On October 8, 2021, the Federal Trade Commission (“FTC”) settled its charges against mattress company Resident Home LLC and its owner for allegedly making unsubstantiated claims that DreamCloud mattress’ are “proudly made with 100 percent USA-made premium quality materials.” In reality, the DreamCloud mattresses are finished abroad, and in some cases, they are completely imported or contain significant imported materials.
The FTC settlement includes a $753,000 payment and incorporates the terms of a 2018 FTC settlement against Nectar Brand LLC, a subsidiary of Resident Home, that covered false “Assembled in USA” claims about imported mattresses. The FTC now alleges that Resident Home violated the earlier settlement because owner Reske stated under penalty of perjury that Resident Home did not make “Made in USA” claims about the DreamCloud mattress.
The settlement’s injunctive terms cover both qualified and unqualified “Made in USA” claims. For example, Resident Home is strictly prohibited from making unqualified “Made in USA” claims unless it can show that the product’s final assembly and processing, and all significant processing, occurs in the United States, and that all or virtually all of the product’s ingredients or components are sourced and made in the United States. For qualified “Made in USA” claims, the company must include clear and conspicuous disclosures about how much of the product contains foreign parts or processing. Products that make “Assembled in USA” claims must be last substantially transformed in the United States, have their principal assembly take place in the United States, and have substantial assembly operations in the United States. Additionally, the settlement requires the company to notify certain affected consumers within 30 days and to submit regular compliance reports.
In connection with the enforcement action, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, stated, “Baseless claims that products are made in the USA hurt not only consumers but also honest businesses that build their products here. Unfortunately, we see too many repeat offenders like Resident Home, but thanks to the FTC’s recently finalized Made in USA Labeling Rule, companies that abuse these labels will face civil penalties in addition to other relief. We will not hesitate to seek strong penalties against Made in USA fraud.”
As we previously reported, the FTC recently imposed a new “Made in USA” Labeling Rule, which became effective on August 13, 2021. The new rule codifies the FTC’s “all or virtually all” standard for unqualified “Made in USA” claims, and it allows the FTC to seek civil penalties of up to $43,280 per violation. It does not apply to qualified claims, which are still subject to Section 5 of the FTC Act. Levine’s statement highlights that this FTC enforcement invokes the new rule, and it should also put companies on notice that the FTC is on high alert for improper “Made in USA” advertising, particularly for repeat claims. Companies should carefully ensure that any “Made in USA” claims are properly qualified and/or substantiated to avoid scrutiny.