Federal Trade Commission Received Documents Jan 19 1996 B1835490060 9333 Milwaukee Avenue Niles, Illinois 60714 Providing Essential Services To Select Collectible Companies Telephone 847 581 8351 Telefax 847 581 8730 January 18, 1996 Donald S. Clark, Secretary Federal Trade Commission Room 159 Sixth Street and Pennsylvania Avenue, NW Washington, DC 20580 Re: "Made in U.S.A." Policy Comment FTC File No. P894219 Dear Mr. Secretary, The following are my comments to the United States Federal Trade Commission regarding consumer perception of "Made in U.S.A." pursuant to Federal Register notice (60 FR 53922, Oct. 18, 1995). I am Vice-President and General Counsel of BGE, Ltd. BGE, Ltd. provides legal and other management services for a variety of affiliated companies engaged in contract manufacturing, importation and direct mail, retail and catalog marketing. For simplicity I will refer to the group of companies as the Bradford Group. In my position with BGE. Ltd., I act as General Counsel for and represent each of the companies in the Bradford Group. They are as follows. BGE, Ltd. The provider of executive management, legal, accounting data processing, human resource and other services for the following affiliated companies. The Bradford Exchange, Ltd. The world's largest developer and marketer of collector's plates (limited edition porcelain plates which display artwork and which are usually issued in series with a common theme) with sales operations in the United States, Canada, England, Australia, Germany, Switzerland, Austria, Denmark, Sweden, Norway, Holland, France and Italy. The Ashton-Drake Galleries, Ltd. A developer and marketer of collectible porcelain dolls developed in the United States, manufactured in the Far East and sold in the United States, Canada and Europe. Van Hygan & Smythe, Ltd. A developer and marketer of wood plate frames and display cases manufactured in the Far East and sold in the United States, Canada and Europe. Hawthorne Architectural Register, Ltd. A developer and marketer of collectible miniature cottages and historic buildings some of which are manufactured in the Far East and sold in the United States and Canada. The Norman Rockwell Estate Licensing Company, The exclusive worldwide licensee and authorized marketer of the name and likeness rights of Norman Rockwell and copyrights owned by the descendants of Norman Rockwell. The Gallery Marketing Group, Ltd. The exclusive wholesale distributor for products offered by the Bradford Group. The Edwin M. Knowles China Company The exclusive supplier of products to companies in the Bradford Group which sources goods in the United States, Canada, Europe and the Far East. Hammacher, Schlemmer & Co., Inc. A century old retailer and mail order company specializing in electronic items and other household goods with stores in Manhattan, Chicago and Beverly Hills. The Bradford Group has branches or sales operations in Taiwan, Thailand, Canada, England, Australia, Germany, Switzerland, Austria, Denmark, Sweden, Norway, Holland, France and Italy; an art purchasing agent resident in Russia, and product purchases from the aforementioned countries plus China, Japan, Indonesia, Malaysia, Greece and Egypt. I have been employed as counsel to the Bradford Group since 1981. As General Counsel, I oversee the legal work related to the domestic and foreign operations of all of the companies. This includes the following: ù Administrative Law Oversee compliance with various regulatory agencies, including: U.S. Customs Service, U.S.Federal Trade Commission, Foreign regulatory agencies in 11 countries ù Advertising Advise on and administer compliance with international consumer protection regulations. ù General Corporate Coordinate communication with shareholders, prepare and maintain corporate minutes, prepare state corporate registration filings, coordinate foreign corporate activities. ù Contracts Oversee preparation of virtually all contracts which include agreements for artwork for products, entertainment properties, celebrities, computer hardware and software services. Sales of the Bradford Group are in the hundreds of millions of dollars. In addition to my experience with the Bradford Group, from 1976 to 1981, I served as a staff attorney with the United States Federal Trade Commission in the Chicago regional office. I also served on the staff of the Bureau of Competition in Washington, DC in 1978. While in the Chicago Regional Office, I supervised cases concerning deceptive advertising and defective products. While at Headquarters, I reviewed cases prepared by regional office staffs. I attended and participated in policy-making and strategy sessions with the bureau chief, and attended major policy sessions and participated in case selection and strategy sessions of FTC Commissioners. On behalf of the companies of The Bradford Group I wish to supply comments in response to the questions posed by the FTC regarding consumer perception of "Made in U.S.A." My comments to the specific questions published in the Federal Register notice are on Exhibit A attached hereto. We trust that these comments will assist the FTC in re-evaluating its position regarding use of the phrase "Made in USA" to enable more flexibility in its application. Thank you for your consideration. Very truly yours, Joel R. Platt Vice-President and General Counsel EXHIBIT A Comments of Joel R. Platt to the United States Federal Trade Commission Regarding Consumer Perception to "Made in USA" 1. When consumers see product advertisements or labels stating or implying that products are "Made in USA", "Made in America," or the equivalent, what amount of U.S. parts and labor do they assume are in the products? a. Are there surveys, copytests, or other direct evidence of consumer perception that will aid the analysis? Comment: The Bradford Group is planning to conduct a survey of customers which concerns this issue prior to the date of the workshop. b. How has increased consumer knowledge of foreign imports or foreign components affected such perceptions? Comment: We believe that consumer knowledge of foreign imports or foreign components has affected their perceptions of what "Made in USA" means. Consumers are much more aware of the international nature of products, specifically that materials can come from various countries and that assembly can take place in one or more countries. How much knowledge of foreign sourcing of components do consumers have? Comment: We believe that consumers have significant knowledge of foreign sourcing of components due to general awareness of news reports on trade agreements, balance of trade, foreign work forces and foreign plants of U.S. companies. In fact, these topics have been the features of numerous newspaper and magazine articles and special television news reports. c. How much, if at all, is consumer perception of Made in USA claims affected by the type of product, complexity of the product, or other factors? Comment: Consumer perception of Made in USA claims seems to be affected by the type of product, complexity of the product, or other factors. We believe that the type of U.S. material or labor used in manufacturing a product has a significant impact on the perceptions of consumers as to whether that product could appropriately be described as having been made in the U.S. For example, consumers of a limited edition art print canvas would be likely to consider the print to be made in the U.S. in those cases where the original art was created in the U.S. and the pigments were affixed to the canvas in the U.S., even though the canvas and frame were imported and even though the cost of the canvas and frame were far in excess of the actual cost of the pigments and the proportionate cost of the original art. d. Do consumers attach higher domestic content to products claimed to be Made in USA when the claims are presented with greater prominence or frequency? When they are featured in advertising, as opposed to merely on labels. Comment: At this time we do not have an opinion on this point. 2. What are the costs and benefits of an "all or virtually all" threshold for Made in USA claims, versus a lower threshold (e.g., 50%)? a. What are the precise benefits of being able to make unqualified Made in USA claims for lower domestic-content products? Comment: One of the major benefits of being able to make unqualified Made in USA claims for lower domestic-content products would be reduction to businesses of administrative costs incurred in determining and keeping track of incidental foreign content and labor for products for which the significant majority of labor and materials is from the U.S. What impact would this have on firms that now meet the higher standard? Comment: Many of the products offered by the companies in the Bradford Group are manufactured in the same way as similar products offered by competitors. The amount of foreign materials and labor used in such products is usually dictated by the fact that there is no domestic supply. In such cases, this should have no negative impact on other firms. What impact would this have on firms that might be able to raise their domestic content to meet a lower threshold? Comment: The same comment as above would apply. b. What difficulties are there in making truthful comparative or qualified claims that reveal that the product is not wholly domestic? Comment: In most cases there would be little difficulty in making truthful comparative or qualified claims that reveal that the product is not wholly domestic, provided that 1) the statements required were simple and 2) all applicable government agencies had the same requirements. Currently, the U.S. Customs service imposes complicated and burdensome requirements of labeling of products which are subjected to substantial U.S. processing and labor but which have foreign components. Customs requires that the country of origin of each of the components of the products be permanently affixed to the