Settles “Made In USA” Mislabeling Claims
Federal Trade Commission has settled “Made in USA” mislabeling
claims against five manufacturers of over-the-counter (“OTC”)
pain relievers. The FTC had claimed the five companies used imported
active ingredients (bulk aspirin, acetaminophen and ibuprofen) that
constitute a substantial portion of the total cost of the finished products.
The FTC alleged that the labeling at issue violated the Commission’s
standard that “Made in USA” claims be supported by evidence
establishing that the product is “all or virtually all” domestically
of the companies involved in the settlements make private label pain
relievers for major retailers such as Kmart, Wal-Mart, Target, Costco
and Walgreen’s. Apart from the “Made in USA” claims
on the labels, a number of the products prominently displayed the American
flag on the outer packaging. “American consumers are more sensitive
than ever to claims that a product is made in America. If a company
chooses to make an American-made claim, it should comply with the Commission’s
standard. Here, the high level and nature of the foreign content exceeded
any reasonable expectation of the meaning of ‘Made in USA,’”
said Howard Bates, Director of the FTC’s Bureau of Consumer Protection.
this case, the FTC based its allegations on the fact that the imported
bulk ingredients at issue comprised a substantial percentage of total
manufacturing costs and imparted the crucial analgesic quality to
the OTC products at issue. Each of the settlements prohibited the
companies from future misrepresentations on the extent to which their
OTC products contain domestic analgesics. The settlements provide
a “safe harbor”
that allows the “Made in USA” claim so long as all, or virtually
all, of the ingredients are made in the United States and all, or virtually
all, labor employed to manufacture the product is performed in the U.S.
The order does allow the companies to represent that products containing
imported active ingredients are “Processed in the United States
with Foreign Ingredients,“ if the product has been “significantly
processed” in the U.S.
The FTC rules do not set requirements for county-of-origin labeling
rules. Those rules are separately promulgated and enforced by the U.S.
Customs Service pursuant to the Tariff Act. However, the FTC has jurisdiction
over foreign origin claims on products and in packaging that are beyond
the disclosures required by Customs. The FTC also has jurisdiction over
foreign origin claims made in advertisements or other promotional materials.
Practice Note: Please contact us for a more complete analysis and explanation
of “Made in USA” and “country-of-origin” labeling
rules that may apply to your business.
Asserts Labeling Regulation Jurisdiction Over Website Content
response to a citizen petition from the Washington Legal Foundation
(“WLF”), the FDA has asserted its jurisdiction to regulate
certain information on companies’ Internet websites under its
statutory “labeling” authority. The April 16, 2001 letter
from the WLF asked the FDA to “formally adopt a rule, policy or
guidance stating that information presented or available on a company’s
Internet website, including hyperlinks to other third party sites, does
not constitute ‘labeling,’” as defined under the
Federal Food Drug and Cosmetic Act. The petition further asked for
a rule, policy or guidance from the FDA that such website information
may, but does not necessarily, constitute advertising. Alternatively,
the WLF requested that FDA exempt Internet information of food companies
from the labeling regulations.
FDA responded to the petition by letter on November 1, 2001, asserting
it had the power to regulate Internet sites. FDA justified its regulatory
authority by citing a 1948 Supreme Court case that which stated that
material “accompanying” a regulated article does not have
to be “attached” to the product to be considered “labeling.”
The court said it was the “textual relationship that is significant.” Types
of labeling that have been regulated under this standard include brochures,
booklets, films and audio recordings.
stressed that it is not seeking to regulate all websites and will look
at each issue on a case-by-case basis. For example, the FDA said it
would likely assert its labeling jurisdiction when a regulated company
used its own website to promote and sell a regulated product directly
from the site. On the other hand, FDA stated that third-party websites
providing product-specific information similar to traditional advertisements
in print media would not be regulated under the labeling rules. Further,
FDA said it saw no reason to treat the Internet information from food
companies any differently than other FDA-regulated industries. However,
FDA declined to issue any formal written rules or guidelines on this
policy. Companies wishing guidance on any specific Internet plans were
encouraged to consult with FDA prior to launching the promotion.
note: Zackler & Associates will be pleased to review your website
to determine whether it presents risks under this new FDA policy.
BEVERAGE AGREES TO ALTER WEIGHT- LOSS CLAIMS
South Beach Beverage Company (“SoBe”), a unit of PepsiCo,
has agreed to remove certain weight-loss claims on print advertisements
for its “SoBe Lean” beverage line after the National Advertising
Division of the Council of Better Business Bureaus Inc. (“NAD”)
raised concerns that the ads conveyed the message that drinking a SoBe
Lean beverage would, by itself, help consumers lose weight. The offending
print ads used phrases like “Fat Burning,” “Get Lean,
Get Results” and “Metabolic Enhancer.” NAD issued
the letter to SoBe because it was concerned that the weight loss claims
suggested a greater performance benefit than the low calorie products
INDICTED IN McDONALDS GAME FRAUD
U.S. Justice Department has indicted 21 people for allegedly defrauding
McDonald’s restaurants of more than $20 million by rigging its
game promotions. Jerome Jacobson, a regional security official with
Simon Marketing Inc., the company contracted by McDonald’s to
run the games, allegedly hatched the scheme in 1995.
overseeing the FBI investigation said wiretap evidence established
that Jacobson distributed winning game pieces to friends, relatives
or associates who would then claim themselves legitimate winners
of up to $1 million. The proceeds would then be distributed among
the conspirators. So far, the FBI has identified nine separate games
that were fixed by the Jacobson ring, including a “Monopoly” game and the “Who Wants
to Be a Millionaire” contest.
response to the allegations, McDonald’s terminated its relationship
with Simon Marketing and ran a $10 million “Instant Give-Away” promotion
over the Labor Day weekend.