In an era where consumer trust and national pride heavily influence purchasing decisions, the automotive industry faces unique challenges in marketing and advertising. With the Federal Trade Commission’s (FTC) “Made in the USA” standard setting strict guidelines, understanding and complying with these rules has become crucial for dealerships. We will delve into why this practice, often seen in dealerships where their brands have U.S. assembly plants, might not only be misleading, but could be non-compliant with FTC regulations.
FTC’s ‘Made in the USA’ Standard
The FTC enforces guidelines to ensure that “Made in the USA” claims are truthful and non-deceptive. Under these standards, products advertised as “Made in the USA” must be “all or virtually all” manufactured within the United States. This encompasses all significant parts and processing of those parts, and only allows for minimal foreign content. The policy is designed to protect consumers from misleading information and to uphold the integrity of truly American-made products. The standard is strict, requiring clear and substantiated claims, and applies to both express and implied representations of origin. More detailed guidance can be found in FTC’s resource on Complying with the Made in USA Standard.
Trends in Dealership Advertising
Recently, there has been a noticeable trend among dealerships advertising their vehicles as “Made in the USA”. This usually appears in the form of a badge on vehicle search result pages (SRPs) or vehicle description pages (VDPs). Sometimes, the dealer will devote an entire page on its website to boast their “Made in USA” claims. This practice is usually based on that some vehicles in a manufacturer’s lineup are partially manufactured or assembled in U.S. facilities, such as with Volkswagens at the Chattanooga Assembly Plant in Tennessee. However, the complexity of modern vehicle manufacturing, which frequently involves a significant number of foreign parts and international assembly processes, raises questions about the compliance of such claims with the FTC’s stringent “all or virtually all” standards.
The Compliance Challenge for Dealerships
Given the global nature of automobile manufacturing where parts and labor often cross international borders, it’s improbable that any of today’s mass-produced vehicles meet the FTC’s “all or virtually all” standard. Therefore, dealerships must navigate these complexities carefully to avoid potential legal and reputational consequences. For instance, a 2021 Kogod School of Business study found that among Volkswagens, the Atlas topped in U.S. content at just 44%. The transmission-equipped Ford Mustang 5.0 liter GT leads overall at 88.5% American-based content. With foreign content at 56% and 11.5%, respectively, these vehicles may not even come close to the FTC’s “all or virtually all” standard, which requires that the product contain no, or negligible, foreign content.
Even more recent electric vehicle models, often praised for their predominantly “American” sourcing, frequently incorporate a significant portion of parts and labor from neighboring countries like Canada and Mexico. Therefore, dealers should be careful when making bold “Made in the USA” claims on their websites, especially when they are not supported. There are, however, alternative options. The FTC allows for “substantiated” claims, enabling dealers to disclose a minimum percentage of U.S. parts and labor in a vehicle. This offers a more transparent approach to compliance if dealers can get manufacturers to provide this data and could influence customers’ decision-making. In the Volkswagen case (and in most cases we’ve seen at ComplyAuto), simply saying “Assembled in the USA” (as opposed to “Made in the USA”) would be a more compliant and accurate approach that the FTC has condoned in its guidance.
Recommendations
While the appeal of advertising vehicles as “Made in the USA” is understandable, this practice is fraught with compliance risks in light of the FTC’s standards for making these claims. The global nature of car manufacturing makes it unlikely that modern mass-produced vehicles fully meet the FTC’s stringent “all or virtually all” standard. Therefore, dealers are advised to make qualified claims where appropriate or avoid these claims altogether to stay in compliance with the FTC’s guidelines. With the FTC having demonstrated its capacity and willingness to enforce these guidelines, dealerships advertising their vehicles as “Made in the USA” are inviting scrutiny and potential trouble.