$750K Wake Up Call: FTC Fines Mattress Manufacturer Over False Made in USA Claims
The 2018 FTC Order and 2019 Compliance Report
In 2018, the FTC filed a complaint against Resident Home LLC (Resident) alleging that the company’s claims that its mattresses were “assembled in the United States” were false and misleading. The matter was resolved via the imposition of an administrative order by which Resident was prohibited from making further misrepresentations as to the origins of its products and services. The order also required Resident to provide a compliance report the following year.
In 2019, Resident duly filed a compliance report in which Resident’s owner, Ran Reske (Reske), attested under penalty of perjury that Resident “has never made US origin claims” and that Resident did “not create advertisements, marketing materials, or representations that their products are of a U.S. origin.”
The 2021 FTC Fine and Settlement
Despite the statements made in the 2019 report, from 2018 to 2020, Resident repeatedly claimed its mattresses are “proudly made with 100% USA-made premium quality materials,” the FTC alleges. The FTC further alleges that in fact, “in numerous instances, [Resident] mattresses are wholly imported or incorporated significant imported materials, [and i]n all instances, [Resident] mattresses are finished overseas.” Thus, in addition to contradicting the 2019 report, the FTC found that Resident’s US-origin claims were false or misleading, and constituted unfair or deceptive acts in violation of the FTCA.
Resident and Reske subsequently entered an FTC agreement and consent order imposing, among other things, a $750,000 fine. The consent order also prohibits Resident from making any unsubstantiated product origin claims, and from making any US-origin claims without a clear and conspicuous disclaimer immediately adjacent to the claim noting the extent of foreign component-parts and manufacture. The order also bars Resident from making any US-origin claim without demonstrating that the products meet US assembly standards, including, in part, that the products are substantially assembled and transformed in the US and that the principal assembly is in the US. The order further compels Resident to file regular compliance reports with the FTC and to notify its customers of the FTC proceeding and of its misleading US-origin claims.
US-origin claims must be carefully scrutinized to ensure they comply with key regulatory requirements. As we have seen, and as this case demonstrates, the FTC is closely monitoring these claims and is willing to levy hefty fines against non-compliant companies. This willingness is only bolstered by the FTC’s Made in USA Labeling Rule, which came into effect in August 2021 and provides for civil penalties.