A home goods company playing fast and loose with “Made in America” claims has been caught red-(white and blue)-handed.
Resident Home LLC and owner Ran Reske will pay $753,000 to settle Federal Trade Commission (FTC) charges that they made false, misleading or unsupported advertising claims that their imported DreamCloud mattresses were made from 100 percent USA-made materials.
Resident Home is the parent of Nectar Brand LLC, better known as Nectar Sleep, a company that had previously agreed to a 2018 FTC administrative order resolving allegations that it falsely advertised imported mattresses as “Assembled in USA.” Following the 2018 order, Reske, under penalty of perjury, stated that Resident had never made U.S.-origin claims about its DreamCloud mattress. This proved to be untrue, the FTC said Friday.
The proposed order incorporates the terms of the 2018 order, orders the payment of $753,000 and expands the application of the 2018 order to all the entities under Reske’s control.
“Baseless claims that products are made in the USA hurt not only consumers but also honest businesses that build their products here,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “Unfortunately, we see too many repeat offenders like Resident Home, but thanks to the FTC’s recently finalized Made in USA Labeling Rule, companies that abuse these labels will face civil penalties in addition to other relief. We will not hesitate to seek strong penalties against Made in USA fraud.”
In the company’s promotional material, Resident Home and Reske claimed that their DreamCloud mattresses were “proudly made with 100 percent USA-made premium quality materials.” But, according to the complaint, these repeat claims were false or misleading and violated the FTC Act. The FTC said all DreamCloud mattresses are finished overseas and, in some cases, are wholly imported or use significant imported materials.
Under the terms of the proposed order, Resident Home and Reske are prohibited from making several claims that deceive consumers and harm law-abiding businesses whose sales were siphoned because of this behavior. The order specifically covers unqualified (claims made with no limitations) U.S.-origin claims for any product unless they can show that the product’s final assembly, final processing and all significant processing takes place in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.
The order also governs any qualified (claims that include explanatory information) Made in USA claims. For qualified claims, Resident Home and Reske must include a clear disclosure about the extent to which the product contains foreign parts, ingredients, components or processing. If they want to say a product is assembled in the U.S., they must ensure that it is last substantially transformed in the U.S., that its principal assembly takes place in the U.S. and that U.S. assembly operations are substantial. Finally, the order requires Resident Home and Reske to notify affected consumers about the FTC’s order and submit compliance reports.
The Made in USA Labeling Rule went into effect on Aug. 13. Companies that violate the rule from that date forward may be subject to civil penalties.
The FTC vote to issue the complaint and accept the proposed consent order for public comment was 3-2, with the majority issuing a statement, Commissioner Rohit Chopra issuing a concurring statement, and Commissioners Noah Joshua Phillips and Christine S. Wilson issuing a joint dissenting statement. The FTC will publish a description of it in the Federal Register.
The FTC issues an administrative complaint when it has “reason to believe” that the law has been or is being violated and it appears that a proceeding is in the public interest. When the FTC issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $43,792.