83 FR 47154 - Sandpiper of California and PiperGear USA; Analysis To Aid Public Comment
FEDERAL TRADE COMMISSION Federal Register Volume 83, Issue 181 (September 18, 2018)
Federal Register Volume 83, Issue 181 (September 18, 2018)
| Page Range | 47154-47159 | |
| FR Document | 2018-20271 |
[Federal Register Volume 83, Number 181 (Tuesday, September 18, 2018)] [Notices] [Pages 47154-47159] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-20271] ======================================================================= ----------------------------------------------------------------------- FEDERAL TRADE COMMISSION [File No. 182 3095] Sandpiper of California and PiperGear USA; Analysis To Aid Public Comment AGENCY: Federal Trade Commission. ACTION: Proposed consent agreement. ----------------------------------------------------------------------- SUMMARY: The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices. The attached Analysis to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order-- embodied in the consent agreement--that would settle these allegations. DATES: Comments must be received on or before October 12, 2018. ADDRESSES: Interested parties may file a comment online or on paper, by following the instructions in the Request for Comment part of the SUPPLEMENTARY INFORMATION section below. Write: ``Sandpiper of California [[Page 47155]] and PiperGear USA'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftcsandpiperconsent by following the instructions on the web-based form. If you prefer to file your comment on paper, write ``Sandpiper of California and PiperGear USA; File No. 1823095'' on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580; or deliver your comment to: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. FOR FURTHER INFORMATION CONTACT: Julia Solomon Ensor (202-326-2377) or Crystal Ostrum (202-326-3405), Bureau of Consumer Protection, 600 Pennsylvania Avenue NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for September 12, 2018), on the World Wide Web, at https://www.ftc.gov/news-events/commission-actions. You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before October 12, 2018. Write ``Sandpiper of California and PiperGear USA; File No. 1823095'' on your comment. Your comment--including your name and your state--will be placed on the public record of this proceeding, including, to the extent practicable, on the public Commission website, at https://www.ftc.gov/policy/public-comments. Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, we encourage you to submit your comments online. To make sure that the Commission considers your online comment, you must file it at https://ftcpublic.commentworks.com/ftcsandpiperconsent by following the instructions on the web-based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that website. If you prefer to file your comment on paper, write ``Sandpiper of California and PiperGear USA; File No. 1823095'' on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580; or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service. Because your comment will be placed on the publicly accessible FTC website at http://www.ftc.gov, you are solely responsible for making sure that your comment does not include any sensitive or confidential information. In particular, your comment should not include any sensitive personal information, such as your or anyone else's Social Security number; date of birth; driver's license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure that your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any ``trade secret or any commercial or financial information which . . . is privileged or confidential''--as provided by Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in particular competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names. Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled ``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted on the public FTC website--as legally required by FTC Rule 4.9(b)--we cannot redact or remove your comment from the FTC website, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule 4.9(c), and the General Counsel grants that request. Visit the FTC website at http://www.ftc.gov to read this Notice and the news release describing it. The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding, as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before October 12, 2018. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy. Analysis of Proposed Consent Order To Aid Public Comment The Federal Trade Commission (``FTC'' or ``Commission'') has accepted, subject to final approval, an agreement containing a consent order from Sandpiper of California, Inc. and PiperGear USA, Inc. (``Respondents''). The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw from the agreement or make final the agreement's proposed order. This matter involves Respondents' marketing, sale, and distribution of bags and wallets with claims that the products are made in the United States. According to the FTC's complaint, Respondents represented that all of their products are all or virtually all made in the United States. In fact, more than 95% of Respondent Sandpiper's products are imported as finished goods, and approximately 80% of Respondent PiperGear's products are either imported as finished goods or contain significant imported components. Based on the foregoing, the complaint alleges that Respondents engaged in deceptive acts or practices in violation of Section 5(a) of the FTC Act. The proposed consent order contains provisions designed to prevent Respondents from engaging in similar acts and practices in the future. Consistent with the FTC's Enforcement [[Page 47156]] Policy Statement on U.S. Origin Claims, Part I prohibits Respondents from making U.S.-origin claims for their products unless either: (1) The final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States; (2) a clear and conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients or components, and/or processing; or (3) for a claim that a product is assembled in the United States, the product is last substantially transformed in the United States, the product's principal assembly takes place in the United States, and United States assembly operations are substantial. Part II prohibits Respondents from making any country-of-origin claim about a product or service unless the claim is true, not misleading, and Respondents have a reasonable basis substantiating the representation. Parts III through VI are reporting and compliance provisions. Part III requires Respondents to acknowledge receipt of the order, to provide a copy of the order to certain current and future principals, officers, directors, and employees, and to obtain an acknowledgement from each such person that they have received a copy of the order. Part IV requires each Respondent to file a compliance report within one year after the order becomes final and to notify the Commission within 14 days of certain changes that would affect compliance with the order. Part V requires Respondents to maintain certain records, including records necessary to demonstrate compliance with the order. Part VI requires Respondents to submit additional compliance reports