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FTC Issues Largest Fine in Made in USA Enforcement — but Seeks to Collect Much Less

December 15, 2023

On Dec. 6, 2023, the Federal Trade Commission (FTC) announced a Decision Containing Consent Order (Proposed Order) against ExotoUSA LLC DBA Old Southern Brass and its owner, Austin Oliver.

The proposed order would enter $4,572,137.66 in liability in favor of the FTC against ExotoUSA LLC and Oliver as monetary relief. However, based on ExotoUSA LLC and Oliver’s financial representations, the FTC will suspend the remainder of the liability amount once it is paid $150,000.

The FTC complaint alleges that ExotoUSA LLC and Oliver improperly marketed products online using unqualified Made in USA claims. The complaint also alleges that ExotoUSA LLC falsely claimed that it was veteran-operated and donated 10% of its sales to military service charities.

The announcement is the latest in a series of actions the FTC has brought against improper Made in USA claims, and the first brought against a company that also made false or misleading claims related to association with the U.S. military. FTC officials have signaled that Made in USA enforcement actions will continue.

Section 5 Violations — Unqualified Claims in Marketing and Veteran Affiliations

The complaint alleges that ExotoUSA LLC and Oliver improperly marketed their glassware, mugs, pens and other novelty items by using unqualified claims of “Made in USA.” This included online advertisements such as banners that were visible on every page of ExotoUSA LLC’s website. The FTC alleges that despite these statements, in numerous instances, ExotoUSA LLC’s products were wholly imported from China or contained significant imported material. ExotoUSA LLC also advertised its products on third-party retailer sites. Some specific claims included: “PROUDLY MADE IN THE USA: Our glassware is 100% made in the USA” and “100% USA made, Military & 1st Responder Gifts!!” and “All of our products are made right here in the United States of America.”

The FTC’s complaint also alleges that ExotoUSA LLC and Oliver violated Section 5 by making improper unqualified claims of veteran or military affiliation. This included banners displayed on every page of ExotoUSA LLC’s website oldsouthernbrass.com, claiming that ExotoUSA LLC was “American Owned and Veteran Operated,” that certain products were made with shell casings fired by U.S. military personnel, and that it donated 10% of its sales to military service charities. Despite these claims, however, ExotoUSA LLC is neither owned by, nor affiliated with, veterans. Moreover, the FTC alleges that ExotoUSA LLC only claimed charitable deductions amounting to 0.5% of its sales in 2022. Therefore, ExotoUSA LLC could not support an unqualified claim that it was owned or operated by veterans or that it donated 10% of its sales to veterans’ groups or charities.

Accordingly, the FTC charges that these claims violated Section 5 of the FTC Act. ExotoUSA LLC and Oliver agreed with the FTC to a proposed order with monetary relief of $4,572,137.66, under which they would pay $150,000, agree to stop making deceptive Made in USA and veteran affiliation claims, and notify past purchasers of their products at issue about the FTC’s investigation — specifically, that the products were, in fact, imported, and that the company is not veteran-operated and does not donate 10% of its sales to military service charities.

FTC Signals Continued Enforcement of False Claims of “Made in USA” and Veteran Affiliations

Recent statements from FTC officials reinforce the FTC’s active enforcement in the Made in USA space and indicate that this enforcement trend will continue.

The FTC’s press release quotes FTC Bureau of Consumer Protection Director Samuel Levine as saying: “This company and its owner’s brazen deception cheated consumers who wanted to support U.S. manufacturing, veteran-operated businesses, and veteran charities. We will continue to hold accountable those who profit from false Made in USA and military association claims.”

Takeaways

  • The FTC is beginning to increase fine amounts for Made in USA marketing violations into the attention-grabbing seven figures, even where the full amount likely is not collectible. This judgment of more than $4 million demonstrates the FTC’s desire to send a clear message to companies marketing products as Made in USA and increase the deterrent effect of enforcement actions.
  • This is the first time the FTC has combined enforcement of false or misleading Made in USA claims and false military claims. The FTC may continue to look for new ways to enforce Section 5 against companies profiting from deceptive claims.
  • This is the ninth enforcement action related to Made in USA claims in the past two years, and monetary penalties for violations are trending upward. This signals that the FTC is not slowing its enforcement efforts in this space.

McGuireWoods attorneys have extensive experience counseling and representing clients that label and market their products as Made in USA. Companies with questions about the FTC’s rules surrounding Made in USA are encouraged to reach out to the authors of this alert.

For background on this issue, see previous McGuireWoods alerts:

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