Tag: labeling

FTC Takes First Actions Under New Made in USA Labeling Rule, Fining Battery Companies for Violations

The Federal Trade Commission (FTC) recently cracked down on Lithionics Battery, LLC, and Lions Not Sheep Products, LLC, for violating the FTC’s Made in USA Labeling Rule. These are some of the first enforcement actions after the FTC codified its longstanding informal Made in USA guidance, which makes it easier for the FTC to seek damages and levy fines. Under the proposed settlement, Lithionics will pay a $100,000 fine for falsely labeling batteries as US-made, while Lions Not Sheep will be required to pay $211,335 for falsely labeling clothing as US-made.

The Made in USA Labeling Rule

Under the Made in USA Labeling Rule, marketers suspected of making unqualified Made in USA claims must prove that their products:

  1. are all or virtually all made in the US;
  2. that all significant processing occurred in the US; and
  3. that the final assembly occurred in the US.

Although Congress enacted legislation authorizing the FTC to seek relief for Made in USA fraud almost thirty years ago, the FTC long remained silent on enforcement due to a general consensus that this specific type of fraud should not be penalized. The 2021 Made in USA Labeling Rule alters this perspective, codifying the FTC’s enforcement policy. With the Commission now being allowed to levy fines, seek damages, penalties, and/or redress on marketers who deceptively and fraudulently represent that their products are made in the US, the FTC has stepped up its enforcement efforts.

The FTC’s Recent Allegations with Lithionics and Lions Not Sheep

Lithionics

Lithionics is a Florida-based company best known for its battery products. The company has become a regular brand throughout American households. It designs and sells products for vehicles, as well as amusement parks.

The FTC alleged that Lithionics has been in violation of the Made in USA Labeling Rule since at least 2018 by intentionally misrepresenting the origin of Lithionics products. According to the Complaint, Lithionics’ products are labeled “Proudly Designed and Built in the USA” and feature an American flag. The claims were also featured across company websites, social media platforms, videos, and printed catalogs. However, according to the FTC, “all Lithionics battery and battery module products contain imported lithium ion cells” and “other significant imported components,” which, if true, would render Lithionics’ Made in USA claims false or unsubstantiated under the Made in USA Labeling Rule.”

Under the proposed order, Lithionics and its owner must stop making these claims unless they can prove their statements are true. As noted above, the company must also pay $100,000 for the alleged activity.

Lions Not Sheep

Lions Not Sheep is a self-proclaimed lifestyle brand that sells sweatshirts, hats, and shirts online.

In its allegations against Lions Not Sheep, the FTC alleged that the company has violated the Made in USA Labeling Rule since May 2021. According to the Complaint, the company intentionally removed tags disclosing that items were made in a foreign country. Instead of leaving the original tags, the FTC alleged that the company replaced them with Made in USA tags despite the products being “wholly imported with limited finishing work performed in the United States.” To make matters worse, the FTC found a video posted on the internet featuring the company’s owner blatantly claiming he could hide the fact that his shirts were made in China.

In addition to charging the company with violating the Made in the USA Labeling Rule, the FTC charged the company with violating mandatory country-of-origin labeling rules, which require all products covered by the Textile Act to include labels disclosing the manufacturer or marketer name and country where the product was manufactured. The company will be prohibited from making these claims and forced to pay $211,335.

Primary Takeaway

With the FTC now levying significant fines under the new Made in USA rule, the potential cost of non-compliance has also significantly increased. Companies should provide notice to their marketing teams and carefully review any existing claims to ensure that Made in USA claims are adequately substantiated and that marketing materials are not conveying unintended implied claims.

Article By Anthony V. Lupo, Dan Jasnow, and Destiny Planter of ArentFox Schiff LLP

For more antitrust legal news, click here to visit the National Law Review.