when requested by the Commission and to permit the Commission or its representatives to interview respondent's personnel. Finally, Part VII is a ``sunset'' provision, terminating the order after twenty (20) years, with certain exceptions. The purpose of this analysis is to aid public comment on the proposed order. It is not intended to constitute an official interpretation of the proposed order or to modify its terms in any way. By direction of the Commission, Commissioner Chopra dissenting. Donald S. Clark, Secretary. Concurring Statement of Commissioner Rebecca Kelly Slaughter, in Which Chairman Joe Simons Joins When companies falsely claim that their products are made in the U.S.A., they take advantage of consumers who choose to spend their dollars supporting domestic products and the companies who expend resources in order to make the claim proudly and truthfully. Today, the Commission is announcing three enforcement actions \1\ targeting companies and an individual who we allege falsely claimed their products were made in the U.S.A. in violation of Section 5 of the FTC Act. In Patriot Puck, respondent George Statler III and his companies marketed hockey pucks imported from China as ``Made in America'' and ``The only American Made Hockey Puck!'' The Nectar Sleep respondents included the statement ``Designed and Assembled in the USA'' in product descriptions for mattresses wholly imported from China. And in Sandpiper/PiperGear, respondents marketed imported backpacks and wallets on websites claiming ``Featuring American Made Products'' and shipped imported wallets with cards labeled ``American Made.'' The Commission's complaints allege that these claims were plainly false and the respondents have all agreed to strong administrative consent orders. --------------------------------------------------------------------------- \1\ To date, the Commission has initiated 25 enforcement actions arising from misleading U.S.-origin claims, targeting entities that engage in intentional deception or refuse to come into prompt compliance. FTC staff also works extensively with companies to achieve compliance in this area, issuing more than 130 closing letters addressing potential U.S.-origin claims. These letters highlight that where companies make errors or potentially deceptive claims to consumers, Commission staff works with them to quickly come into compliance. In addition to enforcement actions and compliance counseling, the Commission's program to protect consumers from deceptive U.S.-origin claims involves significant business education efforts. In 1997, the Commission issued an Enforcement Policy Statement on U.S. Origin Claims that explains the types of U.S.-origin claims that can be made and the substantiation needed to support them. Commission staff has also issued comprehensive guidance, press releases and blogs in this area to promote compliance. --------------------------------------------------------------------------- Each of the administrative consent orders prohibits the respondents from making these types of claims in the future \2\ and requires the respondents to engage in recordkeeping and reporting that will assist the FTC in monitoring compliance.\3\ Any violation of these orders can result in a civil penalty of over $40,000 per violation.\4\ There is evidence that these potential penalties have served as powerful deterrents: To date the FTC has only had cause to initiate one contempt proceeding \5\ against the more than twenty prior respondents in cases involving U.S.-origin claims. --------------------------------------------------------------------------- \2\ Specifically, the orders prohibit respondents from making deceptive unqualified U.S.-origin claims about their products and lay out the type of substantiation required to make truthful claims. The orders also govern the manner and type of qualification needed to make a lawful qualified claim regarding U.S.-origin. The orders further prohibit respondents from making any country-of-origin claim about a product or service unless the claim is true, not misleading, and respondents have a reasonable basis substantiating the representation. \3\ Each of the orders requires the respondents to file a compliance report within one year after the order becomes final and to notify the Commission within 14 days of certain changes that would affect compliance with the order. Respondents are also required to maintain certain records, including records necessary to demonstrate compliance with the order. The orders also require respondents to submit additional compliance reports when requested by the Commission and to permit the Commission or its representatives to interview respondents' personnel. The orders remain in effect for 20 years. \4\ Outside of specific rules, the FTC does not have authority to seek civil penalties for violations of Section 5 of the FTC Act. The FTC does have authority to seek civil penalties for any violations of its administrative orders. See 15 U.S.C. 45(l) and 16 CFR 1.98(d) (2018). \5\ See https://www.ftc.gov/news-events/press-releases/2006/06/ftc-alleges-stanley-made-false-made-usa-claims-about-its-tools (announcing settlement with Stanley Works that imposed a $205,000 civil penalty for violating prior order regarding U.S.-origin claims). --------------------------------------------------------------------------- In this area, administrative consent orders securing permanent injunctive relief buttressed by the threat of significant civil penalties have been largely successful in keeping former violators on the straight and narrow and have no doubt served as a warning to others that false claims will be identified and pursued. Therefore, we are voting in support of the relief set forth in the final and proposed administrative orders announced today. We write separately to highlight the possibility that the FTC can further maximize its enforcement reach, in all areas, through strategic use of additional remedies. For example, in the U.S.-origin claim context, there may be cases in which consumers paid a clear premium for a product marketed as ``Made in the U.S.A.'' or made their purchasing decision in part based on perceived quality, safety, health or environmental benefits tied to a U.S.-origin claim.\6\ In such instances, [[Page 47157]] additional remedies such as monetary relief or notice to consumers may be warranted. Requiring law violators to provide notice to consumers identifying the deceptive claim can help mitigate individual consumer injury--an informed consumer would have the option to seek a refund, or, at the very least, stop using the product. --------------------------------------------------------------------------- \6\ Of the three cases the FTC is announcing today, we note that consideration of additional remedies such as notice could have been of particular value in the Nectar Sleep matter, which involved U.S.