Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: California ‘Made in USA’ safe harbor provisions not preempted by FTC Rule in hair care products case, (Aug 6, 2025)

By Martin A. Steinberg, J.D.

Hair care products manufacturer allegedly violated California consumer protection laws by falsely labeling its haircare products as "Made in the USA" when they contain foreign-sourced ingredients like palm oil, hydrolyzed silk, and tea leaf extract that were not disclosed to consumers.

The federal court in San Diego, California issued a mixed ruling on It’s a New 10, LLC's motion to dismiss a putative class action challenging "Made in the USA" labels on haircare products. First, it rejected Plaintiff’s preemption argument by holding that neither the FTC’s “all or virtually all” standard nor 15 U.S.C. § 45a expressly or implicitly displaces California’s percentage-based safe-harbor labeling statute. Second, the court denied the motion to dismiss under Rule 12(b)(6), finding the complaint plausibly alleges that a reasonable consumer could be deceived by unqualified origin claims, thereby supporting claims under the False Advertising Law, Unfair Competition Law, and Consumers' Legal Remedies Act. Third, applying the Ninth Circuit standing doctrine, the court permitted challenges to four “substantially similar” products that Plaintiff did not purchase, but it dismissed claims as to unidentified items. Finally, because an amendment could cure any remaining pleading defects, the court granted leave to file an amended complaint within 21 days (Corona v. It's a New 10, LLC, No. 3:25-cv-00377-GPC-BLM (S.D. Cal. July 31, 2025)).

Background. On February 20, 2025, Maria Corona filed a putative class action complaint against Defendant, alleging deceptive "Made in the USA" labeling practices on the Defendant's haircare products in violation of both the FTC's "Made in the USA" rule (16 C.F.R. § 323.2) and California's "Made in the USA" rule (Cal. Bus. & Prof. Code § 17533.7). The case centers on her May 5, 2024, purchase of Defendant's Silk Express Miracle Silk Leave-In product at a Marshalls store in Carlsbad, California, where she relied on the prominent "Made in the USA" label displayed in capital letters with metallic formatting on the product's Principal Display Panel.

Plaintiff purchased the product for approximately $8.99, specifically seeking a U.S.-made product with domestic ingredients, but alleges it contains foreign-sourced ingredients, including palm oil, camellia sinensis (tea) leaf extract, hydrolyzed silk, and silk amino acids. The complaint extends to four additional products with similar allegedly false labeling: Miracle Moisture Shampoo (containing acai berry extract), Silk Express Miracle Daily Shampoo (containing palm oil and hydrolyzed silk), Miracle Daily Conditioner (containing silk amino acids), and Miracle Blowdry Volumizer (containing hydrolyzed silk). Corona argues that Defendant has systematically misled consumers for years, exploiting American consumers' perception that U.S.-made products are higher quality to either charge premium prices or gain competitive advantages.

Plaintiff asserts seven causes of action: violations of (1) California's Consumer Legal Remedies Act (CLRA), (2) Unfair Competition Law (UCL), and (3) False Advertising Law (FAL), as well as claims for (4) breach of express warranty, (5) unjust enrichment, (6) negligent misrepresentation, and (7) intentional misrepresentation. Defendant responded by filing a motion to dismiss under Fed. R. of Civ. P. 12(b)(1) (lack of subject matter jurisdiction), 12(b)(6) (failure to state a claim), and 9(b) (heightened fraud pleading requirements).

Preemption. The court found that the FTC Rule does not expressly preempt the California safe harbor provisions. Under the Supremacy Clause, valid federal law, including regulations, preempts any conflicting state statute, whether by express language, by occupying a regulatory field, or by creating direct conflicts or obstacles to federal objectives. In assessing express preemption, the Court examined 15 U.S.C. § 45a and the FTC’s implementing rule at 16 C.F.R. § 323.2, noting that Congress explicitly stated § 45a “shall not preclude the application of other provisions of law relating to labeling,” and that the FTC confirmed Congress declined to preempt state regulation of U.S.-origin claims. Plaintiff has not shown that the California safe harbor provisions stand as an obstacle to the federal objectives. Thus, there is no express federal displacement of California’s “Made in the USA” statutes.

Second, Plaintiff has not shown how the California safe harbor provisions and the FTC Rule impose contradictory or inconsistent requirements. The court found that Plaintiff has not demonstrated that the California safe harbor provisions are preempted by conflict preemption. The legislative histories of both the FTC Rule and the California safe harbor provisions demonstrate a shared purpose of consumer protection and preventing deceptive "Made in USA" labeling.

