Where In The World Is My Product From?

Consumer Class Action, Direct Competitor Lawsuit, False Advertising, Made in the USA,


By: Brent E. Johnson 

A trio of recent legal developments has once again confirmed that false advertising about where products are made is big business for plaintiffs’ lawyers and grist for public interest organizations.  The Lanham Act makes it unlawful for a company to make advertising claims that misrepresent[ ] . . . the geographic origin of [its] or another person’s goods . . . .”  15 U.S.C. §1125(a)(1)(A).  Some states have similar prohibitions — and these laws allow for class action lawsuits.  For example, #4 on the California Consumer Legal Remedies Act’s Top 26 Advertising No-No’s List is “[u]sing deceptive representations or designations of geographic origin in connection with goods or services.”  California Civil Code §1770(a)(4).  Why then — if federal and state law exposes companies to lawsuits and enforcement actions if they make false representations about where their products come from — do companies (sometimes big, sophisticated companies) keep making them?  The three cases discussed below give us some idea.  Let’s take them from hardest to understand to easiest.

1.         The Mercedes-Benz Sprinter Van

Perhaps you’ve seen one of the brand-new, dark grey Amazon Prime Sprinter vans roaming your neighborhood recently.  If so, you should know that Amazon purchased 20,000 of these high-end commercial vehicles after Mercedes-Benz opened its $500 million Sprinter manufacturing plant in North Charleston, South Carolina in September 2018.  At the time it signed its mammoth order, Dave Clark, Amazon’s Senior Vice President of Worldwide Operations, told the press, “We’re proud to partner with Mercedes-Benz Vans to contribute to local economies through the order of Amazon-branded Sprinter vans produced at their new plant in North Charleston.”  For its part, Mercedes-Benz was rightfully proud to point out that its plant employs 900 Americans and plans to expand to 1,300 by the end of 2020.

Perhaps the spirit of bonhomie got a little out of control at Mercedes-Benz because soon after the plant opened, the Company released a video commercial, “If I Built a Van.”  In fairness to Mercedes-Benz and its advertising firm, it’s a fabulous spot — one that should make anybody in the market for a commercial van want to go out and buy one right away.   https://www.ispot.tv/ad/d05_/2019-mercedes-benz-sprinter-if-i-built-a-van-t1#  As the title suggests, the focus of the commercial is Mercedes-Benz’s ability to customize the Sprinter.  As a woman with a mobile pet care service explains, if she built a van, “I’d make it available in dozens, make that thousands of configurations!”  Unfortunately, at the very end of the advertisement, a U.S. autoworker appears from beneath a Sprinter van raised on a hydraulic jack and says that, if he built a van, “I’d build it right here in South Carolina.”  The video ends with the narrator stating that the 2019 all-new Sprinter is “built in the USA,” with those words appearing prominently above a photo of a Sprinter.

It’s important to note that Mercedes-Benz did not opt for the “Assembled in the USA” tagline that the Federal Trade Commission specifically allows in its guidance on its Made in USA Standard if the product’s “principal assembly takes place in the U.S. and the assembly is substantial.”  https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard.  Perhaps Mercedes-Benz believed that “Built in the USA” was more analogous to “Assembled in the USA” than “Made in the USA.”  But the lesson here is that, if FTC gives you an out, don’t try to stretch it.

In any event, the “If I Built a Van” campaign drew the ire of Truth In Advertising, Inc. (TINA.org), a non-profit that battles what it believes to be deceptive advertising.  In a succinct letter to Mercedes-Benz, TINA.org argued that “Built in the USA” is synonymous with “Made in the USA,” and, under FTC’s standard, “all significant parts and processing that go into the product must be of U.S. origin” and the product must contain “no – or negligible – foreign content.”  https://www.truthinadvertising.org/wp-content/uploads/2019/03/Warning-Letter-TINA-to-MB-Vans-3_22_19-REDACTED.pdf.  TINA.org further asserted that, putting aside the foreign content in the Sprinter vans, it had researched the vehicle identification numbers of the vans offered for sale by U.S. dealerships and “90% of a 2,390 sampling . . . are imported from Germany.”  While it’s pure conjecture, it seems that Mercedes-Benz may have believed that because it was, in fact, assembling some Sprinter vans in South Carolina, it was entitled to advertise that its Sprinters were “Built in the USA.”