products. We believe that, if U.S. materials and labor are used in a product, consumers want to know that. They are not particularly interested in knowing the names of the countries from which all of the other components came nor do we believe that they are interested in precise percentages. If a consumer is particularly interested in knowing the specific sources of foreign materials or processing, he or she can ask the question or choose not to buy a product that does not disclose such information. Thus, allowing simple statements such as "USA ___%," "Made in USA (___%)" or "substantially created in the U.S." would be an ideal solution. Is qualifying claims more difficult in this context than in other advertising or labeling contexts (e.g., "30% lower in fat than the leading brand")? Comment: We do not believe that qualifying claims would be more difficult in this context than in other advertising or labeling contexts. Do advertising and labeling pose the same considerations? Comment: We do not believe that advertising and labeling always pose the same considerations. Advertising materials are generally valued by physical space or time, and requiring additional notices in advertising, especially when those same notices will appear on the products at low additional cost, would create at a significant expense and an unreasonable burden on businesses with little value to consumers. c. What are the costs and benefits of alternative thresholds (e.g., 50%, 75%, products "substantially transformed" in the United States)? Comment: Alternative thresholds would both reduce costs to businesses and provide a benefit to consumers. In order to stay competitive, businesses must constantly seek ways to reduce their costs. One way to do this is to find materials at lower prices, and this is frequently done by finding foreign sources of supply. When a product is first brought to market it may be entirely of U.S. content, but, eventually, foreign components may be introduced, and their proportion may vary over time. Allowing businesses flexibility in labeling the products as the nature and sources of the products change would substantially reduce business administrative costs and would reduce waste of outdated labeled materials. Such flexible labeling could still accurately convey to consumers the most important information regarding U.S. content, and the benefit to consumers would be lower prices for accurately labeled products. d. What are the costs to consumers, when the actual domestic content in "Made in USA" products is lower than consumers are led to believe? Comment: If the actual domestic content in "Made in USA" products were lower than consumers are led to believe, it does not seem likely that consumers would pay more for a product than they would have had the domestic content description been accurate. Thus, there probably would be no direct monetary cost to consumers. e. If adding qualifications to Made in USA claims sometimes is impractical or costly due to space limitations, are there alternative phrases that meet this concern and also adequately inform consumers of foreign content? Do such formulations as "USA 80%," "Made in USA (80%)," or similar formulations satisfy these concerns? Comment: Alternative phrases such as "USA 80%," "Made in USA (80%)," would be an excellent solution. Other alternative phrases, which we believe would be acceptable, would include: "Assembled in the U.S." "Processed in the U.S." "Fired in the U.S." (for porcelainware) "Decorated in the U.S." (for porcelainware) "Frame from U.S.A." (for framed print) Although these phrases do not specifically state what portion or value of the product is from the U.S., we believe that consumers would conclude that most or all of the materials and labor EXCEPT for the specific activity or item referenced were of foreign origin. Thus the consumer would be truthfully informed with regard to U.S. content in an efficient and cost effective manner. 9333 Milwaukee Avenue Niles, Illinois 60714 Providing Essential Services To Select Collectible Companies Telephone 847 581 8351 Telefax 847 581 8730 January 18, 1996 Donald S. Clark, Secretary Federal Trade Commission Room 159 Sixth Street and Pennsylvania Avenue, NW Washington, DC 20580 Re: Made in U.S.A. Workshop - Request to Participate FTC File No. P894219 Dear Mr. Secretary, Please accept my request to participate in the Made in U.S.A. Workshop sponsored by the United States Federal Trade Commission pursuant to Federal Register Notice (60 FR 53922, Oct. 18, 1995) scheduled for March 26-27, 1996. Concurrently with this request I have submitted substantive written comments regarding issues concerning consumer perception of "Made in U.S.A." claims. Because of the unique combination of my extensive experience representing businesses which import a variety of products with foreign components and which arrange for the processing of goods in the United States and my service with the Federal Trade Commission as a representative