[Federal Register Volume 86, Number 5 (Friday, January 8, 2021)]
[Notices]
[Pages 1497-1500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00083]


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FEDERAL TRADE COMMISSION

[File No. X160032]


Chemence, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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[[Page 1498]]

SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices. The attached Analysis to Aid Public Comment describes both 
the allegations in the complaint and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before February 8, 2021.

ADDRESSES: Interested parties may file comments online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Chemence, Inc.; File 
No. X160032'' on your comment, and file your comment online at https://www.regulations.gov by following the instructions on the web-based 
form. If you prefer to file your comment on paper, mail your comment to 
the following address: Federal Trade Commission, Office of the 
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Julia Solomon Ensor (202-326-2377), 
Bureau of Consumer Protection, Federal Trade Commission, 600 
Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC website, at this web address: https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before February 8, 
2021. Write ``Chemence, Inc.; File No. X160032'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Due to protective measures in response to the COVID-19 pandemic and 
the agency's heightened security screening, postal mail addressed to 
the Commission will be subject to delay. We strongly encourage you to 
submit your comments online through the https://www.regulations.gov 
website.
    If you file your comment on paper, write ``Chemence, Inc.; File No. 
X160032'' on your comment and on the envelope, and mail your comment to 
the following address: Federal Trade Commission, Office of the 
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580; or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024. If possible, submit your paper comment to the Commission by 
courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's Social 
Security number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing the proposed settlement. The FTC Act and 
other laws that the Commission administers permit the collection of 
public comments to consider and use in this proceeding, as appropriate. 
The Commission will consider all timely and responsive public comments 
that it receives on or before February 8, 2021. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``FTC'' or ``Commission'') has 
accepted, subject to final approval, an agreement containing a consent 
order from Chemence, Inc. and James Cooke (``Respondents'').
    The proposed consent order has been placed on the public record for 
thirty (30) days for receipt of comments from interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and the comments received, and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    This matter involves Respondents' advertising, labeling, sale, and 
distribution of cyanoacrylate ``superglue'' products as made in the 
United States. According to the FTC's complaint, Respondents 
represented that the cyanoacrylate ``superglue'' products they 
manufactured and supplied to trade customers were all or virtually all 
made in the United States. In fact, significant proportions of the 
chemical inputs, and overall costs, to manufacture Respondents' 
cyanoacrylate ``superglues'' are attributable to foreign materials. In 
numerous instances, foreign materials accounted for more than 80% of 
materials costs and more than 50% of overall manufacturing costs for 
these

[[Page 1499]]

products. The complaint also alleges that, by distributing promotional 
materials containing misrepresentations regarding the U.S. origin of 
their products, Respondents provided trade customers the means and 
instrumentalities to commit deceptive acts or practices. Based on the 
foregoing, the complaint alleges that Respondents engaged in deceptive 
acts or practices in violation of Section 5(a) of the FTC Act, and 
violated a 2016 federal court order in the process.
    The proposed consent order contains provisions designed to prevent 
Respondents from engaging in similar acts and practices in the future. 
Consistent with the FTC's Enforcement Policy Statement on U.S. Origin 
Claims, Part I prohibits Respondents from making U.S.-origin claims for 
their products unless either: (1) The final assembly or processing of 
the product occurs in the United States, all significant processing 
that goes into the product occurs in the United States, and all or 
virtually all ingredients or components of the product are made and 
sourced in the United States; (2) a clear and conspicuous qualification 
appears immediately adjacent to the representation that accurately 
conveys the extent to which the product contains foreign parts, 
ingredients or components, and/or processing; or (3) for a claim that a 
product is assembled in the United States, the product is last 
substantially transformed in the United States, the product's principal 
assembly takes place in the United States, and United States assembly 
operations are substantial.
    Part II prohibits Respondents from making any country-of-origin 
claim about a product or service unless the claim is true, not 
misleading, and Respondents have a reasonable basis substantiating the 
representation.
    Part III prohibits Respondents from providing third parties with 
the means and instrumentalities to make the claims prohibited in Parts 
I or II.
    Parts IV through VI are monetary provisions. Part IV imposes a 
judgment of $1,200,000. Part V includes additional monetary provisions 
relating to collections. Part VI requires Respondents to provide 
sufficient customer information to enable the Commission to administer 
consumer redress, if appropriate.
    Part VII is a notice provision requiring Respondents to identify 
and notify certain third-party trade customers of the FTC's action 
within 30 days after the issuance of the order, or within 30 days of 
the customer's identification, if identified later. Respondents are 
also required to submit reports regarding their notification program.
    Parts VIII through XI are reporting and compliance provisions. Part 
VIII requires Respondents to acknowledge receipt of the order, to 
provide a copy of the order to certain current and future principals, 
officers, directors, and employees, and to obtain an acknowledgement 
from each such person that they have received a copy of the order. Part 
IX requires Respondents to file a compliance report within one year 
after the order becomes final and to notify the Commission within 14 
days of certain changes that would affect compliance with the order. 
Part X requires Respondents to maintain certain records, including 
records necessary to demonstrate compliance with the order. Part XI 
requires Respondents to submit additional compliance reports when 
requested by the Commission and to permit the Commission or its 
representatives to interview Respondents' personnel.
    Finally, Part XII is a ``sunset'' provision terminating the order 
after twenty (20) years, with certain exceptions.
    The purpose of this analysis is to aid public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the proposed order or to modify its terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.