- origin claims about mattresses. The fact that purchasers of Nectar Sleep mattresses can seek a refund for any reason for 365 days after their original purchase, https://www.nectarsleep.com/p/returns/, and that purchasers received mattresses with accurate country-of-origin labels, contributed to our decision to vote in favor of the final Nectar Sleep order. --------------------------------------------------------------------------- The Commission has already begun a broad review of whether we are using every available remedy as effectively as possible to fairly and efficiently pursue vigorous enforcement of our consumer protection and competition laws. If we find that there are new or infrequently applied remedies that we should be seeking more often, the Commission will act accordingly--and, where appropriate, signal to the public how we intend to approach enforcement. In our view, a thoughtful review and forward- looking plan is a more effective and efficient use of Commission resources than re-opening and re-litigating the cases before us today.\7\ --------------------------------------------------------------------------- \7\ It is worth noting that all of the cases announced today began well before the current complement of Commissioners were instated, and therefore before staff could reasonably have been expected to anticipate our particular priorities and views on enforcement. To renegotiate these settlements at this point, after litigation strategy was developed and executed, would require substantial investment of staff time and effort and diversion of resources from other important cases. A forward-looking set of remedy priorities will help staff develop litigation strategy in an efficient way. --------------------------------------------------------------------------- Statement of Commissioner Rohit Chopra Question Presented Are no-money, no-fault settlements adequate to remedy serious violations of the FTC's ``Made in USA'' standard? SummarySellers gain a competitive advantage when they falsely market a product as Made in USA, especially when this claim is closely tied to the development of the product's brand. Third-party analysis suggests that Americans are often willing to pay significantly more for American-made goods compared to those made in China. Several of the matters under consideration by the Commission involve Made-in-USA fraud relating to products made in China. The Commission should modify its approach to resolving serious Made-in-USA fraud by seeking more tailored remedies that could include restitution, disgorgement, notice, and admissions of wrongdoing, based on the facts and circumstances of each matter. Analysis and Discussion The Power of Branding and Made in USA While brand identity has historically been a major focus in markets for luxury goods, today it plays a key role in all segments of our economy. As advanced manufacturing and global supply chains challenge firms to find new ways to lower operating costs, consumer goods industries (including everything from apparel to packaged goods) have focused intensely on building and cultivating their brands as a way to drive up margins through price and volume enhancements. Branding is distinct from marketing and advertising. A successful brand is one that creates a clear identity that goes beyond specific product attributes. A brand identity connects with a consumer's values, aspirations, and sense of self. A Made-in-USA claim can serve as a key element of a product's brand that communicates quality, durability, authenticity, and safety, among other attributes. Not only can it be a signal about specific product attributes but it can also contribute to the development of a brand identity that connotes a set of values, such as fair labor practices, to consumers. Made-in-USA branding can also be used to fraudulently conceal countries of origin that may cause concerns for consumers. For example, in recent years, regulators have investigated serious health and safety problems with pet food \1\ and drywall \2\ imported from China, and the OECD estimates that China is the source of the vast majority of counterfeit goods imported to the U.S.\3\ Against this backdrop, slapping a ``Made-in-USA'' label on a good made abroad can be its own form of counterfeiting, replacing an unpopular attribute with one connoting quality, safety, and authenticity. --------------------------------------------------------------------------- \1\ Food & Drug Admin., Melanine Pet Food Recall of 2007 (May 2007), https://www.fda.gov/animalveterinary/safetyhealth/recallswithdrawals/ucm129575.htm. \2\ Fed. Trade Comm'n, Tests for Defective Drywall (Dec. 2009), https://www.consumer.ftc.gov/articles/0124-tests-defective-drywall. \3\ Global trade in fake goods worth nearly half a trillion dollars a year, Org. for Econ. Co-Operation and Dev. (Apr. 18, 2016), http://www.oecd.org/industry/global-trade-in-fake-goods-worth-nearly-half-a-trillion-dollars-a-year.htm. --------------------------------------------------------------------------- In many cases, Americans are actually willing to pay a premium for goods that are made in our country, especially compared to those made in China. A 2012 survey by the Boston Consulting Group shows that more than 80% of Americans express a willingness to pay more for made-in-USA products,\4\ which is consistent with other surveys.\5\ --------------------------------------------------------------------------- \4\ Made in America, Again: Understanding the value of `Made in the USA', The Boston Consulting Group (Nov. 2012) [Hereinafter Made in America, Again]. \5\ See, e.g. Made in America: Most Americans love the idea of buying a U.S.-made product instead of an import. But sometimes it's hard to tell what's real and what's not, Consumer Reports (May 21, 2015), https://www.consumerreports.org/cro/magazine/2015/05/made-in-america/index.htm [hereinafter Made in America] (reporting on a national survey finding that 60%+ of Americans would pay a 10% premium for Made-in-USA goods); Price of patriotism: How much extra are you willing to pay for a product that's made in America?, Reuters (July 18, 2017), http://fingfx.thomsonreuters.com/gfx/rngs/USA-BUYAMERICAN-POLL/01005017035/index.html (reporting on a national survey finding that 60%+ of Americans would pay a premium of 5% or more). Of course, surveys reveal only Americans' stated willingness to pay a premium, not their actual buying behavior. But assuming Americans will pay no premium runs contrary to the available evidence, and firms' aggressive Made-in-USA branding shows they clearly see it as advantageous. --------------------------------------------------------------------------- Importantly, however, price premium does not always accurately capture the harm caused by Made-in-USA fraud. Especially in markets for commodity goods where consumers may be particularly price-sensitive, firms may make false claims to distinguish their brand or conceal unpopular countries of origin. Whatever its purpose, cheating distorts markets in fundamental ways. It rips off Americans who prefer buying domestic goods. It also punishes firms that may bear higher costs to produce goods here, yet must compete on price or branding with firms that cheat. Finally, widespread deception sows doubt \6\ about the veracity of Made-in-USA claims, which may reduce the claim's value and discourage domestic manufacturing. --------------------------------------------------------------------------- \6\ See Made in America, supra note 5 (reporting on a national survey finding that 23% of Americans lack trust in ``Made in America'' labels). --------------------------------------------------------------------------- Backpacks, Hockey Pucks, and Mattresses Today, the Commission is voting on three cases involving Made-in- USA fraud.