To its credit, upon receipt of TINA.org’s letter, Mercedes-Benz immediately set about modifying its advertising campaign by removing the video commercial and modifying its radio spots as well as its online advertising.  In a written response to TINA.org, Mercedes-Benz stated that it was “modifying the current marketing campaign to focus on the jobs and capital invested in the United States.”  Based on the Company’s response, TINA.org did not escalate the matter to FTC.

2.         Dueling Grannies

Grannies make great bread.  Not our grannies, but other grannies.  However, is your granny local?  That was one of the questions posed to a Utah jury in Bimbo Bakeries USA, Inc. v. Leland Sycamore, Tyler Sycamore, Wild Grains Bakery LLC and United States Bakery, Inc. 2:13-cv-00749-DN.  Back in 2013, Bimbo Bakeries sued United States Bakery, Inc. for alleged misappropriation of trade secrets and trade dress infringement.  As often happens when competitors get into a row over intellectual property, a Lanham Act false advertising claim was thrown in.  In this case, Bimbo Bakeries’ claimed that U.S. Bakery falsely advertised its bread as “local,” when it was not.

A little background.  Defendant U.S. Bakery, which does business as Franz Family Bakeries, is headquartered in Portland, Oregon.  It operates commercial bakeries in Anchorage, Alaska; Springfield and McMinnville, Oregon; Billings, Montana; Spokane and Seattle, Washington; Los Angeles, California; and Nampa, Idaho.  One of U.S. Bakery’s products was Grandma Emilie’s Bread.  Plaintiff Bimbo Bakeries sells a brand of bread that competed with Grandma Emilie’s called, “Grandma Sycamore’s Home-Maid Bread.”  Grandma Sycamore’s is sold in Utah, Idaho, Nevada, Arizona, Colorado, Oregon, Washington, Wyoming, and New Mexico.

U.S. Bakery advertised Grandma Emilie’s Bread as “Fresh. Local. Quality.”  Bimbo Bakeries alleged that this representation violated the Lanham Act because Grandma Emilie’s is not baked locally.  U.S. Bakery responded by asserting that the word “local,” is puffery – a vague generality upon which no reasonable consumer would rely – because “local” does not reference a specific geographic location.  The Court disagreed, holding that “[a]lthough it does not carry a set definition, the term ‘local’ is a statement of fact – not a statement of general opinion – which could be found to be misleading as to the nature, characteristics, or qualities of U.S. Bakery’s bread.”  When the issue was put to the jury after testimony from Bimbo Bakeries’ experts, they agreed, finding that “local” is “a geographically descriptive term . . . and [U.S. Bakery used the term] to suggest that its bread products were particularly fresh and of high quality because they were baked within the geographic vicinity of where they were sold.”  The jury awarded Bimbo Bakeries $8,027,720 in damages, which was the amount that its damages expert calculated as Bimbo Bakeries’ lost profits in the eight states where Grandma Sycamore’s Bread is sold.

The saga does not end here, however.  Bimbo Bakeries’ damages expert relied on data from the Company’s consumer survey expert to develop his damages calculation for lost profits in all eight states where the bread companies competed.  The survey expert, however, limited his research to Utah consumers – the state where the lawsuit was pending — ignoring consumers in the other seven states.  And the survey expert admitted during cross-examination that consumers in different states might have different views on what “local” means.  The result?  Bimbo Bakeries’ damages were reduced from the aforementioned $8,027,720 to $83,398.  You do the math.

