“Made in USA” claims have been increasingly popular and continue to be a staple of FTC enforcement, even though the Commission long ago issued guidance that any such claim must be supported by a showing that “all or substantially all” of the costs associated with the product are domestic in origin. What many folks may not realize however is that California beat the FTC to the punch and passed its own “Made in USA” law decades ago. The law arguably differs from the FTC standard in that it prohibits “Made in USA” claims “when the “article, unit, or part thereof” is entirely or substantially made outside the United States. In other words, substantially all of the cost could be domestic -- satisfying the FTC standard -- but if a component of the product was imported the California law arguably does not permit a Made in USA claim. However, for many years it was a difference that made no difference as the law lay dormant. However, a pair of court decisions in class actions in 2005 and 2006 threatened to force manufacturers either to drop “Made in USA” claims entirely or create California specific packaging or claims.
California lower courts affirmed that the California statute looks not to overall domestic cost -- as does the FTC -- but rather to the origin of specific components. In this day and age that can be a difficult hurdle to overcome. However, the courts also created a high hurdle for plaintiffs, signaling that to obtain damages plaintiffs would have to show that the product was not worth the price paid or that there was a difference in quality between the product allegedly mislabeled as “Made in USA” and products that were legitimately marked. Further, concern was also raised as to whether the inability to show damages created a standing issue in that Proposition 64 requires “injury in fact” and the loss of money or property.
A recent California Court of Appeals decision may have for the time being turned the tide on any further Made in USA litigation. In the Kwikset case,the court held that the plaintiff could not make out a claim under California’s Made in USA statute unless he or she could show that they had not received the “benefit of the bargain” with respect to the mislabeled product’s cost, quality or operation. In short, that they had suffered an economic injury. Note, however, that this decision predates a California Supreme Court decision that we blogged about recently that requires only the named plaintiff to show economic injury. Indeed, a petition for review is pending. Nevertheless, barring reversal by the California Supreme Court, it may be sufficiently difficult for even the named plaintiff to show economic injury from an allegedly misleading “Made in USA” claim that plaintiffs’ lawyers may look for lower hanging fruit.