\7\ The conduct of each of these companies was brazen and deceitful. In my view, each respondent firm harmed both consumers and honest competitors. --------------------------------------------------------------------------- \7\ Claiming falsely that a product is Made in USA violates Section 5 of the FTC Act. Although the FTC brought a Made-in-USA case as early as 1940, Congress amended the FTC Act in 1994 to state explicitly that Made-in-USA labeling must be consistent with FTC decisions and orders. See 15 U.S.C. 45a. --------------------------------------------------------------------------- In the Sandpiper and Patriot Puck matters, the evidence suggests that the Made-in-USA claim was a critical component of the companies' brand identities. In the Nectar Sleep matter, the false Made-in-USA claim may have [[Page 47158]] been asserted to convey health or safety benefits. Sandpiper/PiperGear USA: Sandpiper/PiperGear USA (``Sandpiper'') built its brand of military-themed backpacks and gear on patriotism. As detailed in the FTC's complaint, the company boasted in its promotional materials about its ``US manufacturing,'' inserted ``American Made'' labels into products, and included the hashtag ``#madeinusa'' alongside social media posts.\8\ The company sold thousands of backpacks on American military bases overseas. --------------------------------------------------------------------------- \8\ Compl. at ]] 6-7. --------------------------------------------------------------------------- In reality, Sandpiper imported the vast majority \9\ of its products from China or Mexico, a fact the firm actively sought to hide through its aggressive Made-in-USA branding. --------------------------------------------------------------------------- \9\ According to the Complaint, more than 95% of Sandpiper's products are imported as finished goods, while approximately 80% of PiperGear's products are either imported as finished goods or contain significant imported components. Id. at ] 7. --------------------------------------------------------------------------- Patriot Puck: Hockey pucks typically are manufactured to meet certain weight, thickness, and diameter specifications. These are commodity goods. Purchasers largely see competing pucks that boast similar specifications, so brand positioning can be especially salient. Patriot Puck positioned its brand as the all-American alternative to imported pucks. The company literally wrapped its pucks in the flag, embossing each one with an image of an American flag. To drive home the point, the firm claimed its pucks were ``Proudly Made in the USA,'' ``MADE IN AMERICA,'' ``100% Made in the USA!,'' and ``100% American Made!'' The firm even claimed it made ``The Only American Made Hockey Puck!'' \10\ --------------------------------------------------------------------------- \10\ Compl. at ] 9. --------------------------------------------------------------------------- In reality, Patriot Puck imported all of its pucks from China.\11\ --------------------------------------------------------------------------- \11\ The Commission has wisely named George Statler III, who operated the company, in its Complaint. --------------------------------------------------------------------------- That Patriot Puck priced its pucks similarly to other firms illustrates why sticker price premium alone is a poor proxy for the harm caused by Made-in-USA fraud, especially in markets for commodity goods. Hockey is closely associated with international competition, and Patriot Puck's claim to offer the ``only'' puck made in America was a clear effort to create a brand identity that would distinguish its pucks from the competition. Moreover, by pricing its pucks similarly to its competitors, Patriot Puck led consumers to believe they were getting a great deal on American-made hockey pucks, when in fact they were overpaying for pucks made in China.\12\ --------------------------------------------------------------------------- \12\ Surveys show that Americans will pay a premium for U.S.- made sporting goods relative to those made in China, meaning they effectively discount goods made in China. Made in America, Again at 1. And Americans may be particularly averse to buying patriotic- themed goods made in China. See, e.g., Matt Brooks, US Olympic uniforms spark fury in Congress, Wash. Post (July 13, 2012), https://www.washingtonpost.com/blogs/2012-heavy-medal-london/post/us-olympic-uniforms-spark-fury-in-congress/2012/07/13/gJQABvJmhW_blog.html?utm_term=.3d96e391f1dd. --------------------------------------------------------------------------- Nectar Sleep: Nectar Sleep is a direct-to-consumer online mattress firm founded by Silicon Valley entrepreneurs. According to a CNBC profile of the company, Nectar competes with more than 200 firms to capture a slice of the $15 billion mattress market. Nectar mattresses are made in China, which may be a negative attribute for consumers who have health or safety concerns about Chinese-made mattresses.\13\ Perhaps for this reason, the company falsely represented to consumers that its mattresses were assembled in the U.S. --------------------------------------------------------------------------- \13\ Such concerns may be tied to recent recalls of Chinese-made mattresses and bedding, and may be partially reflected in the premium Americans are willing to pay for U.S.-made furniture over furniture made in China. See Made in America, Again at 6. In fact, numerous consumer reviews specifically focus on comparing U.S.-made mattresses. --------------------------------------------------------------------------- Nectar's conduct had clear consequences. Competitors who actually made mattresses domestically were undercut, and consumers looking for U.S.-made mattresses--possibly for health or safety reasons--got ripped off. Further, Nectar may continue to profit from the lingering misperception that its mattresses are made in the U.S. Addressing Made-in-USA Fraud Going Forward Most FTC resolutions of Made-in-USA violations have resulted in voluntary compliance measures \14\ or cease-and-desist orders. Indeed, none of the three settlements approved today includes monetary relief, notice to consumers, or any admission of wrongdoing. --------------------------------------------------------------------------- \14\ Of course, when the violation is unintentional or technical in nature, less formal actions can be helpful, especially if the misstatement is quickly corrected. My comments are limited to matters where the violation was egregious. --------------------------------------------------------------------------- Going forward, in cases involving egregious and undisputed Made-in- USA fraud, I believe there should be a strong presumption against simple cease-and-desist orders. Instead, the Commission should consider remedies tailored to the individual circumstances of the fraud, including redress and notice for consumers, disgorgement of ill-gotten gains, opt-in return programs, or admissions of wrongdoing. Some general principles can inform our approach to tailoring remedies. For firms that built their core brand identity on a lie, full redress or the opportunity for opt-in refunds may be appropriate, given the centrality of the false claim and its widespread dissemination.