Block Division, Inc.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF BLOCK DIVISION, INC.

CONSENT ORDER, ETC. IN REGARD TO ALLEGED VIOLATIONS OF SECTION 5 OF THE FEDERAL TRADE COMMISSION ACT Docket No. C-4613; File No. 172 3052 Complaint, April 12, 2017 – Decision, April 12, 2017 This consent order addresses Block Division, Inc.’s marketing, sale, and distribution of pulley blocks and other products with claims that the products are of U.S.-origin. The complaint alleges that respondent’s claims that its products are “Made in USA” were false or misleading, or not substantiated at the time the representations were made, which is in violation of Section 5(a) of the FTC Act. The consent order prohibits Block Division, Inc. from making U.S.-origin claims for its products unless either: (1) the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States; or (2) a clear and conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients, and/or processing. Participants For the Commission: Julia Solomon Ensor. For the Respondent: Staci Pirnar, Bellinger & Suberg, LLP. COMPLAINT The Federal Trade Commission, having reason to believe that Block Division, Inc., a corporation (“Respondent”), has violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Block Division, Inc. (“Block Division”) is a Texas corporation with its principal place of business at 618 Front St., Wichita Falls, TX 76301.

2. Respondent advertises, labels, offers for sale, and distributes products to consumers, including, but not limited to, pulley blocks. Respondent advertises these products on its VOLUME 163 Complaint website, in stores, at trade shows, through social media, and through flyers and pamphlets. Respondent offers for sale, sells, and distributes its products throughout the United States. 3. The acts and practices of Respondent alleged in this complaint have been in or affecting commerce, as “commerce” is defined in Section 4 of the Federal Trade Commission Act. 4. Respondent has disseminated or has caused to be disseminated advertisements and promotional materials for its products. These materials contain the following statements, among others:

a. “Made in USA”

(Product photograph; Facebook ad); and b. “Made in the USA American Product”

(Block Division catalogue).

BLOCK DIVISION, INC. 571 Complaint 5. In numerous instances, including, but not limited to, in the promotional materials referenced in Paragraph 4, Respondent has represented, expressly or by implication, that its pulley blocks and other products are all or virtually all made in the United States. 6. In fact, Respondent’s pulley blocks and other products incorporate significant imported parts essential to the function of Respondent’s products. Among other things, for a period of several years, Respondent’s pulleys incorporated imported steel plates that entered the United States from overseas already stamped “Made in USA.”

7. Therefore, Respondent’s claims that its products are made in the United States deceive consumers. COUNT I (False or Unsubstantiated Representation) 8. In connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of its products, Respondent has represented, directly or indirectly, expressly or by implication, that such products, including the parts used to make such products, are all or virtually all made in the United States.

9. In fact, in many instances, Respondent’s products include significant imported parts, and those parts are essential to the function of Respondent’s pulley blocks. Therefore, the representation set forth in Paragraph 8 is false or misleading, or was not substantiated at the time the representation was made. VIOLATION OF SECTION 5 10. The acts and practices of Respondent, as alleged in this complaint, constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

THEREFORE, the Federal Trade Commission, this twelfth day of April, 2017, has issued this Complaint against Respondent. By the Commission.

VOLUME 163 Decision and Order DECISION The Federal Trade Commission (“Commission”) initiated an investigation of certain acts and practices of the Respondent named in the caption. The Commission’s Bureau of Consumer Protection (“BCP”) prepared and furnished to Respondent a draft Complaint. BCP proposed to present the draft Complaint to the Commission for its consideration. If issued by the Commission, the draft Complaint would charge the Respondent with violation of the Federal Trade Commission Act.

Respondent and BCP thereafter executed an Agreement Containing Consent Order (“Consent Agreement”). The Consent Agreement includes: 1) a statement by Respondent that it neither admits nor denies any of the allegations in the Complaint, except as specifically stated in this Decision and Order, and that only for purposes of this action, it admits the facts necessary to establish jurisdiction; and 2) waivers and other provisions as required by the Commission’s Rules.

The Commission considered the matter and determined that it had reason to believe that Respondent has violated the Federal Trade Commission Act, and that a Complaint should issue stating its charges in that respect. The Commission accepted the executed Consent Agreement and placed it on the public record for a period of 30 days for the receipt and consideration of public comments, pursuant to Commission Rule 2.34, 16 C.F.R. § 2.34. Now, in further conformity with the procedure prescribed in Rule 2.34, the Commission issues its Complaint, makes the following Findings, and issues the following Order: Findings 1. Respondent is a Texas corporation with its principal place of business at 618 Front St., Wichita Falls, TX 76301.

