New Balance has been named in a new lawsuit over its “Made in USA” marketing. In a proposed class action complaint filed on Monday in a federal court in Massachusetts, plaintiffs Matthew Cristostomo, Anthony Bollini, Spencer Verrilla, Derrick Evans, Clifton Bradley, and Robert Kaminsky allege that Boston, Massachusetts-based New Balance is misleading consumers in representing that its footwear is “U.S.A. Made” when its sneakers do not meet the federal standard, and “continu[ing] to knowingly make these misrepresentations because consumers are willing to pay more for products that they believe are actually made in the United States.”
In the newly-filed complaint, Cristostomo and his fellow plaintiffs assert that New Balance sells several models of footwear that “feature an American flag, the words ‘Made in the USA,’ and/or the word ‘USA’ on the tongue of the shoe.” Additionally, they claim that “the inside of the tongue of each of the [New Balance] sneakers includes representations that they are ‘Made in USA,’” while the packaging for the sneakers bears “similar monikers, including representations on the outside of the shoe box that New Balance footwear has been ‘made in the U.S. for over 75 years.’”
The problem, according to the plaintiffs? Despite “prominently represent[ing] that its sneakers are ‘Made in the USA,’” New Balance’s sneakers do not actually “fit the bill” since “as much as 30 percent” of any individual sneaker is allegedly made up of imported parts, or produced using foreign labor. Given that a portion of the manufacturing of its sneakers occurs outside of the U.S., the plaintiffs argue that New Balance’s sneakers fall short of the legally-established definition of “Made in USA,” which mandates that products marketed as “made in America” or “made in the USA” must be made “all or virtually all” in the United States.
In other words, “all significant parts and processing that go into the product must be of U.S. origin,” and the product should contain “no – or negligible – foreign content.”
Pointing a representation from New Balance’s CEO that the company “imports the soles” of its footwear and a report from the Wall Street Journal that New Balance sources its soles from two Chinese companies, and highlighting the fact that soles are an “important aspect of the shoes,” and “not far enough removed from the manufacturing process to be of little consequence,” the plaintiffs argue that New Balance’s “Made in the USA” claims are “false and misleading.”
To make matters worse, Cristostomo and co. allege that New Balance is knowingly flouting the Federal Trade Commission (“FTC”)’s “Made in USA” rules after the federal consumer agency initiated an administrative action against in in 1996 for making deceptive “Made in the USA” claims about its footwear, and subsequently entering into a class action settlement over its “Made in the USA” claims for consumers who purchased New Balance footwear between January 2012 and January 2019.
While New Balance clarifies its USA Made claims “by including a small print disclaimer in small font in portions of its website and on the underside of its packaging,” the plaintiffs contend that such fine print is insufficient, as “no reasonable consumer would expect that small print language on the underside of a packaging or hid in assorted places on a website contain language inconsistent with the representations that the sneakers were ‘Made in the USA.’”
This is particularly problematic, the plaintiffs contend, given that “consumers are willing to pay more for products that are labeled ‘Made in USA,’” and in fact, in many cases, “consumers prefer goods that are made in America and are willing “’o pay a premium for it.’” With this in mind, the plaintiffs assert that “had New Balance disclosed that the sneakers were not in fact ‘Made in USA,’” they – and other potential class members – would not have purchased the sneakers or would have paid less for the sneakers than they did. And thus, “Plaintiffs and members of the classes were injured by the price premium they paid for the sneakers due to [New Balance’s] misrepresentation that the sneakers were made in the United States when they were not.”
With the foregoing in mind, the plaintiffs set out claims of breach of express warranty, violation of the Magnuson-Moss Warranty Act, which governs warranties on consumer products, unjust enrichment, fraud, and violations of various states’ unfair competition or trade laws., and are seeking monetary damages, as well as an order from the court that certifies their proposed class action.
A rep for New Balance told TFL in response to the suit that the company “takes pride in our longstanding commitment to domestic manufacturing – it is a valued part of our heritage and culture,” noting that its “four New England-based factories currently employ approximately 1,000 Americans who work to produce our athletic footwear.” Additionally, the rep states that “New Balance seeks to be transparent in all consumer communications, prominently disclosing that where domestic value is at least 70 percent, the brand’s footwear is labeled Made in the USA.”
The lawsuit comes on the heels of New Balance coming under fire this fall when Truth in Advertising, Inc. lodged a complaint with the FTC, in which it accused New Balance of running afoul of the regulator’s Made in USA Labeling Rule and harming consumers, as well as “honest American companies trying to compete with one of the world’s largest manufacturers of athletic shoes,” in the process. According to the ad watchdog’s September complaint, “For far too long New Balance has brazenly violated Made in USA origin laws,” which prohibit the labeling of a product as Made in the U.S. “unless the final assembly or processing of the product occurs in the U.S., all significant processing that goes into the product occurs in the U.S., and all or virtually all ingredients or components of the product are made and sourced in the U.S.”
Not only does the case follow from the Truth in Advertising, Inc. action, it comes in the wake of the FTC finalizing a rule this summer that formally adopts its longstanding guidelines for unqualified claims about a product’s “Made in USA” origin, and that authorizes monetary penalties of up to $43,280 for each violation of the “Made in USA” standard.
As Wiley partners Maureen Thorson and Duane Pozza stated this summer, the rule – which applies to goods labeled as “Made in the USA,” “American-made,” “Crafted in USA,” etc. – “clearly applies to physical labels on a product or its packaging, but also extends to unqualified claims of U.S. origin that appear in any ‘seal, mark, tag, or stamp’ in ‘mail order catalogs’ and ‘mail order promotional materials.'” Importantly, they note that “these catalogs/materials are defined not only to include printed advertisements, but advertisements disseminated telephonically, as well as by e-mail or other electronic means,” meaning that “the rule appears to embrace claims on websites.”
The case is Matthew Cristostomo et al, v. New Balance Athletics, Inc., 1:21-cv-12095 (D.Mass.)