The FTC rule itself provides that it “shall not be construed as superseding … any State statute … except to the extent that such statute … is inconsistent with the provisions of this part” (16 C.F.R. § 323.5(a)). Here, “inconsistent” requires either directly contradictory requirements or an obstacle to federal objectives. The FTC’s “all or virtually all” standard mandates that final assembly and all significant processing occur domestically, and that virtually all components be U.S.-sourced—ensuring consumer protection against misleading origin claims. California’s amendments, which allow a safe harbor for products with up to 5 percent (or, in defined circumstances, up to 10 percent) foreign content by value, were crafted to address global supply-chain realities without undermining the shared federal-state goal of preventing deception. Because California’s percentage-based thresholds complement rather than contradict the FTC’s flexible “all or virtually all” test, and because the FTC expressly permits states to impose greater protections, the Court held that California’s safe-harbor provisions are neither expressly nor conflict-preempted by federal law.

The court provided the example of New Balance sneakers, which the California legislature referenced as meeting the FTC's standard despite being made with "roughly 70 percent domestic sources." This example demonstrates the pliability of the "all or virtually all" standard. Therefore, the court concluded that the FTC Rule does not preempt the California safe harbor provisions.

Consumer fraud claims. Next, the court addressed Defendant’s challenge under Rule 12(b)(6), which permits dismissal where a complaint “lacks a cognizable legal theory or sufficient facts to support” one. The court refused to dismiss the complaint for failing to allege a violation of the California MUSA Rule. Still, it granted it to the extent the complaint failed to allege that foreign ingredients in the Products fall outside the state’s safe harbor provisions.

The court found that Plaintiff’s “Made in the USA” allegations that Defendant’s products bear unqualified origin claims despite containing undisclosed foreign ingredients are pleaded with the requisite specificity and plausibly allege consumer deception and injury. The court noted that Plaintiff did not oppose Defendant’s argument that the complaint failed to plead the required elements of each cause of action. Because California’s “Made in the USA” safe-harbor statute (§17533.7) is itself codified in the False Advertising Law (FAL), the court consolidated its analysis of the FAL with claims under the Unfair Competition Law (UCL) and the Consumers Legal Remedies Act (CLRA).

Under California law, a FAL violation necessarily implicates the UCL’s prohibition on “unlawful, unfair or fraudulent” business practices, and the CLRA’s ban on “unfair methods of competition and unfair or deceptive acts or practices.” These statutes are governed by the “reasonable consumer” standard in that a plaintiff must plausibly allege that “members of the public are likely to be deceived” by the challenged representation, not merely that some unreasonable few might be confused.

Applying those principles, the court found that Plaintiff’s “Made in the USA” allegations that Defendant’s products bear unqualified origin claims despite containing undisclosed foreign ingredients were pleaded with the requisite specificity and plausibly allege consumer deception and injury. Because Defendant failed to show that these core state-law claims failed as a matter of law, and had not carried its Rule 12(b)(6) burden as to breach of express warranty, unjust enrichment, negligent misrepresentation, or intentional misrepresentation, the court denied dismissal of all remaining claims.

The court also rejected Plaintiff’s argument that the California safe harbor provisions are an affirmative defense that Defendant must bear in defending the case and not a pleading requirement. Because the safe harbor doctrine precludes plaintiffs from bringing claims based on actions the Legislature permits, caselaw supports Defendant’s position that Plaintiff must allege that its products fall outside the safe harbor provisions on a Rule 12(b)(6) motion because section 17533.7 makes lawful the labeling of products that contain a certain percentage of ingredients from foreign sources.

Accordingly, the court denied Defendant’s motion to dismiss for failing to allege a violation of the California MUSA Rule. It granted Defendant’s motion to dismiss for failing to allege that foreign ingredients in the Products fall outside the California safe harbor provisions.

Standing. The court dismissed for lack of standing any other, unidentified products featured on Defendant’s website that Plaintiff sought to include in her suit. However, Plaintiff has standing concerning those four identified items, though she did not purchase them. The prevailing Ninth Circuit rule allows class-action plaintiffs to assert claims on unpurchased products so long as the products and representations are substantially similar. Defendant argued that Plaintiff lacked Article III standing to sue over any “Made in the USA” claims on products she did not purchase, including unidentified products with unidentified ingredients. In response, Plaintiff pointed to four “substantially similar” haircare items, Miracle Moisture Shampoo, Silk Express Miracle Daily Shampoo, Miracle Daily Conditioner, and Miracle Blowdry Volumizer, that she did not buy but whose labels mirror the challenged claim.

Leave to amend. Finally, the court next addressed whether to grant Plaintiff leave to amend any dismissed claims. Leave to amend should be allowed unless the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency. Plaintiff expressly sought leave to amend any claims found deficient. Because the court found that additional factual allegations could plausibly cure the pleading defects identified, it granted Plaintiff leave to file an amended complaint within 21 days of the order.

The Case is No. 3:25-cv-00377-GPC-BLM.

Judge: Curiel, G.

Attorneys: Abbas Kazerounian (Kazerouni Law Group, APC) for Maria Corona. Trenton H. Norris (Hogan Lovells US LLP) for It's a New 10, LLC.

Companies: It's a New 10, LLC

Cases: Advertising StateUnfairTradePractices ConsumerProtection FederalTradeCommissionNews CaliforniaNews