Authored by: Amy E. Buice and Wm. Parker Sanders

The FTC is serious about enforcing the Made in USA Labeling Rule. On April 12, 2022, the DOJ, on behalf of the FTC, sued Lithionics Battery LLC and its owner, Steve Tartaglia, in the United States District Court for the Middle District of Florida for allegedly falsely representing that its lithium ion cells are made in the United States.[1] It brought its action under the Made in the USA Labeling Rule and Section 5 of the FTC Act.

The Made in the USA Labeling Rule, which took effect on August 13, 2021, requires that marketers using a “Made in the USA” label on their products be able to prove their products are “all or virtually all” made in the United States.[2] Marketers cannot use “Made in the USA” claims on labels unless: (1) final assembly or processing of the product occurs in the United States; (2) all significant processing that goes into the product occurs in the United States; and (3) all or virtually all ingredients or components of the product are made and sourced in the United States. The rule also allows the FTC to seek redress, damages, penalties, and other relief. Civil penalties, per violation, can be up to $43,230.

The complaint alleges that since at least 2018, Lithionics has falsely labeled its battery products with the “Made in the USA” designation, when in fact, its products were primarily made oversees. The FTC seeks an order preventing Lithionics and Tartaglia from continuing to make these claims unless they can prove the claim is true. It also seeks a civil penalty of more than $100,000.[3]

The critical takeaway: If your company uses the “Made in the USA” label when selling products, close compliance with the FTC’s Labeling Rule is key to avoid costly litigation and/or fines. Furthermore, although in April 2021 the United States Supreme Court ruled in AMG v. FTC[4] that the FTC lacks authority to seek equitable monetary relief under Section 13(b) of the FTC Act, the FTC has been encouraging Congress to reverse that decision through legislation. If and when that eventually happens, the amount of money the FTC could recover as disgorgement and restitution for Labeling Rule violations occurring over many years provides even more incentive for your company to comply.

[1] https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20-%20FTCDOJLithionics_0.pdf

[2] https://www.ftc.gov/news-events/news/press-releases/2021/07/ftc-issues-rule-deter-rampant-made-usa-fraud

[3] https://www.ftc.gov/news-events/news/press-releases/2022/04/ftc-enforces-new-made-usa-rule-against-lithionics-owner-steven-tartaglia-falsely-labeling-foreign?utm_source=govdelivery

[4] https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf