The five companies that account for nearly all of the private brand manufacturing of analgesic products in the United States have agreed to settle Federal Trade Commission charges that they falsely represented that certain of their over-the-counter (OTC) analgesics were made in the United States. According to the FTC, many of the "Made in USA"-labeled products contain imported active ingredients (bulk aspirin, acetaminophen, or ibuprofen compounds) that constitute a substantial portion of the total cost of the finished products. The FTC alleges that this labeling violates the Commission's standard that "Made in USA" claims be supported by evidence that the product is "all or virtually all" domestically made. The proposed settlements in these cases would prohibit the companies from misrepresenting the extent to which any of their OTC drug products that contain analgesics are made in the United States.
"American consumers are more sensitive than ever to claims that a product is made in America," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "If a company chooses to make an American-made claim, it should comply with the Commission's standard. Here, the high level and nature of the foreign content exceed any reasonable expectation of the meaning of 'Made in USA.' "
In each of these cases, the FTC's complaints allege that the five companies misrepresented that certain of their analgesic products were all or virtually all made in the United States when a significant portion of their content was of foreign origin. According to the complaints, the active ingredients - bulk aspirin, acetaminophen, or ibuprofen compounds - that respondents processed into tablets are or were made outside the United States. The FTC has explained that the imported bulk ingredients comprise a substantial percentage of total manufacturing costs and impart the crucial analgesic quality to the OTC products at issue. According to the FTC, all of the claims are express statements made on the companies' packaging and labeling, which in some instances were accompanied by pictures of U.S. flags.
The Commission's complaints do not allege that all of the respondents' private label aspirin, acetaminophen, and ibuprofen brands are mislabeled, but only that certain products for certain customers have been improperly labeled. In addition, the FTC did not uncover any evidence that the drugs were adulterated or contained harmful substances.
Perrigo Company, based in Allegan, Michigan, is the nation's largest manufacturer of OTC pharmaceutical products for the store brand market. Perrigo manufactures and sells aspirin, acetaminophen, and ibuprofen tablets for private label customers such as Wal-Mart, Kmart, Target, and Safeway.
A&S Pharmaceutical Corp., based in Bridgeport, Connecticut, manufactures aspirin products for customers such as Food Lion, Price Chopper, and BJ'S Wholesale Club.
Leiner Health Products, Inc., of Carson, California, manufactures acetaminophen tablets for customers such as Wal-Mart, Costco, Target, and Safeway.
LNK International, Inc., based in Hauppauge, New York, manufacturers and sells OTC drug products containing aspirin and acetaminophen. Its customers include Compass Foods (A&P),
Eckerd Drug Company, and Stop & Shop Supermarket Company.
Pharmaceutical Formulations, Inc. is based in Edison, New Jersey. The company manufactures, labels, sells, and distributes products containing aspirin and acetaminophen sold at retail bearing private brand names for customers such as Kmart, Duane Reade, Eckerd Drug Company, and Walgreen Co.
Each of the proposed settlements would prohibit the respondent from misrepresenting the extent to which its OTC drug products containing an analgesic are made in the United States. As in the FTC's prior "Made in USA" cases, the settlements provide a "safe harbor" that allows the respondents to represent that a product is made in the United States so long as all, or virtually all, of the ingredients or component parts of the product are made in the United States and all, or virtually all, labor employed to manufacture the product is performed in the United States. The orders would allow the respondents to represent that a product containing an imported active ingredient is "Processed in the United States with Foreign Ingredients" when the representation is true and is used to describe a product that has been significantly processed in the United States.
In addition, each of the settlements contains a number of recordkeeping and reporting requirements to assist the FTC in monitoring compliance with the orders.
In December 1997, after a comprehensive policy review, the FTC concluded that "Made in USA" advertising and labeling claims must continue to conform to the "all or virtually all" standard that the Commission traditionally has applied. Under this standard, unqualified U.S. origin claims must be substantiated by evidence that a product is "all or virtually all" made in the United States. In addition, the agency issued an Enforcement Policy Statement outlining the factors the Commission will consider in determining whether a U.S. origin claim is "deceptive." In December 1998, the FTC issued a business guide: "Complying with the Made in USA Standard." This guide describes the principles of the FTC's standard for such claims and uses examples to help businesses understand how to comply with the standard. The FTC also has a "Made in USA" Web page (www.ftc.gov/os/statutes/usajump.htm), which includes the Enforcement Policy Statement, information about enforcement actions and investigations, and related business education materials.
The Commission vote to accept the five proposed consent agreements and place them on the public record was 5-0. A summary of the proposed consent agreements will be published in the Federal Register shortly. The agreements will be subject to public comment for 30 days, until December 6, 2001, after which the Commission will decide whether to make them final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000 per day.
Copies of the complaints, the proposed consent agreements, and an analysis of each to aid in public comment are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.htm. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad
(FTC File Nos.012 3039 (Lenier) 012 3051 (A&S) 012 3121 (Perrigo) 012 3058 (LNK) 012 3059