Sandpiper of California, Inc.

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IN THE MATTER OF SANDPIPER OF CALIFORNIA, INC., AND PIPERGEAR USA, INC.

CONSENT ORDER, ETC. IN REGARD TO ALLEGED VIOLATIONS OF SECTION 5 OF THE FEDERAL TRADE COMMISSION ACT Docket No. C-4675; File No. 182 3095 Complaint, April 16, 2019 Decision, April 16, 2019 This consent order addresses Sandpiper of California, Inc.'s and PiperGear USA, Inc.'s marketing, sale, and distribution of bags and wallets with claims that the products are made in the United States. The complaint alleges that Respondents violated Section 5(a) of the Federal Trade Commission Act by representing that all of their products are all o r virtually all made in the United States when, in fact, more than 95% of Respondent Sandpiper's products are imported as fmished goods, and approximately 80% of Respondent PiperGear' s products are either imported as finished goods or contain significant imported components. The consent order prohibits Respondents from making U.S.-origin claims for their 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; (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 or components, and/or processing; or (3) for a claim that a product is assembled in the United States, the product is last substantially transformed in the United States, the product 's principal assembly takes place in the United States, and United States assembly operations are substantial. Participants For the Commission: Julia Solomon Ensor.

For the Respondents: Daniel J. Navigato, Navigato & Battin, LLP. COMPLAINT The Federal Trade Commission, having reason to believe that Sandpiper of California, Inc., a corporation, and PiperGear USA, Inc., a corporation (collectively, "Respondents"), have 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 Sandpiper of California, Inc. ("Sandpiper") 1s a California corporation with its principal office or place of business at 687 Anita Street, Suite A, Chula Vista, CA 91911.

2. Respondent PiperGear USA, Inc. ("PiperGear") is a California corporation with its principal office or place of business at 687 Anita Street, Suite A, Chula Vista, CA 91911. 3. Respondents Sandpiper and PiperGear have operated as a common enterprise while engaging in the unlawful acts and practices alleged below. Because these Respondents SANDPIPER OF CALIFORNIA, INC. 499 Complaint have operated as a common enterprise, each of them is jointly and severally liable for the acts and practices alleged below.

4. Respondents have advertised, labeled, offered for sale, sold, and distributed products to consumers, including, but not limited to, backpacks and travel bags. Respondents advertise these products online, including, but not limited to, on their websites, sandpiperca.com and pipergearusa.com. Respondents offer for sale, sell, and distribute their products throughout the United States.

5. The acts and practices of Respondents alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act.

6. Respondents have disseminated or have caused to be disseminated advertisements and promotional materials for their products, including, but not necessarily limited to, the attached Exhibits A-D. These materials contain the following statements and depictions, among others:

a. "Featuring American Made products developed and manufactured by our sister company, PiperGear USA"

Featuring American Made products developed and manufactured by our sister company, PiperGear USA. We offer manufacturing options to meet Berry Amendment, NAFTA, GSA or Buy American Act requirements. The growth and success of our US manufacturing plant is a great source of pride to us.

(Exhibit A, Sandpiper website);

b. "Made in the USA"

(Exhibit B, PiperGear website);

VOLUME 167 Complaint c. "#madeinusa"

sandpiperofca • Follow sandpiperofca It's all about the details ...

#sandpiperofcalifornia #soc #backpack #camouflage #camo #camping #madeinusa (Exhibit C, Sandpiper Instagram posting); and d. "U.S. Made by S.O.C."

(Exhibit D, Sandpiper Instagram posting, photograph of Sandpiper trade show material).

7. In numerous instances, including, but not limited to, the promotional materials referenced in Paragraph 6, Respondents have represented, expressly or by implication, that all of their backpacks, travel bags, and other products are all or virtually all made in the United States. 8. In fact, more than 95% of Respondent Sandpiper's products are imported as finished goods, and approximately 80% of Respondent PiperGear's products are either imported as finished goods or contain significant imported components. Respondents import products or components from Mexico and China. For certain wallets imported from Mexico as finished goods, Respondents hid truthful country-of-origin information on the back of tags, and inserted cards that prominently displayed false U.S.-origin claims. 9. Therefore, Respondents' express or implied representations that all of their r products are made in the United States are false or unsubstantiated. COUNT I (False or Unsubstantiated Representation) 10. In connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of their products, Respondents have represented, directly or indirectly, expressly or by implication, that all of their products are all or virtually all made in the United States.

