Many companies take pride in the geographic origin of their products (e.g., cars that are “Made in the USA”), or in their products’ capacity to evoke a certain region (e.g., “Hawaiian style” pizza). Claims about the origin or provenance of products seem to pose a relatively low risk of consumer deception: these typically do not implicate health or safety, nor do they convey anything concrete about the products’ qualities. Nevertheless, these “origin” and “provenance” claims have drawn scrutiny from the Federal Trade Commission, state regulators, and – most recently – class action plaintiffs’ lawyers. Below, we’ve highlighted some guidance from regulators and the courts that may be helpful to manufacturers when they consider highlighting their geographic origins in their product branding.
Federal Standard on “Made in the USA” Claims
When it comes to “Made in the USA” claims in product labeling and advertising, manufacturers have the benefit of regulations from the FTC, portions of which have been in place for over two decades. The FTC guidance provides that any product labeled or advertised as “Made in the USA” – or a similar claim, such as “Proudly American” or “Manufactured in the USA” – must be “all or virtually all” U.S.-made, which is to say that “all significant parts and processing” must be of U.S. origin. In assessing whether a part is “significant,” the FTC considers not only the quantity of foreign material relative to the product overall, but also the costs of any foreign materials and their relative prominence in the product. For example, if truffle crackers are marketed as being “100% American,” the FTC may look askance at the use of French truffle extract in the product, given the prominence of that ingredient and the likelihood that it accounts for a disproportionate share of the manufacturing costs. By contrast, using a pinch of wheat germ from a foreign source would be very unlikely to raise any concerns under the FTC guidance.
The FTC guidance similarly provides that a product should be labeled or advertised as “Assembled in the USA” only if the “substantial transformation” of the product into its saleable format occurred in the United States. “Substantial transformation,” according to the FTC, is the process by which a “new and different product” results from its constituent parts. A “screw driver” assembly—merely nailing together two foreign components, for example—would probably not qualify as a “substantial transformation” under the FTC standard.
Although this guidance applies to products whose labeling or advertising clearly communicates American origin through words or images, it does not apply to products with evocative brand names (such as “American Eagle”). Patriotic imagery could be a mixed bag, however, as the FTC guidance specifically calls out U.S. flags, outlines of U.S. maps, and similar imagery as possibly making implied origin claims. Manufacturers who make U.S. origin claims should examine their supply chains with the FTC guidance in mind, and should maintain records or certifications to substantiate these claims in case of inquiries from the agency.
The States Chime In
As is often the case, however, federal regulators are not the only ones to have chimed in. Some state regulators have purported to impose their own standards for both “Made in the USA” claims and claims suggesting that a product originated in a particular state.
California originally made it unlawful to put a “Made in the USA” claim on a product containing any foreign components, no matter how negligible. Cal. Bus. & Prof. Code § 17533.7. Although many have correctly pointed out that this standard is preempted by the contrary FTC regulation, no court has yet held that that is the case. However, perhaps in recognition of these concerns about preemption, California has since amended the statute to permit the claim on products in which the foreign components account for less than 5% of the final wholesale value of the product -- or less than 10%, if the manufacturer can show that the foreign component could not be produced or obtained from a domestic source. See Cal. Bus. & Prof. Code § 17533.7(c). Applying this new standard, courts have dismissed consumer protection cases where the plaintiff failed to plead specific facts establishing that the allegedly foreign-sourced materials exceeded these thresholds. See Fitzpatrick v. Tyson Foods, 2016 U.S. Dist. LEXIS 132797, at *13-15 (E.D. Sept. 27, 2016) (retroactively applying the amended California statute to bar plaintiff’s claims and concluding that plaintiff failed to allege a violation of California law challenging “Made in USA” dog treats), aff’d, 714 F. App’x 797 (9th Cir. 2018).
Hawaii has also passed legislation governing a different type of geographic origin claim: “Made in Hawaii.” A Hawaii state statute prohibits manufacturers and retailers from selling perishable products that are labeled as made, produced, or processed in Hawaii unless that product was entirely processed in the state. HRS § 486-119. The Hawaii statute, however, does not give rise to a private right of action, so it’s unlikely to give rise to a wave of consumer class actions throughout the Aloha State. Maeda v. Pinnacle Foods Inc., 2019 U.S. Dist. LEXIS 79105, at *25 (D. Haw. May 9, 2019) (dismissing consumer protection claims challenging “Hawaiian Kettle Style” potato chips).