Statement of Commissioner Rohit Chopra In the Matter of Chemence, Inc.

Summary

    <bullet> Made in USA fraud harms both consumers and honest 
competitors. Yet for decades, FTC Commissioners pursued a no-money, no-
fault settlement strategy to tackle this problem, ignoring 
Congressional authority to penalize bad actors.
    <bullet> Over the last two years, the Commission has begun to turn 
the page on its checkered record, obtaining significant judgments for 
Made in USA fraud and initiating a rulemaking to trigger damages and 
penalties.
    <bullet> Today's action against Chemence and a top executive is 
another step forward in protecting the Made in USA brand and restoring 
the Commission's law enforcement credibility.
    For markets to function fairly, the Federal Trade Commission must 
be a credible watchdog, ensuring that companies have an incentive to 
follow the law and adhere to the agency's rules and orders. Corporate 
defendants that blatantly lie about their products have been able to 
convince Commissioners that their conduct caused no harm, allowing them 
to extract settlements with virtually no consequences whatsoever. 
Robert Pitofsky, who served as a Commissioner and later as the agency's 
Chairman, described these no-money, no-fault orders as ``scandalously 
weak.'' \1\
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    \1\ See Irving Scher et al., Part II--FTC Improvement Act, 45 
Antitrust L.J. 96, 117 (1976).
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    Longstanding FTC policies recognize that blatant deception harms 
consumers and diverts sales from honest competitors.\2\ But, over the 
years, Commissioners quietly adopted a permissive approach toward 
corporate fraud, while bringing down the hammer on small, fly-by-night 
operations. Going hard on small businesses can give the appearance of 
active enforcement, even as more established companies face few 
consequences for their wrongdoing.
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    \2\ For example, the Commission's Policy Statement on Deception 
notes that ``[t]he prohibitions of Section 5 are intended to prevent 
injury to competitors as well as to consumers.'' FTC Policy 
Statement on Deception, 103 F.T.C. 174, 175 (1984) (appended to 
Cliffdale Assocs., Inc., 103 F.T.C. 110 (1984)), https://www.ftc.gov/public-statements/1983/10/ftc-policy-statement-deception.
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    However, there are promising signs that this is changing. One of 
the best examples of our moving away from lax enforcement is our Made 
in USA fraud program. Today, the Commission is announcing another 
action against an established corporate actor, showing we are turning 
the page on our permissive policy of the past.

FTC's Flawed Made in USA Enforcement Strategy

    Consumers prefer goods that are produced domestically, and they are 
even willing to pay more for them.\3\ This gives bad actors an 
incentive to unlawfully parade their products with the ``Made in USA'' 
brand. Government enforcement can ensure that this strategy does not 
pay off.
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    \3\ See, e.g., Kong, Xinyao and Rao, Anita (June 8, 2020). ``Do 
Made in USA Claims Matter?,'' University of Chicago, Becker Friedman 
Institute for Economics Working Paper No. 2019-138, Available at 
SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3468543.
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    However, for decades, there was bipartisan consensus at the Federal 
Trade Commission that Made in USA fraud should not be penalized. Even 
in egregious cases, most matters were resolved with no-money, no-fault 
settlements, and many violators received nothing more than closing 
letters. In 1994, Congress authorized the Commission to do more--
granting the agency new authority to trigger penalties and damages for 
Made in USA fraud--but past Commissioners declined to even propose 
implementing

[[Page 1500]]

this new authority, allowing it to languish for a quarter century.\4\
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    \4\ See generally Statement of Commissioner Rohit Chopra 
Regarding Activating Civil Penalties for Made in USA Fraud (Apr. 17, 
2019), https://www.ftc.gov/public-statements/2019/04/statement-commissioner-rohit-chopra-regarding-activating-civil-penalties. In 
fact, under pressure from interest groups in the 1990s, 
Commissioners tried to weaken the Made in USA standard in light of 
globalized supply chains. Request for Public Comment on Proposed 
Guides for the use of U.S. Origin Claims, 62 FR 25020 (May 7, 1997), 
https://www.govinfo.gov/content/pkg/FR-1997-05-07/pdf/97-11814.pdf. 
See also Bruce Ingersoll, FTC May Ease Its Guidelines For the `Made 
in USA' Label, Wall Street J. (May 6, 1997), https://www.wsj.com/articles/SB862863598530948000. This effort was widely opposed, and 
it failed. See Matthew Bales, Jr., Implications and Effects of the 
FTC's Decision to Retain the ``All or Virtually All'' Standard, 30 
U. Miami Inter-Am. L. Rev. 727 (1999).
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    This lack of deterrence contributed to brazen Made in USA fraud, as 
seen in some of the Commission's recent cases. In 2018, the FTC sued 
Patriot Puck, which branded its product as ``The Only American Made 
Hockey Puck.'' In fact, according to the Commission's lawsuit, these 
pucks were made in China.\5\ That same year, the FTC sued a seller of 
military bags and other gear, charging the firm with inserting 
fraudulent Made in USA labels into imported products, and marketing 
these products on military bases.\6\ These practices harmed both 
consumers and honest competitors.\7\
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    \5\ Press Release, Fed. Trade Comm'n, FTC Approves Final 
Consents Settling Charges that Hockey Puck Seller, Companies Selling 
Recreational and Outdoor Equipment Made False `Made in USA' Claims 
(Apr. 17, 2020), https://www.ftc.gov/news-events/press-releases/2019/04/ftc-approves-final-consents-settling-charges-hockey-puck-seller; Statement of Commissioner Rohit Chopra In the Matter of 
Nectar Sleep, Sandpiper/PiperGear USA, and Patriot Puck (Sep. 12, 
2018), https://www.ftc.gov/public-statements/2018/09/statement-commissioner-chopra (hereinafter Dissenting Statement on No-
Consequences Made in USA Settlements).
    \6\ Id.
    \7\ In fact, one competitor formally complained to the FTC that 
it lost out on a valuable Army and Air Force exchange listing based 
on Sandpiper's deception. See Advantus, Corp. (Comment #5) at 3-4, 
https://www.ftc.gov/system/files/documents/public_comments/2018/10/00005-155955.pdf.
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    Even firms that the FTC warned were seemingly undeterred. In 2017, 
the FTC required iSpring Water Systems to stop mislabeling its 
products. Last year, iSpring violated this order.\8\ In 2018, the FTC 
warned Williams-Sonoma to stop falsely marketing products as Made in 
USA; \9\ earlier this year, they were charged with doing it anyway.\10\ 
The fact that these repeat offenders were caught is a testament to our 
staff's vigilance, but offenders' willingness to break the law twice 
demonstrates the flaws of the strategy pursued by past Commissions.
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    \8\ Press Release, Fed. Trade Comm'n, Marketer of Water 
Filtration Systems to Pay $110,000 Civil Penalty for Deceptive Made-
in-USA Advertisements in Violation of 2017 Order (Apr. 12, 2019), 
https://www.ftc.gov/news-events/press-releases/2019/04/marketer-water-filtration-systems-pay-110000-civil-penalty.
    \9\ Closing letter to Danielle M. Hohos, Esq., Deputy General 
Counsel for Williams-Sonoma, Inc. (June 13, 2018), https://www.ftc.gov/system/files/documents/closing_letters/nid/musa_williams-sonoma_closing_letter.pdf.
    \10\ Press Release, Fed. Trade Comm'n, Williams-Sonoma, Inc. 
Settles with FTC, Agrees to Stop Making Overly Broad and Misleading 
`Made in USA' Claims about Houseware and Furniture Products (Mar. 
30, 2020), https://www.ftc.gov/news-events/press-releases/2020/03/williams-sonoma-inc-settles-ftc-agrees-stop-making-overly-broad.
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    Recently, we have seen how that strategy is changing. iSpring was 
ordered to pay a civil penalty, and the company admitted that it broke 
the law. Williams-Sonoma was required to pay $1 million to resolve the 
Commission's allegations--a small sum, perhaps, for Williams-Sonoma, 
but a record for the FTC's Made in USA enforcement program. And in 
July, the Commission finally proposed codifying the Made in USA 
standard into a rule.\11\ This rule would help to end the agency's 
reliance on no-money settlements, allowing the Commission to seek civil 
penalties, damages, and other sanctions for Made in USA violations.\12\
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    \11\ Press Release, Fed. Trade Comm'n, FTC Issues Staff Report 
on Made in USA Workshop, Seeks Comment on Related Proposed 
Rulemaking for Labeling Rule (June 22, 2020), https://www.ftc.gov/news-events/press-releases/2020/06/ftc-issues-staff-report-on-made-in-usa-workshop.
    \12\ Of course, not every Made in USA violation requires a 
lawsuit, or justifies a large judgment. But seeking and accepting no 
money and no meaningful consequences undermines our credibility.
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Turning the Page