2. The Commission has jurisdiction over the subject matter of this proceeding and over the Respondent, and the proceeding is in the public interest. BLOCK DIVISION, INC. 573 Decision and Order ORDER Definitions For purposes of this Order, the following definitions apply: A. “Clear(ly) and conspicuous(ly)” means that a required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including in all of the following ways: 1. In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television advertisement, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure (“triggering representation”) is made through only one means.

2. A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood. 3. An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it. 4. In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable (i.e., must be presented and visible alongside any claim).

VOLUME 163 Decision and Order 5. On a product label, the disclosure must be presented on the same display panel as the claim being qualified.

6. The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the triggering representation appears.

7. The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and faceto-face communications.

8. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication.

9. When the representation or sales practice targets a specific audience, such as children, the elderly, or the terminally ill, “ordinary consumers” includes reasonable members of that group.

B. “Made in the United States” shall mean any representation, express or implied, that a product or service, or a specified component thereof, is of U.S.origin, including, but not limited to, a representation that such product or service is “made,” “manufactured,” “built,” or “produced” in the United States, or any other U.S.-origin claim. C. “Respondent” means Block Division, Inc. Provisions I.

PROHIBITED MISREPRESENTATIONS IT IS ORDERED that Respondent, and Respondent’s officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in BLOCK DIVISION, INC. 575 Decision and Order connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any pulley blocks, or any other product or service, must not make any representation, expressly or by implication, that a product or service is Made in the United States unless: A. The final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States; or B. A Clear and Conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients, and/or processing. II.

SUBSTANTIATION IT IS FURTHER ORDERED that Respondent, Respondent’s officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with promoting or offering for sale any product or service, shall not make any representation, in any manner, expressly or by implication, regarding the country of origin of any product or service unless the representation is true, not misleading, and at the time it is made, Respondent possesses and relies upon a reasonable basis for the representation. III.

ACKNOWLEDGMENTS OF THE ORDER IT IS FURTHER ORDERED that Respondent obtains acknowledgments of receipt of this Order: A. Respondent, within 10 days after the effective date of this Order, must submit to the Commission an acknowledgment of receipt of this Order sworn under penalty of perjury.

VOLUME 163 Decision and Order B. For 20 years after the issuance date of this Order, Respondent must deliver a copy of this Order to: (1) all principals, officers, and directors; (2) all employees, agents, and representatives who participate in conduct related to the subject matter of the Order; and (3) any business entity resulting from any change in structure as set forth in the Provision titled Compliance Reports and Notices. Delivery must occur within 10 days after the effective date of this Order for current personnel. For all others, delivery must occur before they assume their responsibilities. C. From each individual or entity to which Respondent delivered a copy of this Order, Respondent must obtain, within 30 days, a signed and dated acknowledgment of receipt of this Order. IV.

COMPLIANCE REPORTS AND NOTICES IT IS FURTHER ORDERED that Respondent make timely submissions to the Commission:

A. One year after the issuance date of this Order, Respondent must submit a compliance report, sworn under penalty of perjury, in which Respondent must: (a) identify the primary physical, postal, and email address and telephone number, as designated points of contact, which representatives of the Commission, may use to communicate with Respondent; (b) identify all of Respondent’s businesses by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; (c) describe the activities of each business, including the goods and services offered, the means of advertising, marketing, and sales; (d) describe in detail whether and how Respondent is in compliance with each Provision of this Order, including a discussion of all of the changes Respondent made to comply with the Order; and (e) provide a copy of each Acknowledgment of the Order BLOCK DIVISION, INC. 577 Decision and Order obtained pursuant to this Order, unless previously submitted to the Commission.

B. Respondent must submit a compliance notice, sworn under penalty of perjury, within 14 days of any change in the following: (a) any designated point of contact; or (b) the structure of Respondent or any entity that Respondent has any ownership interest in or controls directly or indirectly that may affect compliance obligations arising under this Order, including: creation, merger, sale, or dissolution of the entity or any subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order. C. Respondent must submit notice of the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding by or against Respondent within 14 days of its filing.

D. Any submission to the Commission required by this Order to be sworn under penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by concluding: “I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on: _____” and supplying the date, signatory’s full name, title (if applicable), and signature.

E. Unless otherwise directed by a Commission representative in writing, all submissions to the Commission pursuant to this Order must be emailed to [email protected] or sent by overnight courier (not the U.S. Postal Service) to: Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. The subject line must begin: In re Block Division, Inc.

VOLUME 163 Decision and Order V.

