Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Retailers Settle Justice Department and FTC Claims of Textile Misidentification; FTC Issues Enforcement Policy Statement for Retail Textile Importers, (Jan 4, 2013)

By Tobias J. Gillett, J.D., LLM.

Textile retailers Amazon.com, Leon Max Inc. (doing business as Max Studio), Macy’s Inc., Sears Roebuck & Co., Kmart Corporation, and Kmart.com have agreed to settle charges that the retailers had labeled and advertised rayon textile products as being made from bamboo, in violation of the Textile Fiber Product Identification Act (TFPIA) and the FTC’s Textile Rules, the Department of Justice and the Federal Trade Commission have announced.

The FTC also announced issuance of an enforcement policy statement concerning the FTC’s policies regarding enforcement of the TFPIA, the Wool Products Labeling Act, and the Fur Products Labeling Act with respect to certain retailers that directly import textile, wool, and fur products.

Proposed Settlement Orders

According to the agencies, the retailers had advertised and labeled certain textile products they sold as containing bamboo, a fiber promoted as being relatively environmentally friendly, when the products were actually made out of rayon. For example, the agencies had alleged in their complaints that Amazon sold baby blankets and crib sheets as being made from “100% Organic Bamboo” or “100% knit bamboo,” that Leon Max sold clothing as being made from “delicate and eco-friendly bamboo and silk fabric,” ““65% BAMBOO, 35% silk,” and ““50% Bamboo, 50% Cotton,” that Macy’s sold textile products with labels containing the terms “bamboo” and “bamboo fiber,” and that Sears, Kmart, and Kmart.com (collectively, Sears) allegedly sold sheets as being made from “Pure Fiber 100% Bamboo” and “55% Bamboo/45% Cotton.”

“When attempting to appeal to environmentally conscious consumers, companies need to ensure they don’t cross the line into misleading labeling and advertising,” said Charles Harwood, Acting Director of the FTC’s Bureau of Consumer Protection. “If a textile is made of rayon, sellers need to say that, even if bamboo was used somewhere along the line in the production process.”

“Consumers pay a premium for products labeled and advertised as being made from bamboo because they believe that the product is made from a renewable resource and is good for the environment,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. “Consumers expect that they will get what they pay for; here, they didn’t.”

The proposed settlement orders would require the retailers to comply with the TFPIA and Textile Rules in future, and to ensure that future violations do not occur by distributing the orders to managers responsible for marketing or sale of textile products, by keeping records necessary to demonstrate compliance with the order, and by reporting compliance to the FTC. The orders would also require the retailers to pay monetary penalties, with Sears paying $475,000, Amazon $455,000, Macy’s $250,000, and Leon Max $80,000. Under the orders, the retailers would be able to comply with the TFPIA and Textile Rules by obtaining “good faith guarantees” that products were not mislabeled before being sold, although the guarantees would not apply if the retailers knew or should have known the products were mislabeled.

The FTC approved filing the complaints against Amazon, Macy’s, and Sears, and referring them to the Department of Justice, by a vote of 4-1, with Commissioner J. Thomas Rosch voting no. The FTC unanimously voted to file the complaint against Leon Max and to refer the company to the Department of Justice.

The FTC’s actions follow similar actions pursued in 2009 against four retailers of textile products, Sami Designs, LLC, doing business as Jonäno; CSE, Inc., doing business as Mad Mod; Pure Bamboo, LLC, and The M Group, Inc., doing business as Bamboosa, also for promoting rayon textile products as being made out of bamboo. In 2010, the FTC warned seventy-eight retailers about advertising or labeling rayon products as consisting of bamboo, including those subject to the present enforcement actions.

Enforcement Policy Statement

In conjunction with its announcement of the proposed settlement orders, the FTC also announced that it had issued an enforcement policy statement setting forth the FTC’s enforcement intentions with respect to retailers that repeat marketing claims regarding directly imported textile products in good faith reliance on information provided by the products’ manufacturers.

Under the TFPIA, the Wool Products Labeling Act, and the Fur Products Labeling Act, a retailer can avoid liability for mislabeling or false advertising of covered products if the retailer obtains a guaranty from a third party certifying that the products are not misbranded, falsely invoiced, or falsely advertised, but a retailer can only obtain such a guaranty from a “person residing in the United States.”

The enforcement policy statement provides that the FTC will not initiate an enforcement action against a retailer under the laws “where the retailer (1) cannot legally obtain a continuing or separate guaranty under the applicable Act; (2) does not embellish or misrepresent claims provided by the manufacturer related to the applicable Act or Rules; and (3) does not market the product as a private label product.” However, the policy would not apply if the retailer knew or should have known that marketing the product would violate the laws.

News: ConsumerProtection FederalTradeCommissionNews