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. One CFA attorney firm has already been contacted by three clients who have received “notice to comply” letters.
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 and carefully.
California’s requirements for labeling goods as ‘made-in-USA’ 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”
It appears the methods used in these ‘class action’ citations mirror those utilized by Proposition 65 ‘trollers’. While there is no specific bounty hunter provision in the California "Made in USA" statute, attorney's fees are available under the California Consumer Legal Remedies Act. This provides an incentive to initiate a ‘class action’ suit, and courts often provide a "bonus" on top of the actual fees.
Apparel companies receiving these letters should respond carefully, given liberal California state laws on the filing of class action litigation. There is the potential for much higher expenses in the form of settlements, penalties, etc.
Apparel companies are particularly vulnerable to these claims because their merchandise is composed of many components sourced from numerous global entities for zippers, thread, trimmings, etc. Many apparel companies have developed specific labels to accurately reflect the origin of their goods; however, even qualified claims such as “Made in USA of Imported Materials” are being called into question within the demand letters.
It is vital to seek out the counsel of attorneys who have established a successful track record in similar situations in order to present a strong defense and minimize any potential damages.