\15\ When refunds are difficult to administer or the firm lacks ability to pay, the Commission should at least seek notification to consumers or corrective advertising \16\--especially in markets where country of origin bears on health or safety. Finally, if firms' misrepresentations are undisputed and clear, the Commission should strongly consider seeking admissions--a form of accountability that is explicitly contemplated by our rules of practice.\17\ --------------------------------------------------------------------------- \15\ Particularly for misbranded products, the FTC could likely show that a firm's Made-in-USA misrepresentations were widely disseminated, that they were of the kind usually relied on by reasonable persons, and that consumers purchased the product, thus making gross sales an appropriate starting point for calculating restitution. See FTC v. Kuykendall, 371 F.3d 745, 764 (10th Cir. 2004) (holding, in a contempt action, that after the Commission establishes a presumption of reliance, ``the district court may use the Defendants' gross receipts as a starting point''). Importantly, if there was deception in the sale, defendants generally do not receive credit for the value of the product sold. See FTC v. Figgie Int'l, Inc., 994 F.2d 595, 606-07 (9th Cir. 1993) (``The fraud in the selling, not the value of the thing sold, is what entitles consumers'' to full redress.). \16\ Corrective advertising can be important to preventing firms from continuing to profit from deception. As explained by then- Chairman Pitofsky after a corrective advertising order was upheld by the D.C. Circuit, ``It is important for advertisers to know that it is not enough just to discontinue a deceptive ad, and that they can be held responsible for the lingering misimpressions created by deceptive advertising.'' See Press Release, Fed. Trade Comm'n, Appeals Court Upholds FTC Ruling; Doan's Must Include Corrective Message in Future Advertising and Labeling (Aug. 21, 2000), https://www.ftc.gov/news-events/press-releases/2000/08/appeals-court-upholds-ftc-ruling-doans-must-include-corrective. \17\ See 16 CFR 2.32. --------------------------------------------------------------------------- Admissions may have particular value in cases involving Made-in-USA fraud. In these cases, clear and undisputed facts may give the agency a strong basis to demand an admission from a firm. And if that firm lacks funds or records for consumer redress or disgorgement, admissions can be a powerful tool to give consumers, competitors, and counterparties tools to remedy harm, even when we cannot.\18\ Moreover, because the Commission is generally limited to seeking equitable rather than punitive remedies for first-time offenses, seeking admissions is among the most effective ways we can deter lawbreaking and change the cost- benefit calculus of deception. --------------------------------------------------------------------------- \18\ For example, a factual admission may have a preclusive effect in a Lanham Act claim by a competitor. --------------------------------------------------------------------------- [[Page 47159]] I hope that the Commission will reexamine its approach to tackling Made-in-USA fraud. I believe we should seek more tailored remedies that vindicate the important goals of the program and send the message that Made-in-USA fraud will not be tolerated. Conclusion Nectar Sleep, Sandpiper, and Patriot Puck clearly violated the law, allowing them to enrich themselves and harm their customers and competitors. Especially given widespread interest in buying American products, we should do more to protect the authenticity of Made-in-USA claims. I am concerned that no-money, no-fault settlements send an ambiguous message about our commitment to protecting consumers and domestic manufacturers from Made-in-USA fraud. Going forward, I hope the Commission can better protect against harms to competition and consumers by seeking monetary relief, notice, admissions, and other tailored remedies. Every firm needs to understand that products labeled ``Made in USA'' should be made in the USA, and that fake branding will come with real consequences. [FR Doc. 2018-20271 Filed 9-17-18; 8:45 am] BILLING CODE 6750-01-P
![47154 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices
Interested parties may submit comments that are considered in acting on the the BHC Act (12 U.S.C. 1842(c)). If the
on the agreements to the Secretary by notices are set forth in paragraph 7 of proposal also involves the acquisition of
email at Secretary@fmc.gov, or by mail, the Act (12 U.S.C. 1817(j)(7)). a nonbanking company, the review also
Federal Maritime Commission, The notices are available for includes whether the acquisition of the
Washington, DC 20573, within twelve immediate inspection at the Federal nonbanking company complies with the
days of the date this notice appears in Reserve Bank indicated. The notices standards in section 4 of the BHC Act
the Federal Register. Copies of also will be available for inspection at (12 U.S.C. 1843). Unless otherwise
agreements are available through the the offices of the Board of Governors. noted, nonbanking activities will be
Commission’s website (www.fmc.gov) or Interested persons may express their conducted throughout the United States.
by contacting the Office of Agreements views in writing to the Reserve Bank Unless otherwise noted, comments
at (202) 523–5793 or tradeanalysis@ indicated for that notice or to the offices regarding each of these applications
fmc.gov. of the Board of Governors. Comments must be received at the Reserve Bank
Agreement No.: 201260–002. must be received not later than October indicated or the offices of the Board of
Agreement Name: Ocean Network 3, 2018. Governors not later than October 15,
Express Pte. Ltd. (ONE)/NYK Bulk & A. Federal Reserve Bank of Chicago 2018.
Projects Carriers Ltd. Slot Charter (Colette A. Fried, Assistant Vice A. Federal Reserve Bank of New York
Agreement. President) 230 South LaSalle Street, (Ivan Hurwitz, Vice President) 33
Parties: Ocean Network Express Pte. Chicago, Illinois 60690–1414: Liberty Street, New York, New York
Ltd. and NYK Bulk & Project Carriers 1. Sanford O. Ilstrup, Trempealeau, 10045–0001. Comments can also be sent
Ltd. Wisconsin, individually and acting in electronically to
Filing Party: Carrol Hand; Ocean concert with Richard Davig, Viroqua, Comments.applications@ny.frb.org:
Network Express. Wisconsin, Jeffrey Ilstrup, Onalaska, 1. Rhinebeck Bancorp MHC and
Synopsis: The amendment extends Wisconsin, Rondi Solverson, Viroqua, Rhinebeck Bancorp, Inc.; to become
the geographic scope of the agreement Wisconsin, Shane Ilstrup, Trempealeau, bank holding companies by acquiring
and allows for space allocation on an as Wisconsin, Stephanie Sirek, Rochester, voting shares of Rhinebeck Bank, all of
needed/as available basis. Minnesota, Erik Solverson, Hermosa Poughkeepsie, New York.
