Advertising & Labeling

FTC Settles “Made In USA” Mislabeling Claims

The 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 manufactured.

All 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.

In 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.

 

FDA Asserts Labeling Regulation Jurisdiction Over Website Content

In 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.

The 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.

FDA 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.

Practice note: Zackler & Associates will be pleased to review your website to determine whether it presents risks under this new FDA policy.

 

SoBe 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 could deliver.

 

21 INDICTED IN McDONALDS GAME FRAUD

The 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.

Prosecutors 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.

In 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.