© 2022 ArentFox Schiff LLP

GM Labeling Update: Ingredient Disclosure Debate

  • As previously reported on this blog, legislation requiring labeling of genetically modified (GM) foods and food ingredients was signed into law on July 29, 2016.  This law directs the U.S. Department of Agriculture (USDA) to develop regulations and standards to create mandatory disclosure requirements for bio-engineered foods by July 2018. On June 28, 2017, USDA’s Agricultural Marketing Service (AMS) posted a list of 30 questions to obtain stakeholder input to facilitate the drafting of mandatory disclosure requirements to implement the National Bioengineered Food Disclosure Law. One of those questions is:
    • “Will AMS require disclosure for food that contains highly refined products, such as oils or sugars derived from bioengineered crops?”
  • USDA has not yet posted the comments it has received, which were due by August 25, 2017; however, several organizations have posted the comments they submitted in response to the questions. Among the organizations supporting disclosure were the Grocery Manufacturers Assn. (GMA), the International Dairy Foods Assn. (IDFA)and the Consumers Union. Noting that excluding highly refined ingredients (HRI) from the scope of the mandatory disclosure standard would result in roughly 80% fewer products being subject to the disclosure requirements under the federal law, GMA wrote, “A clear, simple, and consistent mandatory disclosure standard that includes HRI will assist manufacturers in educating consumers about biotechnology as a safe and beneficial method of plant breeding.”
  • In contrast, the Information Technology & Innovation Foundation (ITIF) and The Biotechnology Innovation Organization (BIO) are opposed to mandatory disclosure of HRI. ITIF suggested that some refined products do not contain residual DNA sequences and that “[t]here are not analytical methods that would allow such products to be identified as coming from ‘GM’ plants or animals vs. others.”
  • While USDA develops mandatory disclosure requirements for bio-engineered foods, a number of class action laws suit have been filed suggesting that products containing GM ingredients are falsely labeled as natural. For example, last week, the U.S. Supreme Court refused to hear a bid by Conagra Brands Inc. to avoid a class-action lawsuit concerning cooking oil labeled 100% natural that contains GM ingredients (see S. News). And earlier this month, Frito-Lay North America agreed to not make any non-GMO claims on certain products “unless the claim is certified by an independent third-party certification organization”(see Food Navigator).
  • We will continue to monitor developments on the National Bioengineered Food Disclosure Standard and report them to you here.
This post was written by the Food and Drug Law at Keller and Heckman of Keller and Heckman LLP., © 2017
For more Biotech, Food & Drug legal analysis, go to The National Law Review

EPA Announces Updates to Pesticide Label Review Manual

On September 19, 2017, the U.S. Environmental Protection Agency (EPA) announced an update to Chapters 15 and 16 of the Office of Pesticide Programs’ (OPP) Label Review Manual.  

Updates to Chapter 15: Company Name and Address, include removing non-label related instructions on submitting address change requests and updating the National Pesticide Information Center’s contact information, including new hours of operation. Updates to Chapter 16: Graphics and Symbols, include adding hyperlinks to graphic and logo examples and allowing a QR (Quick Response) code as an acceptable symbol when used only for retail pricing.

EPA states that the Label Review Manual, which began as a guide for EPA label reviewers, serves as a tool to assist registrants in understanding the pesticide labeling process and assists registrants in understanding approaches for how labels should generally be drafted.  Pesticide product labels provide critical information about how to safely and legally handle and apply pesticides.  EPA directs registrants to submit questions or comments on the Label Review Manual by using its Pesticide Labeling Questions & Answers — Form.

This post was written by Barbara A. Christianson of  Bergeson & Campbell, P.C. ©2017
For more legal analysis go to The National Law Review

FDA (Food and Drug Administration) Proposes Tobacco Products Rule; E-Cigarettes, Cigars To Be Regulated

Morgan Lewis logo

The rule would ban the sale of e-cigarettes, cigars, pipe tobacco, and other products to those under 18; would require warning statements on product packages and in advertisements; and would require manufacturers to register and list products the with Agency and submit new products for premarket review.

On April 25, the U.S. Food and Drug Administration (FDA or the Agency) published a proposed rule (the Rule) in the Federal Register, establishing, for the first time, federal regulatory authority over electronic cigarettes (e-cigarettes), cigars, pipe tobacco, dissolvable tobacco products, and nicotine gels (deemed tobacco products).[1]

Key Takeaways from the Rule, if Finalized

The following would apply to the newly deemed tobacco products:

  • No sales to those younger than 18 years of age and requirements for verification by means of photographic identification
  • Requirements to include health warnings on product packages and in advertisements
  • Prohibition of vending machine sales unless in an adult-only facility

In addition, per the Rule, manufacturers of newly deemed tobacco products would be subject to the following requirements, among others:

