NEWS : FTC vs Shinola

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During his recent visit to the U.K. President Barack Obama gave British Prime Minister David Cameron an American gift : a Shinola watch with the presidential seal engraved on the back.

When the Shinola brand of watches was launched in 2011 it seemed that you couldn’t turn a corner without bumping into a story about how this Detroit-based company was not only doing its bit to revitalise the city, but also doing its bit to reinvigorate American watchmaking with its accessibly-priced cleanly designed wares.

This latter point is something that a few other smaller American watch brands have also been doing, with each of the brands having slightly different wording regarding their watches’ manufacturing process and the origins of the parts.

The mini boom in such talk about American watch manufacturing lead, in some online areas, to a lot of animated discussions about the very strict Federal Trade Commission’s determinations of what constitutes something that is ‘Made in the U.S.’. It is against this that Shinola have found themselves unstuck; they are now being forced to drop their ‘Built in Detroit’ slogan from all products and marketing/ advertising copy.

The requirements for a product to be able to claim the status of “made in the U.S.” basically amount to it needing to be assembled in the United States of America from “all or virtually all” American parts. Shinola’s ‘Built in Detroit’, with it being no secret that they use non-U.S. parts in their watches, has been determined to be a way of getting around this strict requirement, with the FTC seeing no difference between “made in America” and “Built in Detroit” for the purposes of how consumers are likely to interpret meaning.

Below is the text of the FTC letter. Click on this link for the full PDF version :

“We received your submissions on behalf of Bedrock Manufacturing Company, LLC, also d/b/a Shinola/Detroit, LLC, and Filson Holdings, Inc. (“Bedrock” or the “Company”). During our review, we raised concerns that certain marketing materials overstated the extent to which certain Shinola and Filson-branded products, including, but not limited to, watches and certain leather goods and bicycles, are “made” or “built” in the United States.

As we have discussed, unqualified “Made in USA” or “Built in USA” claims likely suggest to consumers that products are “all or virtually all” made in the United States. The Commission may analyse a number of different factors to determine whether a product is “all or virtually all” made in the United States, including the proportion of the product’s total manufacturing costs attributable to U.S. parts and processing, how far removed any foreign content is from the finished product, and the importance of the foreign content or processing to the overall function of the product.

In this case, the Company sources significant inputs to many of its products overseas. For example, 100% of the cost of materials used to make certain watches is attributable to imported materials. Similarly, more than 70% of the cost of the materials used to make certain belts is attributable to imported materials such as decorative buckles. Additionally, Bedrock sources the steel used to make certain bicycle forks overseas.

Accordingly, to avoid deceiving consumers, Bedrock implemented a remedial action plan to account for this significant imported content by qualifying its representations. Among other things, this plan includes: (1) applying corrective hangtags and information cards to watches, bicycles, and other affected products to alert consumers to the fact that those products include significant imported content; (2) redesigning watch casebacks; (3) updating embossed claims in affected leather goods; (4) updating Internet and hardcopy advertising materials to qualify claims; (5) updating employee training materials; (6) updating advertising materials distributed to third-party retailers; (7) transitioning away from the Company’s “Where American is Made” slogan; and (8) developing enhanced policies and procedures, including additional legal review, to avoid future deception or mislabelling.

Based on Bedrock’s implementation of the plan described above, the staff has decided not to recommend enforcement action at this time. However, certain materials presented to us during the pendency of our investigation raise concerns that Bedrock may make deceptive U.S.- origin claims in the future. Therefore, we will continue to monitor the Company’s advertising closely.

Issuance of this letter should not be construed as a determination that there was no violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. The Commission reserves the right to take such further action as the public interest may require.”

As mentioned at the outset, Shinola has not been the only watch brand that has come onto the radar of the FTC, with Kansas City-based watchmaker Niall Luxury Goods also having come into strife for a ‘made in U.S.’ claim.

In addition to changing its ‘Built in Detroit’ tag to ‘Built in Detroit from Swiss and imported parts’, Shinola will no longer be allowed to use its “Where American Is Made” slogan.

The ‘Swiss Made’ requirements, it must be remembered, are less strict than the FTC ones, although the requirements for the ‘Swiss Made’ origin label have just been strengthened to watches for which at least 60% of production costs (which includes the strap and case) were incurred in Switzerland (as well as the requirement that half of the movement’s value must be derived from components manufactured in Switzerland). This will take effect on 1 January, 2017.

With many consumers not only believing that certain designations (much like appellations) are ‘worth’ more, whether this be ‘Swiss Made’, ‘Made in Australia’, ‘Made in Japan’, ‘Made in Germany’ or ‘Made in Great Britain’, what does this come down to?

Well to my mind at least, it’s not just about the FTC or any similar requirements but about other broader issues as well – transparency by brands about their sourcing and manufacturing, and the rather more tricky semantics of ‘made’ versus ‘built’.

 



Categories: Industry news, News, watches

1 reply

  1. Interesting method the Swiss have chosen to further tighten the definition of “Swiss Made”. The 60% of production costs and 50% of movement values are not a particularly difficult thresholds to meet on paper – mere matter of having the “right” transfer prices for parts and attribution rates for direct and indirect costs of production. Different story altogether if it also included a threshold such as 60% of total labour time (man hours) occurred in Switzerland IMHO.

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