3.         From Hawaii Via Oregon And Points Beyond      

It’s never a bad idea to evoke images of Hawaii.  Since at least the 1960s, when the California and Hawaii Sugar Company touted the superiority of cane sugar “from Hawaii, growing in the sun,” companies have realized the psychological power of associating their brands with the Islands.  Such is the case with Kona Brewing Company, a beer brand owned by Craft Brew Alliance, Inc. of Portland, Oregon.  From its beautifully designed bottles featuring an embossed image of the Hawaiian Islands and, in cursive, the words, “Liquid Aloha” to its creative beer names – e.g., “Big Wave Golden Ale,” “Longboard Island Lager,” “Pipeline Porter” – the Kona Brewing brand speaks to mainlanders who yearn to return, at least in their minds, to the Aloha State.

Kona Brewing was started in 1994 by Cameron Healy and Spoon Khalsa.  In 1998, the father/son team opened their first brew pub on Hawaii’s Big Island.  In 2010, Kona Brewing was purchased by Craft Brew and quickly became one of its most successful beer brands, which brands also include Redhook and Widmer Brothers.  Shortly after the acquisition, Craft Brew began brewing Kona beers for sale in the continental United States in Portland, Oregon; Portsmouth, New Hampshire; Woodinville, Washington; and Memphis, Tennessee.

On February 28, 2017, two California shoppers filed a putative class action against Craft Brew claiming that they were misled into believing that they were buying beer brewed in Hawaii when they purchased Kona Brewing libations.  And what was their harm?  This is how they explain it:  “The significance of brewing Kona Brewing Co. beer in the mainland, as opposed to Hawaii, extends beyond consumer sentiment.  Craft Beer and/or Kona Brewing Co. publicly acknowledge that, as a result of brewing Kona Brewing Co. beer in the continental United States, this beer does not contain Hawaii water.”  Yet in the same breath, plaintiffs quote Kona Brewing’s website that “[t]he beer brewed at Kona Brewing Company’s partner breweries utilizes Kona’s hops, malt and proprietary yeast.  The water mineral levels at each brewery are adjusted to replicate the water used in Hawaii.”  In other words:  (1) Kona Brewing brews its beer for sale in the continental United States in the continental United States; and  (2) it tastes the same as the beer it brews in Hawaii.

It’s noteworthy that much of plaintiffs’ support for the claim that Kona Brewing’s beer is not brewed in Hawaii comes from Kona Brewing’s website, itself.  Clearly, this was not a well-kept secret – if it was a secret at all.  Moreover, the complaint acknowledges that, on the side of the bottle labels of each bottle of Kona Brewing’s beers, it states, “KONA BREWING CO KONA HAWAII · PORTLAND, OR · WOODINVILLE, WA · PORTSMOUTH, NH · MEMPHIS TN” (albeit in “small lettering” – but in all capital letters).

On April 25th, Craft Brew indicated in an SEC filing that it expects to incur costs of approximately $4.7 million to settle the lawsuit.  This amount includes attorney fees, costs, and class administration expenses, but does not include compensation to class members.  The fact that Craft Brew is settling is unsurprising.  In 2015, Anheuser-Busch InBev NV settled a class action alleging that the Company tricked consumers into believing that its Beck’s Beer was brewed in Germany.  We’ll know more about the terms of the settlement as the parties move toward a preliminary approval hearing set for May 23rd.

What should we learn from these cases?  Here are our key take-aways:

  • If you’re going to advertise where your products are made, make sure your claims are 100% accurate as to all products.
  • Take the FTC “Made In The USA” Standard literally.
  • The term “local” has a discernable meaning.  It’s not clear what that meaning is, however, and it probably varies from case to case.  A court won’t necessarily tell you what “local” means — it may be a jury.  Therefore, take care using that term.
  • Branding can be tricky when your brand evokes a geographic location.  If your brand leads consumers to believe something about your product’s origin that is inaccurate, disclosures may not cure the problem (although they should).

Finally, although it’s not the focus of this post, keep in mind that suing a competitor for false advertising (a Lanham Act claim) is tough business.  Even if your cause is just and the advertising is awful, it takes a lot of money (attorney and expert fees) to build a credible damages case.  If you take shortcuts, even if a jury buys your argument, a court may not because large advertising verdicts always seem a bit speculative, particularly in a multi-competitor market.