- March 18, 2011
- Posted by: Seth Heyman
- Categories: Business Law, Featured, Marketing & Advertising Law
We Americans love our stuff. Even in the midst of the toughest recession in recent memory, we continue to buy a lot of it and we want it to be cheap enough to justify tossing a perfectly good year-old cell phone for the latest and greatest Blackberry, Android, or iPhone. We’ve known for a very long time that our stuff is made offshore; in China (mostly), or India (alot), and anywhere else in the world where people are willing work 16 hours a day at $1.50 an hour.
Outsourcing has essentially transformed our economy. The profits of U.S. companies have soared as a result of outsourcing the production of their entire product or certain components. Of course, some brave and patriotic manufacturers have kept all of their operations within our borders, and their packaging is proudly emblazoned with “Made in the U.S.A.” That term evokes a certain patriotism, and adds a warm, fuzzy feeling to any purchase by generating a mental picture of hard working parents on the assembly line, making an honest living, sending their kids to college, and otherwise living the American Dream. All too often, that picture is not entirely accurate.
In a case called Kwikset Corporation v. Superior Court (Benson), the plaintiff alleged that he was deceived by Kwikset, which marketed locksets as being “Made in the U.S.A.,” when in fact they included screws or pins made in Taiwan or Mexico. The plaintiff’s lawyers argued that Kwikset’s false advertising violated California’s unfair competition law. The plaintiff further alleged that he relied on Kwikset’s “Made in USA” representation in deciding to purchase its product, and that he would not have purchased in the absence of that representation.
Employing inaccurate product descriptions is called “false marking,” and the Federal Trade Commission has been active in pursuing enforcement actions with respect to improperly marked products. However, the FTC is a relatively small agency, and it has its hands full with more pressing matters.
On January 11, 2011, the California Supreme Court held that where an individual relies on misrepresentations on a label in purchasing a product that the individual would not have purchased without the misrepresentation, the individual does not receive the “benefit of the bargain” even if the product is not otherwise overpriced or defective. In explaining its decision, the Court offered the following analogy: If a Jew or Muslim purchases food advertised as kosher or halal that is not, or if a parent purchases food advertised as organic that is not, those individuals have not received the benefit of the bargain.
The California decision creates a whole new level of potential exposure to civil lawsuits brought by disgruntled consumers against manufacturers and distributors of products that were assembled with some materials made abroad, and which are labeled “Made in U.S.A.”
These American companies are advised to tread carefully. Litigation is one product that is still proudly “Made in the U.S.A.”