New FTC Regulations and Policies to Know

The FTC has Adopted Several New Regulations and Policies Over the Past Few Years—Here’s What You Need to Know in 2023

The U.S. Federal Trade Commission (FTC) is tasked with ensuring a competitive marketplace and protecting consumers against commercial fraud. While the FTC has broad statutory authority under the Federal Trade Commission Act (FTC Act) and other federal laws, it also has the power to issue regulations and policies that govern commerce in the United States.

Pursuant to this power, the FTC has established several new regulations and policies over the past few years. These regulations and policies address a wide range of topics—from “Made in the USA” claims to the enforceability of non-competition covenants. Here is an overview of what business owners, executives, and in-house lawyers need to know in 2023:

1. “Made in the USA” Claims

The FTC regulates claims that products are “Made in the USA” or “Made in America.” While the FTC has a longstanding policy against unfounded or misleading claims about a product being of “unqualified U.S.-origin,” it adopted new regulations in 2021 that further clarify its position on when these types of claims are—and aren’t—allowed.

Specifically, the new regulations (codified at86 C.F.R. 37022-35)address the following provision of the “Made in the USA” law, 15 U.S.C. Section 45a:

“To the extent any person introduces, delivers for introduction, sells, advertises, or offers for sale in commerce a product with a ‘Made in the U.S.A.’ or ‘Made in America’ label, or the equivalent thereof, in order to represent that such product was in whole or substantial part of domestic origin, such label shall be consistent with decisions and orders of the Federal Trade Commission.”

While the Background section of the FTC’s new regulations makes clear that the regulations “impose no new obligations on market participants,” it clarifies that companies may not make “unqualified U.S.-origin” claims unless their products satisfy all three of these criteria:

• Final assembly or processing of the labeled product occurs in the U.S.;
• All “significant processing” for the labeled product occurs in the U.S.; and,
• “All or virtually all” of the product’s ingredients or components are made and sourced in the U.S.

Before adopting these new regulations, the FTC received comments suggesting that the “all or virtually all” component of this three-part test was unnecessary, as consumers would understand that products assembled or processed in the U.S. may include foreign-sourced material. However, the FTC rejected this approach. It also rejected requests for a specific definition of what qualifies as “all or virtually all,” noting that it has already provided “extensive guidance” on this standard.

Since adopting these new regulations, the FTC has taken action against multiple companies accused of making false “Made in the USA” claims. For example, in Mach 2023, the FTC issued a Final Order against the manufacturer of Pyrex-brand kitchen products which prohibits the company from “making unqualified U.S.-origin claims for any product, unless it can show that the product’s final assembly or processing—and all significant processing—takes place in the U.S., and that all or virtually all ingredients or components of the product are made and sourced in the U.S.” The Final Order also establishes a “clear and conspicuous” disclosure requirement for the company’s qualified “Made in the USA” claims and requires the company to pay a $129,416 judgment.

Put our highly experienced team on your side

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

2. Repair Restrictions

In July 2021, the FTC adopted apolicy statement focused on combating “manufacturers’ practices that make it extremely difficult for purchasers to repair their products or shop around for other service providers to do it for them.” In a press release issued following the policy statement’s publication, the FTC indicated that the purpose of the policy statement is to, “target repair restrictions that violate antitrust laws enforced by the FTC or the FTC Act’s prohibitions on unfair or deceptive acts or practices.”

These types of repair restrictions had become prevalent in the years preceding the policy statement’s publication, with cell phone and other electronics manufacturers being among the primary offenders. The FTC’s press release gives three examples of repair restrictions that may constitute “unfair or deceptive acts or practices” under the FTC Act: (i) using adhesives that make it difficult to remove and replace components; (ii) limiting the availability of the parts and tools needed to make repairs; and, (iii) limiting the availability of diagnostic software.

Importantly, the FTC’s policy statement on repair restrictions also indicates that:

• Manufacturers may face enforcement action under the Sherman Act (in addition to the FTC Act) if they refuse to deal with third-party repair providers or retailers.
• Unlawful repair restrictions may also trigger enforcement action under the Magnuson-Moss Warranty Act.
• Along with examining manufacturers’ repair restrictions themselves, the FTC is also scrutinizing manufacturers’ claims related to the repairability of their products.

In short, the FTC is taking unlawful repair restrictions very seriously—and this remains true in 2023. With this in mind, companies that impose repair restrictions, whether explicitly or through their commercial practices, will want to carefully review and reconsider their internal policies with their legal counsel.

3. Non-Competition Clauses

In a July 2021 Executive Order, President Biden “encouraged” the FTC to “exercise [its] statutory rulemaking authority under the [FTC Act] to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” Since then, the FTC has taken several steps toward curtailing the enforceability of non-competition clauses—although it has yet to adopt final regulations.

In January 2023, the FTC proposed a rule that would ban employers from imposing non-competition clauses on their employees. While comments on the proposed rule were originally due March 20, the FTC extended the comment deadline to April 19. As a result, whether and to what extent the FTC restricts non-competition clauses remains to be seen—although it appears likely that at least some restrictions will be imposed within the context of the employment relationship.

But, while the FTC’s new non-competition regulations have yet to be finalized, this has not stopped the Commission from taking action against employers that have sought to restrict their employees’ opportunities. In March 2023 alone, the FTC issued Final Orders against three companies charged with imposing unlawful competitive restrictions.

4. The FTC’s Rulemaking Procedures

Notably, the FTC has also recently updated its rulemaking procedures in order to “set[] the stage for stronger deterrence of corporate misconduct.” According to an FTC press release, the changes “modernize the way [the FTC] issues Trade Regulation Rules under Section 18 of the FTC Act, which will provide a roadmap for businesses, stop widespread consumer harm, and promote robust competition.”

The FTC’s new rulemaking procedures eliminate “decades of self-imposed red tape” and are, in part, in response to a U.S. Supreme Court decision holding that courts can no longer award refunds to consumers under Section 13(b) of the FTC Act. As the FTC notes, this decision “revers[ed] four decades of case law that the Commission has used to provide billions of dollars of refunds to harmed consumers,” and the FTC intends to use its new streamlined rulemaking procedures to enhance its own enforcement capabilities.

FAQs: What Do Companies Need to Know About FTC Compliance in 2023 (and Beyond)?

Contact Us for More Information

If you have questions or concerns about FTC compliance in 2023 (or beyond), we encourage you to get in touch. Call 888-680-1745 or contact us online to arrange a complimentary consultation at Oberheiden P.C.

Further Information About Our FTC Defense Lawyer Services

• How Does the FTC View “Sponsored Content”?
• FTC Defense Lawyer for Investigation & CIDs
• FTC False & Deceptive Advertising Defense