RECORDKEEPING IT IS FURTHER ORDERED that Respondent must create certain records for 20 years after the issuance date of the Order, and retain each such record for 5 years, unless otherwise specified below. Specifically, Respondent must create and retain the following records:

A. Accounting records showing the revenues from all goods or services sold;

B. Personnel records showing, for each person providing services in relation to any aspect of the Order, whether as an employee or otherwise, that person’s: name; addresses; telephone numbers; job title or position; dates of service; and, if related to the subject matter of this Order, the reason for termination; C. Copies or records of all consumer complaints and refund requests, whether received directly or indirectly, such as through a third party, and any response;

D. All records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Commission;

E. A copy of each unique advertisement or other marketing material making a representation subject to this Order; and F. For 5 years from the date of the last dissemination of any representation covered by this Order: 1. All materials that were relied upon in making the representation; and 2. All evidence in Respondent’s possession, custody, or control that contradicts, qualifies, or otherwise calls into question the representation, or the basis BLOCK DIVISION, INC. 579 Decision and Order relied upon for the representation, including complaints and other communications with consumers or with governmental or consumer protection organizations.

VI.

COMPLIANCE MONITORING IT IS FURTHER ORDERED that, for the purpose of monitoring Respondent’s compliance with this Order: A. Within 10 days of receipt of a written request from a representative of the Commission, Respondent must: submit additional compliance reports or other requested information, which must be sworn under penalty of perjury, and produce records for inspection and copying.

B. For matters concerning this Order, representatives of the Commission are authorized to communicate directly with Respondent. Respondent must permit representatives of the Commission to interview anyone affiliated with Respondent who has agreed to such an interview. The interviewee may have counsel present. C. The Commission may use all other lawful means, including posing through its representatives as consumers, suppliers, or other individuals or entities, to Respondent or any individual or entity affiliated with Respondent, without the necessity of identification or prior notice. Nothing in this Order limits the Commission’s lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.

VII.

ORDER EFFECTIVE DATES IT IS FURTHER ORDERED that this Order is final and effective upon the date of its publication on the Commission’s website (ftc.gov) as a final order. This Order will terminate on VOLUME 163 Analysis to Aid Public Comment April 12, 2037, or 20 years from the most recent date that the United States or the Commission files a complaint (with or without an accompanying settlement) in federal court alleging any violation of this Order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of: A. Any Provision in this Order that terminates in less than 20 years; and B. This Order if such complaint is filed after the Order has terminated pursuant to this Provision. Provided, further, that if such complaint is dismissed or a federal court rules that the Respondent did not violate any provision of the Order, and the dismissal or ruling is either not appealed or upheld on appeal, then the Order will terminate according to this Provision as though the complaint had never been filed, except that the Order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal. By the Commission.

ANALYSIS OF CONSENT ORDER TO AID PUBLIC COMMENT The Federal Trade Commission (“FTC” or “Commission”) has accepted, subject to final approval, an agreement containing a consent order from Block Division, Inc. (“respondent”). The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw from the agreement or make final the agreement’s proposed order.

BLOCK DIVISION, INC. 581 Analysis to Aid Public Comment This matter involves respondent’s marketing, sale, and distribution of pulley blocks and other products with claims that the products are of U.S.-origin. According to the FTC’s complaint, respondent represented that its products are “Made in USA.” In fact, respondent’s products incorporate significant imported parts, including imported steel pulley plates that entered the United States from overseas already stamped “Made in USA.” The complaint alleges that respondent’s claims that its products are “Made in USA” were false or misleading, or not substantiated at the time the representations were made. Accordingly, the complaint alleges that respondent engaged in deceptive acts or practices in violation of Section 5(a) of the FTC Act.

The proposed consent order contains provisions designed to prevent respondent from engaging in similar acts and practices in the future. Consistent with the FTC’s Enforcement Policy Statement on U.S. Origin Claims, Part I prohibits Block Division, Inc. from making U.S.-origin claims for its products unless either: (1) the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States; or (2) a clear and conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients, and/or processing.

Part II prohibits respondent from making any “Made in USA” or other country-of-origin claim about a product or service unless the claim is true, not misleading, and respondent has a reasonable basis substantiating the representation. Parts III through VI are reporting and compliance provisions. Part III requires respondent to acknowledge receipt of the order, to provide a copy of the order to certain current and future principals, officers, directors, and employees, and to obtain an acknowledgement from each such person that they have received a copy of the order. Part IV requires the filing of compliance reports within one year after the order becomes final and within 10 days of any change in respondent that would affect compliance VOLUME 163 Analysis to Aid Public Comment with the order. Part V requires respondent to maintain certain records, including records necessary to demonstrate compliance with the order. Part VI requires respondent to submit additional compliance reports when requested by the Commission and to permit the Commission or its representatives to interview respondent’s personnel.

Finally, Part VII is a “sunset” provision, terminating the order after twenty (20) years, with certain exceptions. The purpose of this analysis is to aid public comment on the proposed order. It is not intended to constitute an official interpretation of the proposed order or to modify its terms in any way.

DAVITA INC. 583 Complaint