Apparel companies are beginning to receive letters that raise the specter of significant potential liability for damages under California’s “Made in USA” false advertising law. The letters threaten to bring class action lawsuits against these companies for labeling their clothing as having been made in the U.S. even though they contain foreign-made parts. Affected companies should take these demand letters seriously and address them immediately but carefully. Sandler, Travis & Rosenberg has substantial experience helping firms protect their interests in such situations.
Companies operating in California have become accustomed to receiving so-called “Proposition 65 letters,” which threaten legal action over products found to not be compliant with the state’s product safety laws even if they meet federally mandated standards. This threat typically prompts the recipient to either fight the allegations in court or modify the manufacture of its goods, both of which incur substantial expense.
It appears this method is now also being utilized with respect to California’s requirements for labeling goods as made in the U.S., which are more stringent than those enforced by the Federal Trade Commission and prohibit such labels if “the merchandise or any article, unit or part thereof has been entirely or substantially made, manufactured or produced outside of the United States.” Apparel companies are particularly vulnerable to these claims because their goods are composed of many components sourced from numerous locations. Many apparel companies have developed specific labels to accurately reflect the origin of their goods, but even qualified claims such as “made in USA of imported materials” are being called into question in the demand letters.
Apparel companies receiving these letters should respond carefully, especially given liberal California state laws on the filing of class action litigation that present defendants with the potential for much higher expenses in the form of settlements, penalties, etc. ST&R attorneys have an established track record of helping companies in similar situations to present a strong defense and minimize any potential damages.
This article originally appeared in the Sandler, Travis & Rosenberg Trade Report, a daily e-newsletter covering the international trade agreements and global laws, regulations, policies and procedures that affect the importation and exportation of goods around the world. To receive a free subscription, click here.