Proposed Effective Date: 10/20/2018. Beach, California, and Ingrid Solverson- Rhinebeck Bank proposes to
Location: https://www2.fmc.gov/ Keneipp, Viroqua, Wisconsin; to join the reorganize into a two-tier mutual
FMC.Agreements.Web/Public/ Ilstrup Family Control Group and holding company structure. Rhinebeck
AgreementHistory/13191. acquire voting shares of Firsnabanco, MHC will own 55 percent of Rhinebeck
Inc. and thereby indirectly acquire Bancorp, which will own 100 percent of
Agreement No.: 201272.
shares of Citizens First Bank, both of the bank.
Agreement Name: KYOWA/CNCo
Viroqua, Wisconsin.
Pacific—Asia Slot Charter Agreement. Board of Governors of the Federal Reserve
Parties: Kyowa Shipping Co.,, Ltd. Board of Governors of the Federal Reserve System, September 13, 2018.
and The China Navigation Co. Pte. Ltd. System, September 12, 2018.
Yao-Chin Chao,
Filing Party: Conte Cicala; Clyde & Co. Yao-Chin Chao,
Assistant Secretary of the Board.
US LLP. Assistant Secretary of the Board.
[FR Doc. 2018–20253 Filed 9–17–18; 8:45 am]
Synopsis: The Agreement authorizes [FR Doc. 2018–20159 Filed 9–17–18; 8:45 am]
BILLING CODE P
KYOWA to charter space to CNCo on BILLING CODE P
certain vessels KYOWA operates and
authorizes CNCo to charter space to
KYOWA on certain vessels CNCo FEDERAL RESERVE SYSTEM FEDERAL TRADE COMMISSION
operates between and among various [File No. 182 3095]
foreign ports and Pago Pago, American Formations of, Acquisitions by, and
Samoa. Mergers of Bank Holding Companies Sandpiper of California and PiperGear
Proposed Effective Date: 9/12/2018. The companies listed in this notice USA; Analysis To Aid Public Comment
Location: https://www2.fmc.gov/ have applied to the Board for approval,
FMC.Agreements.Web/Public/ AGENCY: Federal Trade Commission.
pursuant to the Bank Holding Company
AgreementHistory/16283. Act of 1956 (12 U.S.C. 1841 et seq.) ACTION: Proposed consent agreement.
Dated: September 13, 2018. (BHC Act), Regulation Y (12 CFR part SUMMARY: The consent agreement in this
Rachel E. Dickon, 225), and all other applicable statutes matter settles alleged violations of
Secretary. and regulations to become a bank federal law prohibiting unfair or
[FR Doc. 2018–20219 Filed 9–17–18; 8:45 am]
holding company and/or to acquire the deceptive acts or practices. The attached
assets or the ownership of, control of, or Analysis to Aid Public Comment
BILLING CODE 6731–AA–P
the power to vote shares of a bank or describes both the allegations in the
bank holding company and all of the complaint and the terms of the consent
banks and nonbanking companies order—embodied in the consent
FEDERAL RESERVE SYSTEM
owned by the bank holding company, agreement—that would settle these
Change in Bank Control Notices; including the companies listed below. allegations.
Acquisitions of Shares of a Bank or The applications listed below, as well
as other related filings required by the DATES: Comments must be received on
Bank Holding Company
daltland on DSKBBV9HB2PROD with NOTICES
Board, are available for immediate or before October 12, 2018.
The notificants listed below have inspection at the Federal Reserve Bank ADDRESSES: Interested parties may file a
applied under the Change in Bank indicated. The applications will also be comment online or on paper, by
Control Act (12 U.S.C. 1817(j)) and available for inspection at the offices of following the instructions in the
§ 225.41 of the Board’s Regulation Y (12 the Board of Governors. Interested Request for Comment part of the
CFR 225.41) to acquire shares of a bank persons may express their views in SUPPLEMENTARY INFORMATION section
or bank holding company. The factors writing on the standards enumerated in below. Write: ‘‘Sandpiper of California
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![Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices 47157
additional remedies such as monetary Analysis and Discussion more for made-in-USA products,4 which
relief or notice to consumers may be is consistent with other surveys.5
The Power of Branding and Made in
warranted. Requiring law violators to Importantly, however, price premium
USA
provide notice to consumers identifying does not always accurately capture the
the deceptive claim can help mitigate While brand identity has historically harm caused by Made-in-USA fraud.
individual consumer injury—an been a major focus in markets for luxury Especially in markets for commodity
informed consumer would have the goods, today it plays a key role in all goods where consumers may be
option to seek a refund, or, at the very segments of our economy. As advanced particularly price-sensitive, firms may
least, stop using the product. manufacturing and global supply chains make false claims to distinguish their
The Commission has already begun a challenge firms to find new ways to brand or conceal unpopular countries of
broad review of whether we are using lower operating costs, consumer goods origin.
every available remedy as effectively as industries (including everything from Whatever its purpose, cheating
possible to fairly and efficiently pursue apparel to packaged goods) have distorts markets in fundamental ways. It
vigorous enforcement of our consumer focused intensely on building and rips off Americans who prefer buying
protection and competition laws. If we cultivating their brands as a way to domestic goods. It also punishes firms
find that there are new or infrequently drive up margins through price and that may bear higher costs to produce
applied remedies that we should be volume enhancements. goods here, yet must compete on price
seeking more often, the Commission Branding is distinct from marketing or branding with firms that cheat.
will act accordingly—and, where and advertising. A successful brand is Finally, widespread deception sows
appropriate, signal to the public how we one that creates a clear identity that goes doubt 6 about the veracity of Made-in-
intend to approach enforcement. In our beyond specific product attributes. A USA claims, which may reduce the
view, a thoughtful review and forward- brand identity connects with a claim’s value and discourage domestic
looking plan is a more effective and consumer’s values, aspirations, and manufacturing.
