Truth in Advertising Provisions Keep Brands on their Toes: Defining Made in the U.S.A.

Written by Alexandra Goldstein

On June 4, 2014, California resident -- and disgruntled designer jeans-wearer, David Paz, filed suit against denim designer, AG Adriano Goldschmied, Inc. (“AG”) and clothing retailer, Nordstrom, Inc. (“Nordstrom”). The suit presents a host of claims stemming from what Mr. Paz alleges are liberties the defendants took with AG’s use of the “Made in U.S.A.” label. In particular, the plaintiff alleges that despite the “Made in U.S.A.” label on defendant’s denim, the pants in question “…are substantially made, manufactured or produced from component parts that are manufactured outside of the United States.” The case is notable in that it highlights a private right of action under California law for a brand’s alleged false advertising and branding.

 

Headquartered in Southern California, Defendant AG’s labeling is subject to both federal labeling requirements and California’s advertising standards. The federal government, under the guise of the Federal Trade Commission (FTC), is tasked with setting the standards for clothing labeling. The FTC’s requirements allow a manufacturer to assert “Made in the USA” when the “ . . . product [is] in whole or in substantial part of domestic origin” (15 U.S.C. § 45a ) Since the passage of the FTC’s regulations, they have put forth clarifying principles on the language of the statute, notably

 

“where a product is labeled or advertised as ‘Made in USA,’ the marketer should possess and rely upon a reasonable basis that the product is all, or virtually all, made in the United States. A product that is “all or virtually all” made in the United States is described typically as one in which all significant parts and processing that go into the product are of U.S. origin, i.e., where there is only a de minimus, or negligible, amount of foreign content.”

 

California’s labeling laws generally fall under various advertising provisions of the state code, including California’s Consumer Legal Remedies Act (CLRA). The CLRA is notable in that it establishes a private right of action - in this case, allowing consumers to bring suit against companies alleged to employ “deceptive representations or designations of geographic origin in connection with goods or services [and] [a]dvertising goods or services with intent not to sell them as advertised.

 

The case most recently survived a motion to dismiss, in which the defendants alleged that the California statutes at the root of plaintiff’s claim were preempted by the FTC’s labeling laws. The court found that while it may have been difficult for defendants to comply with both the FTC and California’s labeling requirements, it was not impossible, suggesting that AG could have complied by creating one label for sales within California and one for sales outside of the state. In light of the court’s ruling, the case will continue.

 

The case is Paz et al v. AG Adriano Goldschmied, Inc., Nordstrom, Inc., and Does 1-100, Case No. 14-cv-01372, S.D.CA.