  • Register with, and report product and ingredient listings to, the Agency
  • Market new tobacco products only after FDA review
  • Not make direct and implied claims of reduced risk unless FDA confirms (1) that scientific evidence supports the claim and (2) that marketing the product will benefit public health
  • Not distribute free samples

Background

The Tobacco Control Act provides FDA with the authority to regulate cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. Section 901 of the Federal Food, Drug, and Cosmetic Act (FD&C Act), as amended by the Tobacco Control Act, permits FDA to issue regulations deeming other tobacco products not named in the tobacco control statute (e.g., e-cigarettes) to be subject to the FD&C Act. Section 906(d) provides FDA with the authority to propose restrictions on the sale and distribution of tobacco products, including restrictions on access to, and advertising and promotion of, tobacco products if FDA determines that such regulation would protect public health.

The Rule would extend FDA’s existing authority over cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco to include e-cigarettes, cigars, pipe tobacco (including hookah [water pipe] tobacco), dissolvable tobacco products, and nicotine gels. This latter group of tobacco products, deemed by FDA to be subject to the Tobacco Control Act, was not named in such legislation.

Scope of the Rule

Broadly, the Agency has proposed the following two alternatives for the scope of the deeming provisions and, consequently, the application of the Rule:

  • Option 1 would extend the Agency’s authority to all tobacco products not previously regulated by FDA that meet the statutory definition of “tobacco product,”[2] except accessories of such products
  • Option 2 would extend the Agency’s authority to all tobacco products not previously regulated by FDA that meet the statutory definition of “tobacco product,” except premium cigars[3] and the accessories of products not previously regulated by FDA

FDA is seeking comment on the relative merits of Option 1 versus Option 2, based primarily on the public health consequences of adopting one option or the other.

The principal difference between the two options is the scope of cigar regulation. Under Option 1, all cigars would be covered. Under Option 2, only a subset of cigars (i.e., “everything but “premium” cigars) would be covered by the Rule.

As noted above, accessories of proposed deemed tobacco products are outside the scope of the Rule. FDA considers accessories of proposed deemed products to be those items that are not included as part of a finished tobacco product or items that are intended or expected to be used by consumers in the consumption of a tobacco product. For example, FDA considers accessories to be those items that may be used in the storage or personal possession of a proposed deemed product (e.g., hookah tongs, bags, cases, charcoal burners and holders, cigar foil cutters, humidors, carriers, and lighters). However, e-cigarettes, and the components thereof, and hookah pipes are covered by the Rule.

Requirements; Implications for Retailers and Manufacturers

Generally, deemed tobacco products would be subject to the same FD&C Act provisions that apply to cigarettes. These include, but are not limited to the following:

  • Prohibition on selling (at a retail counter or via a vending machine) these products to persons under 18 years of age and verification by means of photographic identification related to the same
  • Enforcement action against products determined to be adulterated and misbranded
  • Required submission of ingredient listing and reporting of harmful and potentially harmful constituents (HPHCs) for all tobacco products
  • Required registration and product listing for all tobacco products
  • Prohibition against use of modified risk descriptors (e.g., “light,” “low,” and “mild” descriptors) and claims unless FDA issues an order permitting their use
  • Prohibition on the distribution of free samples
  • Premarket review requirements

Display of Health Warnings on Deemed Tobacco Product Packages and Advertisements

The Rule would require the following health warning on packages of cigarette tobacco, roll-your-own tobacco, and deemed tobacco products other than cigars sold, distributed, or imported for sale within the United States: “WARNING: This product contains nicotine derived from tobacco. Nicotine is an addictive chemical.” Regarding cigars, the Rule would require that any cigar sold, distributed, or imported for sale within the United States must bear one of the following warning statements on each product package:

  • “WARNING: Cigar smoking can cause cancers of the mouth and throat, even if you do not inhale.”
  • “WARNING: Cigar smoking can cause lung cancer and heart disease.”
  • “WARNING: Cigars are not a safe alternative to cigarettes.”
  • “WARNING: Tobacco smoke increases the risk of lung cancer and heart disease, even in nonsmokers.”
  • “WARNING: This product contains nicotine derived from tobacco. Nicotine is an addictive chemical.”[4]

These warning statement requirements also apply to advertisements of cigarette tobacco, roll-your own tobacco, and deemed tobacco products, regardless of form, which could encompass retail or point-of-sale displays (including functional items, such as clocks or change mats), magazine and newspaper ads, pamphlets, leaflets, brochures, coupons, catalogues, posters, billboards, direct mailers, and Internet advertising (e.g., websites, banner ads, etc.).