It is possible that a plaintiff might bring a California consumer protection claim for “Hawaiian” labeling, as the plaintiff did in Maeda, and use the Hawaii statute to establish that the label was “unlawful” under Hawaii state law. But such a claim is tenuous. If the Hawaii statute does not give rise to a private right of action in Hawaii, it would frustrate the Hawaii legislature’s purpose to say that it does give rise to a private right of action in California. Moreover, interpreting the Hawaii statute to regulate consumer-merchant transactions in California would run afoul of the dormant commerce clause. So although manufacturers of “Hawaiian” products should of course review the Hawaii statute to ensure their compliance with it, we do not expect the statute to result in a tidal wave of private litigation.
Differing Outcomes on the Reasonable Consumer’s Understanding
Geographic origin claims that are not covered by the FTC regulations, or by any state-law provision, may still give rise to garden-variety consumer class actions if an enterprising plaintiff can claim to have been misled by them. We think that, in reality, these claims are typically unlikely to deceive “reasonable consumers.” Such consumers understand that references to beautiful or exotic places are meant to evoke the sensory experience of the product and highlight its heritage, not convey facts about its ingredients or manufacturing process. But class action plaintiffs can be quite imaginative when interpreting product labels, and a few have brought lawsuits based on purported misrepresentations of geographic origin.
Many courts have viewed these claims with the skepticism that they deserve, even at the motion to dismiss stage. For example, a Florida court tossed a consumer’s lawsuit alleging that the MillerCoors slogan “Born in the Mountains” misled consumers into believing that the product was brewed in the Rockies. The court concluded that a reasonable consumer would understand the slogan to be an allusion to the brand’s origins as opposed to a representation about the ingredients or process used to generate the product today. Lorenzo v. MillerCoors, 16-cv-20851, Dkt. No. 47, at 14 (S.D. Fla. Sept. 16, 2016), reversed and remanded on other grounds 702 F App’x 917 (11th Cir. July 13, 2017). For similar reasons, a California court dismissed a plaintiff’s claim that “Jamaican-style lager” and “Taste of Jamaica” falsely communicated that the beer was brewed in Jamaica rather than in the United States. See Dumas v. Diageo PLC, 2016 U.S. Dist. LEXIS 46691, at *8 (S.D. Cal. 2016). The court reasoned that “[t]he mere fact that the word ‘Jamaica’ and ‘Jamaican’ appear on the packaging” did not constitute a claim “regarding the origin and ingredients of the beer,” particularly given the explicit indication that the beer was simply “Jamaican-style.” Id. at *8-*10.
Courts have also been reluctant to let such claims proceed in cases where the alleged consumer confusion could have been resolved by reading the entirety of the label. A New York federal court, for example, dismissed a consumer-protection claim arising from allusions to Japanese heritage on the labeling of Sapporo beer, after noting that the label clearly disclosed that the product was imported from Canada. Bowring v. Sapporo Co., 234 F. Supp. 3d 386, 391-92 (E.D.N.Y. 2017).
However, other courts have not been as rigorous in their application of the Rule 12 plausibility standards to these claims. One Florida court permitted a claim to go forward on the grounds that several specific references to a beer’s German heritage could give rise to the understanding that it was brewed in Germany using German ingredients. And in another closely watched case, a court permitted a claim to proceed on the basis that a beer’s several references to Hawaii, including an invitation that consumers visit their breweries when in Hawaii, could lead a reasonable consumer to believe that all of the company’s beer was brewed in Hawaii. Although, in our view, these cases are more indulgent of dubious theories of consumer deception than Rule 12 requires, they demonstrate that defendants cannot always count on getting these farfetched claims nipped in the bud.
The bottom line? Federal regulators, state legislatures, and consumer class action lawyers are all watching these claims, so it pays to be careful. Make sure that claims about the heritage or style of a product are not susceptible to being construed as messages about its ingredients or manufacturing process, and when in doubt, a disclosure clarifying the origin can go a long way towards reducing future litigation risk. If you do make a claim about ingredients or manufacturing process, make sure that you have substantiation for it at the ready. And if the claim is “Made in the USA” or “Made in Hawaii,” make sure that your substantiation demonstrates compliance with both the federal and state standards.