of consumer interests, I believe that: 1) My attendance at the workshop would promote the representation of a balance of interest at the conference and consideration of the issues presented, 2) I have substantial expertise in issues that will be raised at the workshop, and 3) I can adequately reflect the views of the interests that I represent, and I have been designated by parties that I represent as sharing their interests. My background is more specifically described in the following paragraphs. I am presently Vice-President and General Counsel of BGE, Ltd. BGE, Ltd. provides legal and other management services for a variety of affiliated companies engaged in contract manufacturing, importation and direct mail, retail and catalog marketing. For simplicity I will refer to the group of companies as the Bradford Group. In my position with BGE, Ltd., I act as General Counsel for and represent each of the companies in the Bradford Group. They are as follows: BGE, Ltd. The provider of executive management, legal, accounting data processing, human resource and other services for the following affiliated companies. The Bradford Exchange, Ltd. The world's largest developer and marketer of collector's plates (limited edition porcelain plates which display artwork and which are usually issued in series with a common theme) with sales operations in the United States, Canada, England, Australia, Germany, Switzerland, Austria, Denmark, Sweden, Norway, Holland, France and Italy. The Ashton-Drake Galleries, Ltd. A developer and marketer of collectible porcelain dolls developed in the United States, manufactured in the Far East and sold in the United States, Canada and Europe. Van Hygan & Smythe, Ltd. A developer and marketer of wood plate frames and display cases manufactured in the Far East and sold in the United States, Canada and Europe. Hawthorne Architectural Register, Ltd. A developer and marketer of collectible miniature cottages and historic buildings some of which are manufactured in the Far East and sold in the United States and Canada. The Norman Rockwell Estate Licensing Company The exclusive worldwide licensee and authorized marketer of the name and likeness rights of Norman Rockwell and copyrights owned by the descendants of Norman Rockwell. The Gallery Marketing Group, Ltd. The exclusive wholesale distributor for products offered by the Bradford Group. The Edwin M. Knowles China Company The exclusive supplier of products to companies in the Bradford Group which sources goods in the United States, Canada, Europe and the Far East. Hammacher, Schlemmer & Co., Inc. A century old retailer and mail order company specializing in electronic items and other household goods with stores in Manhattan, Chicago and Beverly Hills. The Bradford Group has branches or sales operations in Taiwan, Thailand, Canada, England, Australia, Germany, Switzerland, Austria, Denmark, Sweden, Norway, Holland, France and Italy; an art purchasing agent resident in Russia, and product purchases from the aforementioned countries plus China, Japan, Indonesia, Malaysia, Greece and Egypt. I have been employed as counsel to the Bradford Group since 1981. As General Counsel, I oversee the legal work related to the domestic and foreign operations of all of the companies. This includes the following: ù Administrative Law Oversee compliance with various regulatory agencies, including: U.S. Customs Service, U.S.Federal Trade Commission, Foreign regulatory agencies in 11 countries ù Advertising Advise on and administer compliance with U.S. and international consumer protection regulations. ù General Corporate Coordinate communication with shareholders, prepare and maintain corporate minutes, prepare state corporate registration filings, coordinate foreign corporate activities. ù Contracts Oversee preparation of virtually all contracts which include agreements for artwork for products, entertainment properties, celebrities, computer hardware and software services. Sales of the Bradford Group are in the hundreds of millions of dollars. In addition to my experience with the Bradford Group, from 1976 to 1981, I served as a staff attorney with the United States Federal Trade Commission in the Chicago regional office. I also served on the staff of the Bureau of Competition in Washington, DC in 1978. While in the Chicago Regional Office, I supervised cases concerning deceptive advertising and defective products. While at Headquarters, I reviewed cases prepared by regional office staffs. I attended and participated in policy-making and strategy sessions with the bureau chief, and attended major policy sessions and participated in case selection and strategy sessions of FTC Commissioners. I would greatly appreciate it if you would grant my request to participate in the workshop. You may contact me at the above address or at 847 581 8351 (phone) or 847 581 8730 (fax). Thank you for your consideration. Very truly yours, Joel R. Platt Vice-President and General Counsel