Glue Manufacturing Company Caught in a Sticky Situation: $1.2M Fine for False “Made in USA” Product Labels

Arent Fox
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Arent Fox

[co-author: Sarah Alberstein]
 

The Federal Trade Commission (FTC) issued a $1.2 million fine against glue manufacturing company, Chemence, Inc. for violating a 2016 consent order requiring the company to qualify its “Made in USA” claims in its promotional materials and product packaging.

To date, this is the largest fine issued over a “Made in USA” claim.

The 2016 Complaint and Consent Order Against Chemence, Inc.

In 2016, the FTC brought charges against Chemence, Inc. (Chemence) alleging that Chemence made deceptive US-origin claims on its product packaging and associated marketing materials, in violation of the Federal Trade Commission Act. Specifically, Chemence’s website, product packaging, and promotional materials included the statements, “Proudly Made in the USA” and “Made in the USA” in close proximity to American flags. The FTC alleged that through these statements, Chemence represented that its glue products, including the component raw materials, were all or virtually all made in the USA when, in fact, imported chemical components comprised up to 80% of the product and accounted for up to 55% of the manufacturing costs.

Ultimately, Chemence was allowed to continue to make its US-origin claims only if these claims appeared immediately adjacent to a clear and conspicuous disclaimer accurately conveying the extent to which the product contains foreign parts, ingredients, and/or processing. In 2020, however, Chemence was found to be in violation of this consent order and the FTC brought charges alleging deceptive US-origin claims once more.

The 2020 Consent Order and $1.2 Million Fine

In its 2020 complaint against Chemence, the FTC alleged that once again the company, and its CEO, included deceptive “Made in USA” claims on its product packaging and promotional materials. The FTC further alleged that these claims were made without the qualifying language required by the 2016 consent order. The FTC also alleged that in a 2017 Compliance Report to the FTC, Chemence’s CEO falsely declared under penalty of perjury that Chemence had changed its products’ labels to read “Made in USA with US and globally sourced materials.”

As a result of these charges, Chemence was fined $1.2 million; the largest monetary judgment to date for a “Made in USA” case. In addition to paying a fine, Chemence is subject to a new consent order that prohibits it from making any unsubstantiated product origin claims, and from making any US-origin claims without a clear and conspicuous disclaimer noting the extent of foreign component-parts and manufacture. The order also bars Chemence from making any US-origin claim without demonstrating that the products meet US assembly standards including, in part, that the products are substantially assembled and transformed in the US and that the products’ principal assembly is in the US The order further compels Chemence to file regular compliance reports with the FTC, and to notify its customers of the FTC proceeding and of its misleading US-origin claims.

Takeaways

“Made in the USA” claims should be carefully scrutinized to ensure they comply with key regulatory requirements. As this case makes clear, the FTC is closely monitoring these claims, including those made on product packaging, and has shown a willingness to pursue large fines against offenders.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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