    Today's action against Chemence and its top executive marks another 
turning point for the FTC's enforcement strategy. Chemence is an 
established player in the adhesives and sealants business. The order 
announced today imposes real consequences--a major difference from the 
Commission's past Made in USA settlements.
    First, the proposed order requires Chemence to forfeit $1.2 million 
in revenue stemming from the company's failures. This is another record 
judgment for the FTC's Made in USA enforcement program, and it 
represents a sea change from the era of no-money settlements. It is 
encouraging to see the FTC reducing its reliance on no-money orders, 
both here and in other program areas.
    Second, this order reminds businesses that FTC orders are not 
suggestions.\13\ The FTC's complaint highlights false compliance 
reports filed by Chemence, and charges the company's president 
personally for his involvement in the alleged violations.\14\ This 
stands in stark contrast to other actions against repeat offenders, 
where the FTC granted broad releases to executives who oversaw 
egregious violations. The approach in this matter is far more 
effective.\15\
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    \13\ Memorandum from Commissioner Chopra to FTC Staff Regarding 
Repeat Offenders (May 14, 2018), https://www.ftc.gov/public-statements/2018/05/commissioners-memorandum-2018-01-repeat-offenders.
    \14\ Compl. ]] 13-16, In the Matter of Chemence, Inc. et al., 
Docket No. X160032.
    \15\ In addition, by filing this case administratively, the 
Commission has triggered civil penalties for future violations, even 
if in the absence of a final Made in USA fraud rule.
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    Third, the proposed order requires Chemence to notify consumers of 
this action. Notice confers benefits in cases like this. It helps to 
erase any competitive advantage a firm realized through deception, and 
it accords consumers the dignity of knowing what happened. I have long 
argued we should seek notice in Made in USA and other matters,\16\ and 
I am pleased to see this provision incorporated into this enforcement 
action.
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    \16\ Dissenting Statement on No-Consequences Made in USA 
Settlements, supra note 4, https://www.ftc.gov/system/files/documents/public_statements/1407380/rchopra_musa_statement-sept_12.pdf.
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    Our new approach is a critical step forward for protecting the Made 
in USA brand, and a model for other FTC enforcement areas. There is 
more work to do, including finalizing a Made in USA fraud rule, but we 
are clearly moving in the right direction.
    While it is tempting for any government agency to think that the 
status quo is working well, we do our best work when we engage in self-
critical analysis and strive for continuous improvement. I congratulate 
all of the agency's staff who fought for this outcome, as well as the 
many stakeholders who have worked with us to turn the page on the 
policy inherited from our predecessor Commissioners.\17\ These efforts 
to reboot the Made in USA enforcement program represent real progress.
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    \17\ See, e.g., Press Release, Truth in Advertising, Inc. 
(TINA.org), Ad Watchdog TINA.org Petitions FTC for Made in USA Rule 
(Aug. 22, 2019), https://www.truthinadvertising.org/made-in-usa-press-release/; Consumer Reports (Comment #6), https://www.ftc.gov/policy/public-comments/2018/10/12/comment-00006-0; Alliance for 
American Manufacturing (Comment #5), https://www.ftc.gov/policy/public-comments/2018/10/12/comment-00005-0.

[FR Doc. 2021-00083 Filed 1-7-21; 8:45 am]
BILLING CODE 6750-01-P