The Federal Trade Commission (FTC) recently investigated the Kansas-based, high-end watchmaker Niall Luxury Goods, LLC (Niall) over whether the firm overstated the extent to which its watches are made in the U.S.
A key issue was that critical components of the company’s watches are sourced from other countries. According to the FTC, the significant (1) parts, (2) processing, and (3) labor, have to be of U.S. origin in order to say a product is made in or built in the U.S. "The enforcement policy statement is based on consumer perception evidence; that's always the touchstone from our point of view. How would a reasonable consumer understand the claim?" said Julia Solomon Ensor, an attorney with the FTC.
The FTC sent a letter to Niall highlighting that the products’ movements, which are made in Switzerland, are “essential to the function of a watch” and “though the cost of a Swiss movement may be small relative to Niall’s overall U.S. manufacturing costs, without a movement, a watch cannot tell time.” As a result, the company’s ability to make “Made in USA” claims is limited.
Ultimately, the FTC closed the investigation because Niall implemented a remedial plan to qualify its representations to avoid deceiving consumers that included updating claims on the watch dials, updating its website and social media, and adopting new compliance measures to review future marketing materials and a coordinated media plan.
The FTC rules may present challenges to watchmakers—and other producers and manufacturers—who routinely source parts from abroad.