economy and standards these companies must meet. According to the lawsuit, “U.S.-made component parts are subject to strict regulatory requirements, such as environmental, labor and safety standards,” but the plaintiff claims that she was prevented from supporting these standards when she purchased the allegedly mislabeled jeans.

In August 2014, Citizens of Humanity responded to the lawsuit and requested that the case be dismissed, arguing that federal law should trump state law in this case. Under federal law, the jeans could still be labeled “Made in the USA” with the foreign-made component parts; however, the plaintiff disagreed, arguing that preemption can only be used if simultaneous compliance with both state and federal law is impossible, which wasn’t the case.

While the judge is still reviewing the motions, it doesn’t look good for Citizens of Humanity. As the plaintiff pointed out at the end of her response to the company’s argument, Citizens of Humanity is “willing to accept money from California consumers but apparently unwilling to comply with California’s labeling laws while doing so.”

But, what about some quintessentially “all-American” brands? Both Weber and Craftsman have been targeted over their allegedly misleading “made in” labels, and Ford may even be next.

In 2011, Weber agreed to settle a class action lawsuit that alleged some of the company’s grills and grilling accessories labeled “Made in the USA” were actually manufactured and/or contained component parts manufactured in China and Taiwan. Under the settlement, Weber agreed to label products that contain foreign-made component parts as “Made in the USA, incorporating globally sourced component parts” in the future.

Similarly, Craftsman continues to face a lawsuit over the “Made in the USA” labels on some of its tools. Despite using parts that were entirely or substantially made outside of the United States, the plaintiff alleges that Craftsman continues to stamp some of its tool with these labels and misleads consumers about the origination of these products.

This is not to mention that Ford, which is about as American as they come, may be subject to a similar lawsuit. In 2011, the non-profit organization Made in the USA Foundation filed a complaint with the FTC over one of Ford’s commercials. According to the organization, Ford allegedly aired a radio commercial for its Edge model, which is made in Canada, suggesting that the vehicle was made in the United States. In the commercial, a customer claims that he wasn’t sure whether the Ford Edge would be right for him and refers to it as an “American car.” The non-profit organization said that this alleged false advertising is reinforced because the company also removes country-of-origin stickers from its display vehicles during auto shows in violation of the American Automobile Labeling Act.

Whether consumers want to purchase foods from specific countries or are just trying to support their local economy, country of origin matters. But when companies try to mislead consumers about country of origin to influence their shopping decisions, they may end up facing legal action for these deceiving practices.

Resources:

Marty, et al. v. Anheuser-Busch Companies, LLC., case number 13-cv-23656, U.S. District Court for the Southern District of Florida – Complaint

Stoltz, et al. v. Chobani LLC, case number 1:14-cv-03827 in the U.S. District Court for the Eastern District of New York - Complaint

Clark v. Citizens of Humanity, LLC, et al., case number 14-cv-1404, U.S. District Court for the Southern District of California – Complaint & Memo in Response to Defendants’ Motion to Dismiss

“Weber Deals with Made-in-USA Fallout,” April 5, 2012. Home Channel News.

Greenfield v. Sears, Roebuck, case number 1:05-cv-21297, U.S. District Court for the Southern District of Florida

In the Matter of Ford Motor Company’s Radio Advertisement for the Ford Edge Stating that it is an American Car when it is Imported from Canada, Petition for the Issuance of a Complaint