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Volume XII, Number 176

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FTC Uses Civil Penalty Authority in Rayon-as-Bamboo Cases

Several retailers recently settled cases with the FTC over allegations they deceptively marketed “bamboo” textiles. These cases come as some of the first, if not the first, instances of the FTC using its revived civil penalty authority to punish initial offenses by retailers.

According to the FTC’s complaints, the retailers advertised numerous textile products as made of bamboo when in fact they may have originated from bamboo but had been manufactured and processed into rayon. The retailers are alleged to have failed to identify these products as made of rayon in violation of the Textile Act.

The companies also were alleged to have misleadingly advertising their bamboo products as eco-friendly, when, per the FTC, the rayon manufacturing process “involves the use of hazardous chemicals,” and leads to the release of “hazardous air pollutants.”

If we stopped there, these cases would be similar to the FTC’s bamboo cases from nearly a decade ago. The really interesting part of these cases, however, is the $5.5 million combined settlement. As we wrote about last October, over the past six months, the FTC has sought to resurrect its civil penalty authority—last used in the 1980s—allowing the agency to seek civil penalties for a first violation of the FTC Act where the FTC has already issued a written decision that certain conduct is unfair or deceptive, and the particular company knew the conduct was unfair or deceptive. And in these cases, the basis for the FTC’s authority is a 2010 warning letter sent to 78 retailers about this exact conduct, instructing the retailers to “stop labeling and advertising rayon textile products as bamboo.”

These cases, then, signal that the FTC is willing to use prior correspondence and decisions—likely made before the return of civil penalty authority was even contemplated—as the basis for establishing an entity’s knowledge of the wrongfulness of certain conduct, allowing the FTC to seek civil penalties for a first offense. As a result, retailers should review past interactions with the FTC, and proceed with the understanding that future, similar violations could lead to a seven-figure fine.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XII, Number 102
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About this Author

Phyllis H. Marcus Partner Consumer Products Food Industry Retail Practices
Partner

With 17 years of experience at the FTC, Phyllis brings a unique advertising and children’s privacy vantage point to our clients.

Phyllis heads the firm’s advertising counseling practice, and focuses on all aspects of advertising, from the initial development of a claim to its ultimate defense in the marketplace. Phyllis’s practice includes claim creation and substantiation, pre-acquisition due diligence, dissemination in traditional and digital media, and both offensive and defensive competitor challenges. She also counsels clients on the intricacies of compliance with the Children’...

202-955-1810
Samuel J. Thomas Litigation Attorney Hunton Andrews Kurth Law Firm Washington, DC
Associate

Sam’s wide-ranging practice focuses on class action and complex commercial litigation.

A litigation associate in the Washington, DC office, Sam represents clients in matters big and small from multi-district litigation to commercial lease disputes and non-party subpoenas. Sam also works closely on compliance issues, helping clients to safely navigate federal and state regulatory regimes. He maintains an active pro bono practice focused on asylum and relief from removal. Working with clients across a broad range of industries including food service, retail, and more, Sam has the...

202-419-2059
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