Consumer Federation of California

The California Supreme Court issued a significant ruling yesterday protecting consumer access to the courts in cases of false advertising. The case involved a manufacturer that labeled as ‘Made in the USA’ products that, in fact, contained component assemblies manufactured in Mexico ‘ a clear violation of state law prohibiting this label on products that are substantially produced outside of the United States.

The case is Kwikset Corp. v Superior Court (Benson). Quikset, a manufacturer of locksets, closed down its Anaheim factory and shipped jobs to Mexicali, Mexico. It continued to label products containing foreign-made subassemblies as "Made in the USA". Consumers sued under California’s Unfair Competition Law, claiming that they were duped into buying these products only because of their prominent "Made in the USA" label.

While the case was before a lower court, California voters enacted Proposition 64, which eliminated consumer lawsuits in false advertising cases where the consumer could not show that he or she had suffered a loss of money or property as the result of the misrepresentation. Based on the enactment of Proposition 64, the lower court dismissed the complaint filed by Quikset customers, reasoning that the consumers were not overcharged. Therefore, this court found, they suffered no monetary loss and had no grievance to bring to a court of law. The lower court found that while the consumers’ ‘patriotic desire to buy fully American-made products was frustrated’ they suffered no injury of consequence and therefore had no legal standing to seek redress in court.

The ruling was appealed to the California Supreme Court. The Consumer Federation of California joined with several other consumer, environmental, and labor organizations in filing a friend of the court brief asking the Supreme Court to overrule the lower court, because consumers were injured when they bought products they would not otherwise have purchased but for the false claims about the product.

We argued that the ‘Made in the USA’ label  provided the manufacturer a marketplace advantage in appealing to large numbers of California consumers who care about the origin of a product. If this were not the case, domestic manufacturers would not display this label prominently in packaging and marketing materials. Abuse of this label caused economic injury to the affected consumers.

The California Supreme Court agreed with our side and reversed the lower court ruling. The Supreme Court wrote:

    Simply stated: labels matter. The marketing industry is based on the premise that labels matter, that consumers will choose one product over another similar product based on its label and various tangible and intangible qualities they may come to associate with a particular source.

    To some consumers, processes and places of origin matter’Whether a particular food is kosher or halal may be of enormous consequence to an observant Jew or Muslim. Whether a wine is from a particular locale may matter to the oenophile who values subtle regional differences. Whether a diamond is conflict free may matter to the fianc