efficient use of Commission resources sense of self.
than re-opening and re-litigating the Backpacks, Hockey Pucks, and
A Made-in-USA claim can serve as a
cases before us today.7 Mattresses
key element of a product’s brand that
communicates quality, durability, Today, the Commission is voting on
Statement of Commissioner Rohit three cases involving Made-in-USA
Chopra authenticity, and safety, among other
attributes. Not only can it be a signal fraud.7 The conduct of each of these
Question Presented about specific product attributes but it companies was brazen and deceitful. In
Are no-money, no-fault settlements can also contribute to the development my view, each respondent firm harmed
adequate to remedy serious violations of of a brand identity that connotes a set both consumers and honest competitors.
the FTC’s ‘‘Made in USA’’ standard? of values, such as fair labor practices, to In the Sandpiper and Patriot Puck
consumers. matters, the evidence suggests that the
Summary Made-in-USA branding can also be Made-in-USA claim was a critical
• Sellers gain a competitive used to fraudulently conceal countries component of the companies’ brand
advantage when they falsely market a of origin that may cause concerns for identities. In the Nectar Sleep matter,
product as Made in USA, especially consumers. For example, in recent the false Made-in-USA claim may have
when this claim is closely tied to the years, regulators have investigated
4 Made in America, Again: Understanding the
development of the product’s brand. serious health and safety problems with
• Third-party analysis suggests that pet food 1 and drywall 2 imported from value of ‘Made in the USA’, The Boston Consulting
Group (Nov. 2012) [Hereinafter Made in America,
Americans are often willing to pay China, and the OECD estimates that Again].
significantly more for American-made China is the source of the vast majority 5 See, e.g. Made in America: Most Americans love
goods compared to those made in China. of counterfeit goods imported to the the idea of buying a U.S.-made product instead of
Several of the matters under U.S.3 Against this backdrop, slapping a an import. But sometimes it’s hard to tell what’s
real and what’s not, Consumer Reports (May 21,
consideration by the Commission ‘‘Made-in-USA’’ label on a good made 2015), https://www.consumerreports.org/cro/
involve Made-in-USA fraud relating to abroad can be its own form of magazine/2015/05/made-in-america/index.htm
products made in China. counterfeiting, replacing an unpopular [hereinafter Made in America] (reporting on a
• The Commission should modify its attribute with one connoting quality, national survey finding that 60%+ of Americans
would pay a 10% premium for Made-in-USA
approach to resolving serious Made-in- safety, and authenticity. goods); Price of patriotism: How much extra are you
USA fraud by seeking more tailored In many cases, Americans are actually willing to pay for a product that’s made in
remedies that could include restitution, willing to pay a premium for goods that America?, Reuters (July 18, 2017), http://
disgorgement, notice, and admissions of are made in our country, especially fingfx.thomsonreuters.com/gfx/rngs/USA-
BUYAMERICAN-POLL/01005017035/index.html
wrongdoing, based on the facts and compared to those made in China. A (reporting on a national survey finding that 60%+
circumstances of each matter. 2012 survey by the Boston Consulting of Americans would pay a premium of 5% or more).
Group shows that more than 80% of Of course, surveys reveal only Americans’ stated
with accurate country-of-origin labels, contributed Americans express a willingness to pay willingness to pay a premium, not their actual
to our decision to vote in favor of the final Nectar buying behavior. But assuming Americans will pay
Sleep order. no premium runs contrary to the available
7 It is worth noting that all of the cases announced 1 Food & Drug Admin., Melanine Pet Food Recall evidence, and firms’ aggressive Made-in-USA
today began well before the current complement of of 2007 (May 2007), https://www.fda.gov/ branding shows they clearly see it as advantageous.
Commissioners were instated, and therefore before animalveterinary/safetyhealth/recallswithdrawals/ 6 See Made in America, supra note 5 (reporting on
daltland on DSKBBV9HB2PROD with NOTICES
staff could reasonably have been expected to ucm129575.htm. a national survey finding that 23% of Americans
2 Fed. Trade Comm’n, Tests for Defective Drywall lack trust in ‘‘Made in America’’ labels).
anticipate our particular priorities and views on
enforcement. To renegotiate these settlements at (Dec. 2009), https://www.consumer.ftc.gov/articles/ 7 Claiming falsely that a product is Made in USA
this point, after litigation strategy was developed 0124-tests-defective-drywall. violates Section 5 of the FTC Act. Although the FTC
and executed, would require substantial investment 3 Global trade in fake goods worth nearly half a brought a Made-in-USA case as early as 1940,
of staff time and effort and diversion of resources trillion dollars a year, Org. for Econ. Co-Operation Congress amended the FTC Act in 1994 to state
from other important cases. A forward-looking set and Dev. (Apr. 18, 2016), http://www.oecd.org/ explicitly that Made-in-USA labeling must be
of remedy priorities will help staff develop industry/global-trade-in-fake-goods-worth-nearly- consistent with FTC decisions and orders. See 15
litigation strategy in an efficient way. half-a-trillion-dollars-a-year.htm. U.S.C. 45a.
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![Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices 47159
I hope that the Commission will harms to competition and consumers by Commission and the Assistant Attorney
reexamine its approach to tackling seeking monetary relief, notice, General advance notice and to wait
Made-in-USA fraud. I believe we should admissions, and other tailored remedies. designated periods before
seek more tailored remedies that Every firm needs to understand that consummation of such plans. Section
vindicate the important goals of the products labeled ‘‘Made in USA’’ 7A(b)(2) of the Act permits the agencies,
program and send the message that should be made in the USA, and that in individual cases, to terminate this
Made-in-USA fraud will not be fake branding will come with real waiting period prior to its expiration
tolerated. consequences. and requires that notice of this action be
Conclusion [FR Doc. 2018–20271 Filed 9–17–18; 8:45 am] published in the Federal Register.
