Today’s instant communication means brands must respond to calls for transparency or risk widespread exposure to reputational damage. Two recent investigations of major brands reveal the power of public calls for accountability in motivating brand behavior changes.
First, Walmart came under scrutiny last month by ad watchdog group truthinadvertising.org (TINA.org) for its deceptive use of “Made in America” labels. TINA.org filed a complaint to the Federal Trade Commission (FTC), claiming that Walmart has labeling errors on over 100 products on its website.
These products display USA product labels but actually contain significant components from foreign countries, and fail to disclose important qualifying language required by federal law. The phrase ‘Made in the USA’ can only be used if “all or virtually all” of its components, processing and labor are from the US.
"False made in USA labeling on Walmart's website has misled consumers looking to purchase American-made products,'' said TINA.org Executive Director Bonnie Patten. "The largest retailer in the world should have made sure its American-made claims were accurate before affixing Made in USA labels on its products. Until Walmart cleans up this mess, consumers should be cautious when shopping on the site."
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US Senator Chris Murphy (D-Conn.) also sent a letter to the FTC urging its investigation into whether Walmart and other retailers are selling mislabeled products.
“A fraudulent ‘Made in USA’ label not only rips off those consumers paying more for what they think are American-made goods, but also the retailers and manufacturers attaching those labels in good faith,” Murphy said in the letter.
According to a recent Consumer Reports survey, 8 in 10 American consumers prefer to buy an American-made product, and over 60 percent say they are willing to pay more for it. In 2013, Walmart announced that it will buy an additional $50 billion in American-made products per year in an effort to grow U.S. manufacturing and encourage the creation of U.S. jobs. And in 2014, the retailer launched a $10 million fund to further foster innovation in US manufacturing.
Blaming suppliers, Walmart acknowledged the labels were an error and pledged to undertake a quality assurance review. The company has also recently scolded its suppliers for incorrectly labeling the amount of product inside packages. The Wall Street Journal reports Walmart sent a memo to hundreds of suppliers last month, warning them to comply with labeling laws.
“This is a reminder to our suppliers to make sure their labeling matches what’s in the product,” a Walmart spokesman told the newspaper.
Meanwhile, personal care brand Tom’s of Maine, known for its commitments to sustainability and “natural” ingredients, recently faced courtroom battles over its labeling claims. Class-action suits filed in 2014 and earlier this summer scrutinize the company for claiming to use “all natural” ingredients in its toothpastes, while they in fact contain highly processed ingredients – including the sweetener xylitol and cleaner compound sodium lauryl sulfate.
Tom’s and its parent company, Colgate-Palmolive, settled the case late last month by agreeing to pay $4.5 million and change its labeling practices, Law360.com reports.
Tom’s is known for its natural image and sustainability ambitions, and this exposure could present obstacles in attracting and retaining environmentally-minded consumers. It remains to be seen how Tom’s customers will respond.