New Requirements for Deemed Tobacco Products; Implications for E-Cigarettes and Hookahs

Significantly, the Rule would require manufacturers of deemed tobacco products to meet new additional requirements. In addition to the deemed tobacco products themselves, the scope of the Rule also includes components and parts sold separately or as parts of kits sold or distributed for consumer use or further manufacturing or included as part of a finished tobacco product. Such examples would include, but are not limited to, the following:

  • Air/smoke filters
  • Tubes
  • Papers
  • Pouches
  • Flavorings used for any of the proposed deemed tobacco products (such as flavored hookah charcoals and hookah flavor enhancers)
  • Cartridges for e-cigarettes (including the liquid contained therein)

The Rule would require manufacturers of deemed tobacco products that were not on the market in the United States by February 15, 2007 to only market such products after FDA premarket clearance. The review process adopts a system similar to the medical device regulatory process. Manufacturers may submit either (1) a premarket tobacco product application (PMTA) to, and receive a marketing authorization order from, FDA or (2) a substantial equivalence (SE) report if the new product is substantially equivalent to a predicate product (i.e., a product commercially marketed in the United States as of February 15, 2007) at least 90 days prior to introducing or delivering for introduction into interstate commerce for commercial distribution of the product.[5]

A PMTA may require one or more types of studies, including chemical analysis, nonclinical studies, and clinical studies. To demonstrate substantial equivalence, an SE notice must compare a new product to a predicate product to demonstrate that the products have the same characteristics or, if there are differences between such products, that the differences do not raise different questions of public health.

The Agency intends to continue to allow the marketing of such products pending FDA’s review of either a PMTA or SE notice, presuming such application or notice is submitted within 24 months after publication of the final Rule. It is unclear whether most e-cigarette products commercially marketed in the United States could be eligible for an SE report or if they would be required to go through the PMTA process.

Although the PMTA and SE requirements do not take effect until 24 months after publication of the final Rule, we would expect manufacturers to begin, in the near term, to gather the necessary information and prepare the necessary applications/notifications to come into compliance. Those manufacturers that submit their PMTAs or SE reports early within the 24-month window presumably will receive clearance before the close of the window. Retailers should be aware of supply chain issues and possible disruptions in the marketplace because of the Rule and should work with suppliers to understand the continued availability of deemed tobacco products.

What Is Not in the Rule; No Impact on Internet Sales or Flavored Products

The Rule’s prohibition on sales from vending machines is not intended to impact the sale of any tobacco product via the Internet, and the Rule does not otherwise address Internet sales. Note, however, that state laws would continue to apply to Internet sales.

Moreover, the Rule does not restrict the sale of deemed tobacco products that are flavored. FDA specifically notes in the Rule that the prohibition against the use of characterizing flavors established in the Tobacco Control Act applies to cigarettes only (i.e., it does not apply to e-cigarettes, pipe tobacco, cigars, dissolvable tobacco products, or nicotine gels). However, FDA requests comments on the characteristics or other factors it should consider in determining whether a particular tobacco product is a “cigarette” as defined in section 900(3) of the FD&C Act and, consequently, subject to the prohibition against characterizing flavors. FDA’s request for comments in this area is in response to the proliferation of products marketed as “little cigars” or “cigarillos” (allegedly to get around the flavored cigarette ban), but which the Agency has indicated are truly cigarettes.

Compliance Dates

The age restrictions in the Rule would take effect 30 days after publication of the final Rule, whereas the proposed health warning requirements would take effect 24 months after publication of the same. The PMTA and SE requirements would also take effect 24 months after publication of the final Rule.

Comments on the Rule

Interested parties are encouraged to submit comments on the Rule, identified by Docket No. FDA-2014-N-0189 and/or Regulatory Information Number (RIN) 0910-AG38 by July 9, 2014.

[1]. Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Regulations on the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Products, 79 Fed. Reg. 23,142 (proposed April 25, 2014) (to be codified at 21 C.F.R. pts. 1100, 1140, 1143), available here.

