Importers have long understood the need to comply with the country of origin marking requirements enforced by U.S. Customs. Now, a flurry of class action lawsuits brought under state consumer protection laws involving country of origin labeling violations serves as a reminder that domestic manufacturers must also exercise caution when advertising a product as "imported" or "Made in the USA."
Among the number of recently filed class action lawsuits are two filed against Anheuser-Busch InBev SA/NV (AB InBev) for allegedly misrepresenting the origin of beer sold in the United States. In one case, the company is accused of misleading consumers by labeling its Busch beer as made in the USA even though it contains imported hops. In the other, which was recently settled out-of-court, the company was accused of exactly the opposite: leading consumers to believe that Beck's beer is imported from Germany, when it is really brewed in St. Louis.
Background on the Class Action Lawsuits
In late June, a federal court in Florida preliminarily approved a settlement in a class action lawsuit that will require AB InBev to refund Beck's beer drinkers for allegedly marketing that beer as a German import. According to the complaint, consumers purchased Beck's beer under the mistaken belief that it was imported from Germany because its packaging states that it is a "German quality" beer "brewed under the German Purity Law of 1516" and that it "originated in Bremen, Germany." The plaintiffs argued that the small, white text on each bottle stating "Product of USA" did not clarify that misconception because that text is difficult to read, and is not visible on the outside packaging of Beck's six-packs and 12-packs. The plaintiffs had brought this action under Florida, New York and California state consumer protection laws.
The settlement between AB InBev and the plaintiffs permits individuals who purchased Beck's since 2011 to collect up to $50 in refunds. AB InBev also agreed to change Beck's packaging to prominently include the phrases "Brewed in USA" or "Product of USA" on the front and back of consumer-facing packaging and make the labels on its bottles more visible.
Interestingly, AB InBev is currently defending another class action lawsuit in California alleging it misled consumers by doing the exact opposite: labeling Busch beer as a "Product of the USA" while making the beer with imported hops -- in violation of the California Business and Professions Code, which prohibits the use of an unqualified U.S-origin claim on a label when "the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States." The complaint asks the court to award monetary damages and attorney's fees and to prohibit AB InBev from advertising Busch as "Made in the USA."
- Class action lawsuits brought under state consumer protection laws for country of origin-related violations are on the rise. The Busch beer class action suit is just one of multiple class actions pending against companies under the recently upheld California law, which that requires that 100% of the materials used to make a product labeled "Made in USA" be of U.S.-origin. On the other end, in addition to the Beck's settlement, AB InBev entered into a similar settlement in January 2015 to resolve allegations that it misled consumers to believe its U.S.-origin Kirin beer line is produced in Japan.
- Complying with the "Made in USA" labeling standards is increasingly difficult. The Federal Trade Commission (FTC) requires a product to be "all or virtually all" made in the United States to be labeled "Made in USA," and "all or virtually all" means that all significant parts and processing that go into the product must be of U.S.-origin (i.e., the product may only contain a negligible amount of foreign content). The recently upheld California standard is even stricter in that it requires that 100% of the materials used to make the product be U.S.-made. As a result, a product sold in California may require a different label than the one used in the rest of the country. Given the very high standard applicable to unqualified U.S.-origin claims, the use of qualified U.S.-origin claims (e.g., "Made in USA of U.S. and imported parts") is sometimes more appropriate and is worth considering.
- The cost of running afoul of country of origin labeling standards can be significant. Companies accused of misrepresenting the origin of their products may be liable for damages and attorney's fees (in the case of a class action) or civil penalties (in the case of an FTC enforcement action). That is likely in addition to the reputational harm of being forced to change a product's labels.
We have significant experience advising companies on country of origin determinations and product labeling. If you have any questions about these cases, please contact:
Richard Mojica, email@example.com, 202-626-1571
Austen Walsh, firstname.lastname@example.org, 202-626-5566