It’s the latest enforcement effort by the Federal Trade Commission, which has gotten tougher on companies that purposely mislabel their imported goods.
For years, companies that used deceptive labeling to promote their imported products as Made in USA would get nothing more than amounts to a slap on the wrist.
But the Federal Trade Commission (FTC) has become more aggressive in its pursuit of country of origin labeling cheaters in recent years, leveling heavy fines on companies that attempt to deceive the American public.
The most recent violation was announced earlier this month against motocross and ATV parts maker Cycra and its officer Chad James for falsely claiming the company’s products were manufactured in the USA. Not only was Cycra caught red-handed, but the company is subject to heavy monetary fines for its deception, thanks to the new policies afforded the FTC to clamp down on labeling cheaters.
The FTC alleges that North Carolina-based Cycra imported parts and equipment made in other countries and packaged products with false “Made in USA” labels, in violation of the FTC Act and the Made in USA Labeling Rule.
Cycra’s website described products as “proudly designed, developed, and manufactured in Lexington, North Carolina” and the company’s Instagram and Facebook pages referred to items as “proudly made in the USA” and “Made in the USA,” often accompanied by images of the American flag.
But according to the FTC, many of the items promoted as Made in the USA weren’t all or virtually all made in the United States, which the FTC Act and Made in USA Labeling Rule requires if companies want to represent their products as American-made.
For example, Cycra imported at least 30 shipments of parts or accessories from Asia or Europe. In some instances, Cycra allegedly imported finished products packaged for sale with Made in USA labels. And the complaint against the company charges that in at least two instances Cycra imported shipments of finished products from Taiwan that were already packed with those false Made in USA labels.
The FTC issued an $872,577 monetary judgement against Cycra and the company must notify customers who purchased these products that they were imported from Taiwan. The fine is partially suspended based on an inability to pay; Cycra and James will be required to pay $221,385.66.
The Cycra case is the latest that the FTC has taken meaningful action against since 2021, when the FTC announced there would be a rule change that would allow for substantial monetary penalties for companies that purposely mislabel a product as Made in USA.
Up until a few years ago, the FTC would often investigate false Made in USA labeling claims and announce its findings, but no financial penalties would be issued. In some cases, companies didn’t even have to admit fault.
Thankfully, that’s changed in recent years. In one prominent case, the FTC fined retail giant Williams Sonoma $1 million for mislabeling imported products across its wide array of brands, including Pottery Barn and Rejuvenation. The company claimed its Pottery Barn Teen organic mattress was “crafted in America from local and imported materials” but they were actually made in China.
Several other Williams Sonoma products sold by Pottery Barn and Rejuvenation were also later to be found mislabeled. The company strongly pushed “Made in the USA” on its website and email marketing and even put together a video about Pottery Barn furniture being “Made in America.” But according to the FTC, the products were “wholly imported or contain significant imported materials or components. Therefore, Williams Sonoma allegedly deceived customers with its broad claims that all items in these product lines are all or virtually all made in the United States.”
Retailers like Williams Sonoma know that “Made in USA” is an attractive selling point. American consumers have indicated in polling that they want to purchase products that are Made in America.
In 2021, Alliance for American Manufacturing (AAM) President Scott Paul said, “When wrongdoers making fraudulent claims go unpunished, it robs consumers of their spending dollars, and it hurts U.S. manufacturers who have invested in our nation. The Made in USA label isn’t a PR tool. It’s a way to recognize the hard work and dedication required of American manufacturers and their employees who make their products in our local communities.”
AAM applauds the FTC for aggressively investigating companies that look to circumvent U.S.-made rules and regulations and taking meaningful action when appropriate. American consumers often look for that Made in America label, and we must do everything possible to ensure they can be confident in it.