Nectar Sleep, Sandpiper, and Patriot BILLING CODE 6750–01–P The following transactions were
Puck clearly violated the law, allowing granted early termination—on the dates
them to enrich themselves and harm indicated—of the waiting period
FEDERAL TRADE COMMISSION provided by law and the premerger
their customers and competitors.
Especially given widespread interest in Granting of Requests for Early notification rules. The listing for each
buying American products, we should Termination of the Waiting Period transaction includes the transaction
do more to protect the authenticity of Under the Premerger Notification number and the parties to the
Made-in-USA claims. I am concerned Rules transaction. The grants were made by
that no-money, no-fault settlements the Federal Trade Commission and the
send an ambiguous message about our Section 7A of the Clayton Act, 15 Assistant Attorney General for the
commitment to protecting consumers U.S.C. 18a, as added by Title II of the Antitrust Division of the Department of
and domestic manufacturers from Made- Hart-Scott-Rodino Antitrust Justice. Neither agency intends to take
in-USA fraud. Improvements Act of 1976, requires any action with respect to these
Going forward, I hope the persons contemplating certain mergers proposed acquisitions during the
Commission can better protect against or acquisitions to give the Federal Trade applicable waiting period.
EARLY TERMINATIONS GRANTED JULY 1, 2018 THROUGH JULY 31, 2018
07/02/2018
20181318 ...... G Contura Energy, Inc.; ANR, Inc.; Contura Energy, Inc.
20181442 ...... G Paddy Power Betfair plc; FanDuel Ltd.; Paddy Power Betfair plc.
20181443 ...... G Fastball Holdings LLC; Paddy Power Betfair plc; Fastball Holdings LLC.
20181476 ...... G Spirit AeroSystems Holdings, Inc.; S.R.I.F. NV; Spirit AeroSystems Holdings, Inc.
20181482 ...... G Sanofi; Translate Bio, Inc.; Sanofi.
20181500 ...... G Michael Alexander Cannon-Brookes; Zoox, Inc.; Michael Alexander Cannon-Brookes.
20181501 ...... G JSW Energy Interests LP; FirstEnergy Corp.; JSW Energy Interests LP.
20181508 ...... G Fortive Corporation; Johnson & Johnson; Fortive Corporation.
07/03/2018
20181496 ...... G Arthur J. Gallagher & Co.; Vincent DiBenedetto; Arthur J. Gallagher & Co.
20181517 ...... G Nidec Corporation; Whirlpool Corporation; Nidec Corporation.
20181533 ...... G Ergon, Inc.; Blueknight Energy Partners, L.P.; Ergon, Inc.
07/05/2018
20181485 ...... G Ashtead Group plc; Blagrave No. 2 Limited; Ashtead Group plc.
07/09/2018
20181478 ...... G Webster Capital III, L.P.; Clark H. & Pamela A. Gustafson; Webster Capital III, L.P.
20181479 ...... G Webster Capital III, L.P.; James D. and Janet A. Clary; Webster Capital III, L.P.
07/10/2018
20181506 ...... G CJ CheilJedang Corporation; Ann M. Drake; CJ CheilJedang Corporation.
20181529 ...... G CMS Energy Corporation; Starwood Energy Infrastructure Fund II Investor, LLC; CMS Energy Corporation.
20181534 ...... G Bain Capital Fund XII, L.P.; Hercules Achievement Holdings, Inc.; Bain Capital Fund XII, L.P.
20181535 ...... G Bain Capital Fund XII, L.P.; Hercules VB Holdings, Inc.; Bain Capital Fund XII, L.P.
20181537 ...... G Ourhome Ltd.; Hanjin Heavy Industries & Construction H; Ourhome Ltd.
20181539 ...... G Clayton, Dubilier & Rice Fund X, L.P.; Cardinal Health Inc.; Clayton, Dubilier & Rice Fund X, L.P.
20181540 ...... G IIF US Holding 2 LP; American Midstream Partners, LP; IIF US Holding 2 LP.
20181541 ...... G Ken Garff Enterprises, LLC; Jefferies Financial Group Inc.; Ken Garff Enterprises, LLC.
daltland on DSKBBV9HB2PROD with NOTICES
20181545 ...... G Tiger Global Private Investment Partners VIII, L.P.; InVisionapp Inc.; Tiger Global Private Investment Partners VIII, L.P.
20181547 ...... G Tiger Global Private Investment Partners VII, L.P.; InVisionapp Inc.; Tiger Global Private Investment Partners VII, L.P.
20181550 ...... G George Feldenkreis; Perry Ellis International, Inc.; George Feldenkreis.
20181553 ...... G Madison Dearborn Capital Partners VII–A, L.P.; Audax Private Equity Fund IV, L.P.; Madison Dearborn Capital Partners
VII–A, L.P.
20181556 ...... G Blackstone Capital Partners VII L.P.; PSAV Holdings LLC; Blackstone Capital Partners VII L.P.
20181577 ...... G Telapex, Inc.; Pamlico Capital II, L.P.; Telapex, Inc.
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Document Created: 2018-09-18 01:18:05
Document Modified: 2018-09-18 01:18:05
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | Proposed consent agreement. | |
| Dates | Comments must be received on or before October 12, 2018. | |
| Contact | Julia Solomon Ensor (202-326-2377) or Crystal Ostrum (202-326-3405), Bureau of Consumer Protection, 600 Pennsylvania Avenue NW, Washington, DC 20580. | |
| FR Citation | 83 FR 47154 |
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