[2]. Section 201(rr) of the FD&C Act (21 U.S.C. 321(rr)), as amended by the Tobacco Control Act, defines the term “tobacco product” to mean “any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product (except for raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product).” FDA notes in the Rule that products falling within the FD&C Act’s definition of “tobacco product” may not be considered tobacco products for federal excise tax purposes. See 26 U.S.C. § 5702(c).

[3]. The Rule defines “premium cigars” as cigars that are wrapped in whole tobacco leaf; contain a 100% leaf tobacco binder; contain primarily long filler tobacco; are made by manually combining the wrapper, filler, and binder; have no filter, tip, or non-tobacco mouthpiece and are capped by hand; do not have a characterizing flavor other than tobacco; weigh more than 6 pounds per 1,000 units; and sell for $10 or more per cigar.

[4]. In 2000, in settlements with the Federal Trade Commission (FTC), the seven largest U.S. cigar manufacturers agreed to include warnings about significant adverse health risks of cigar use in their advertising and packaging. See, e.g., In re Swisher International, Inc., Docket No. C-3964 (FTC Aug. 25, 2000). Under the 2000 FTC consent orders, virtually every cigar package and advertisement is required to clearly and conspicuously display one of several warnings on a rotating basis. FDA is proposing to adopt these four cigar warning statements from the FTC consent orders, which the vast majority of cigars already use.

[5]. FDA states in the Rule that it is aware of new product category entrants into the market after the February 15, 2007 reference date and that the SE pathway may not be available to these newer products.

Article By:

Jonathan A. Havens
Anthony “Tony” Pavel
Kathleen M. Sanzo
Of:
Morgan, Lewis & Bockius LLP

Supreme Court Will Rule on Whether Agency-Approved Beverage Label Can Be Challenged as ‘False Advertising’ in Federal Court

McDermottLogo_2c_rgb

On January 10, 2014, the U.S. Supreme Court agreed to hear an appeal by Pom Wonderful LLC against The Coca-Cola Company.  The Court will examine whether Pom can bring a federal Lanham Act false advertising claim against a Minute Maid juice product label that had been approved by the U.S. Food and Drug Administration (FDA).  (Pom Wonderful LLC v. The Coca-Cola Co., U.S. Supreme Court case no. 12-761).

At issue in the lawsuit is a Minute Maid label for “Pomegranate Blueberry Flavored Blend of 5 Juices.”  The label presents the words “Pomegranate Blueberry” in larger type than the remainder of the phrase.  Pom claimed that the label was misleading because the product contains 0.3 percent pomegranate juice and 0.2 percent blueberry juice.

A California federal trial court and the 9th Circuit federal appeals court in California both ruled that Pom could not bring a Lanham Act false advertising claim against the label, since it had been specifically examined and approved by the FDA.  Pom has argued that the decisions were contrary to established law in other U.S. courts, and that federal regulations establish a floor –but not a ceiling — on what an advertiser is required to do to avoid a claim that the advertising is false and misleading.  Coca-Cola has argued that product labeling that is specifically authorized by the Food, Drug and Cosmetic Act (FDCA) and approved by the FDA cannot be charged as false or misleading under another federal statute such as the Lanham Act.

Although the question before the Supreme Court is whether a private party can bring a Lanham Act claim challenging a product label regulated under the FDCA, the Supreme Court’s decision could potentially have significant implications for the alcohol beverage industry.  For example:

  • If the Supreme Court rules that a competitor cannot bring a Lanham Act claim against a label that has been approved by the FDA, a natural question is whether the same rule will apply with regard to alcohol beverage labels that have been reviewed and approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB) (by its terms, the Federal Alcohol Administration Act does not preempt the Lanham Act); and
  • If a Lanham Act claim would be barred against labels approved by TTB, a question may arise about whether a Lanham Act claim would be barred on elements of the label that TTB does not specifically review as a matter of policy – such as contrast, size and placement of label elements.

The Supreme Court is expected to hear argument this spring and decide the case by June 2014.  Depending on the decision, alcohol beverage industry members could find they have additional insulation against a federal false advertising claim, but they may likewise be limited in bringing a federal false advertising lawsuit against a competitor’s label that has been approved by TTB.

Article by:

Robert W. Zelnick

Of:

McDermott Will & Emery