Wire Manufacturer and its Distributor and a Cosmetics Co. Agree to Settle Charges of Making Misleading "Made in USA" Claims

An electrode manufacturer and its distributor, both based in Connecticut, and a California-based cosmetics company have all agreed to settle Federal Trade Commission charges that they misrepresented that certain products they make are made in the United States. According to the FTC, these representations by The Wire Works, Inc., Electrodes, Inc., and Physicians Formula Cosmetics, Inc. were false or misleading because these products were actually made with significant foreign components or labor. The proposed settlements with The Wire Works, Inc., Electrodes, Inc., and Physicians Formula Cosmetics, Inc. would prohibit the companies from misrepresenting the extent to which their products are made in the United States.

In December 1997, after a comprehensive policy review, the FTC concluded that "Made in USA" advertising and labeling claims must continue to conform to the "all or virtually all" standard that traditionally has been applied by the Commission. Under this standard, unqualified U.S. origin claims must be substantiated by evidence that a product is "all or virtually all" made in the United States. In addition, the agency issued an Enforcement Policy Statement outlining the factors the Commission will consider in determining whether a U.S. origin claim is "deceptive." In December 1998, the FTC issued a new business guide: "Complying with the Made in USA Standard." This guide describes the principles of the FTC's standard for such claims and uses examples to help businesses understand how to comply with the standard.

Earlier this year, the Commission announced final consent orders settling charges that six other manufacturers of consumer and business products had misrepresented that their products were made in the United States. Jodie Bernstein, Director of the Commission's Bureau of Consumer Protection, emphasized: "Whether it's lawnmowers, fishing line, wrenches, or cosmetic accessories sold to consumers, or industrial or commercial products sold to other businesses, 'Made in USA' claims must be truthful and backed by evidence that they are entirely American products."

The Wire Works, Inc. and Electrodes, Inc.

Based in Milford, Connecticut, The Wire Works, Inc. produces drawn brass wire which it sells for use as Electrical Discharge Machining (EDM) wire electrodes. Electrodes, Inc. distributes and sells EDM materials, supplies, and accessories, and is the sole distributor for Wire Works' EDM wire electrodes. According to the FTC's complaint, the two companies disseminated advertising and labeling for their EDM wire electrodes that contained such statements as:

• [M]anufactured right here in the USA; and
• Made in USA;

when, in fact, a substantial portion of the components and labor used to produce their EDM wire electrodes was of foreign origin.

The proposed settlement would prohibit the companies from misrepresenting the extent to which their EDM wire electrode products are made in the United States.

Physicians Formula Cosmetics, Inc.

A Delaware corporation based in Azusa, California, Physicians Formula Cosmetics, Inc. sells and distributes cosmetics, cosmetics brushes, and skin-care products. The FTC's complaint charges that the company misrepresented that certain of its cosmetics, cosmetic brushes, and skin-care products are made in the United States, i.e., that all, or virtually all, of the parts of the products are made in the United States, and all, or virtually all, of the labor in manufacturing the products is performed in the United States. According to the FTC, these representations were false or misleading because a significant portion of the products' content was of foreign origin.

The proposed settlement would prohibit the company from misrepresenting the extent to which any of its products are made in the United States.

The Commission votes to accept the proposed consent agreements for public comment were 4-0. Announcements regarding the proposed consent agreements will be published in the Federal Register shortly. The agreements will be subject to public comment for 60 days, after which the Commission will decide whether to make them final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: Consent agreements are for settlement purposes only and do not constitute an admission of a law violation. When the Commission 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 $11,000.

Copies of the complaints, proposed consent agreements and an analysis of each to aid in public comment as well as the business guide, Enforcement Policy Statement and a Consumer Alert concerning the use of "Made in USA" advertising and labeling claims, are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.