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GDLSK ALERT: FTC Issues $1.26 Million in Penalties for Mislabeling Rayon Textiles as Bamboo

On January 3, 2013, the Federal Trade Commission (“FTC”) announced that $1.26 million in penalties will be paid collectively by four national retailers to settle charges that the companies mislabeled various textile products.

According to the FTC, the products were labeled and advertised as made of bamboo, when in fact such products were made of rayon, resulting in a violation of the Textile Fiber Products Identification Act and the FTC’s textile rules. The FTC alleges that these companies continued to mislabel their products even after the FTC issued a business alert to the public in 2009 as well as warning letters directly to 78 companies in January 2010.

The FTC’s guidelines provide that use of the term “bamboo” is not appropriate to describe a fiber which is derived from bamboo via a chemical process. Such processing generally results in a rayon, viscose or other man-made fiber due to the chemical transformation of the bamboo.

Under the FTC regulations, a retailer can avoid liability for mislabeling or false advertising if a retailer obtains a guaranty from its supplier certifying that such products are not mislabeled, falsely invoiced or falsely advertised. However, such guarantees may only be obtained from “a person residing in the United States”. The retailer therefore cannot rely on a guaranty provided by a foreign vendor (i.e., guarantees are not acceptable for directly imported products).

On January 3, 2013, the FTC issued a new Enforcement Policy Statement designed to extend protections to retailers that directly import textile, wool and fur products, where the retailer relies in good faith on the information provided by the foreign seller. Pursuant to the Policy Statement, the FTC will not issue an enforcement action for falsely marketing directly imported textile, fur or wool products, provided the retailer (1) does not embellish or misrepresent claims provided by the manufacturer; and (2) does not market the product as a private label product. The new policy does not apply “if the retailer knew or should have known” that the marketing claim made by the manufacturer was false.

Please do not hesitate to contact David J. Evan or Christina M. Leonard at (212) 557-4000 with any questions.