SANDPIPER OF CALIFORNIA, INC. 501 Complaint 11. In fact, more than 95% of Respondent Sandpiper's products are wholly imported, and approximately 80% of Respondent PiperGear's products are either imported as finished goods or contain significant imported components. Therefore, the representation set forth in Paragraph 10 is false or misleading, or was not substantiated at the time the representation was made.

VIOLATION OF SECTION 5 12. The acts and practices of Respondents 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 sixteenth day of April, 2019, has issued this Complaint against Respondents.

By the Commission.

VOLUME 167 Complaint Exhibit A Sandplptt of CaW'onua Company u:afl•NAITA MANUMCTUWIO •vAUaS SANDPIPERQUALITY TRAY~)L DAG~OF.t BACKPACKSCALIFORNIASINC~: 1900 HOME PROOUCTS USER PHOTOS COMPANY MEDIA CONTACT Sandpipe r of California Established in 1980, SOC produced and sold products primarily in Southern California. You will find SOC products in retail locations around the world. For over 3 decades our quest for quality has been a progression to provide the best products for our customers. Piper Gear Our basic philosophy is to provide a great Recreational and outdoors collection. Great for product at a fair price, and provide superior hikes, day trips or school. Modern colors and customer service. contemporary designs. Featuring American Made products developed and manufactured by our sister company, PiperGear USA. We offer manufacturillg options to meet Berry Amendment, NAFTA, GSA or Buy American Act requirements. The IJtflSA] Fo nder O JdCOb growth and success of our US manufacturing plant is a great source of pride to us.

PGUSA COMPANY EX ECUTIVES Working with law enforcement and US military Piper Gear USA is the manufacturing sister personnel is an honor and privilege, and company of Sandpiper of California. PG USA Mo rto n Holfae11der essenbal to our success by prov1dmg relevant provides add1t1oral options to customers Chief Financu,J Officer product designs and features. providing materials and assembly to c-over the mortonC,ptpergear.com full range of manufacturing requirements. Berry By keeping it simple we maintain consistency Amendment, Buy Amf!ncan Act., NAFTA, as well in our manufacturing quality and service as overseas production. levels, while im proving our products and increasing sales growth opportunities. We http://www.p1pergearusa.com/ invite new retail partners and manufacturing opportunities no matter how bi9 or small.

hnp:l/'wwY,'.sandf)tperca.com/cowpaoy.pbp{lf25f2018 1:41:J'? PM] E :tblbit A p. 1 or 1 SANDPIPER OF CALIFORNIA, INC. 503 Complaint Sandpiper of California I Company Sandpiper of California A ABOUT US FXPLORE PRODUCTS FOILOW U S (6tQ) 4?4-nn Get 1::-mail Updates! Enter your e-mail ...

Sli~.'IT (0 7016 Sandpiper of C.ahtom1.:1. All nghts reserved. I Pnvacy Polley I Site Mnp b.ttp://www..s.a.ndpiptrca.com/company.php(l/25/201S 1:41:12 PM] E:utibit A p. 2 of2 VOLUME 167 Complaint Exhibit B PIPERGEAR USA SEWN GOODS DESIGN ':liilS~] -•-a...;;.._.;.__ _,_ ANO MANUFACTURING USA ' I HOME I PROTOTYPES I COMPANY I SERVICES I CONTACT I PiperGear USA • TACTICAL GEAR • BERRY COMPLIANT PiperGear USA, Inc. is the manufacturing sister company of • PACKS, POUCHES & BAGS • BUY AMERICAN ACT Sandpiper of califomia, Inc. p;perGear USA was established in • CUSTOM DESIGNS • NAFTA 2007 as a solution to provide the U.S. Department of Defense • PROTOTYPES • OVERSEAS PRODUCTION (DOD) with Berry Amendment compliant products. Located in Chula Vista, California, just 6 mtles from downtown San Diego, California, PiperGear USA is now a leading manufacturer of tactical nylon products and sewn goods equipment. Read more .•• PiperGec,r USA ABOUT US PROTOTYPES S.O.C. PRODUCTS (619) 424-2222 Exhibit B p. l of 2 SANDPIPER OF CALIFORNIA, INC. 505 Complaint © 2016 Popert;ear USA. All Rights Reserved. I CAGE Code: SXPUB I Site Map Exhibit B p. 2 of 2 VOLUME 167 Complaint Exhibit C P • Q C, .., s.mti,per of c.lijomia (@>s... • --~~ ~ sandpiporofca • follow sandpipwrofca It's all about the details...

#sandpiperorcdlifornia #soc: trbackpack • camouflage ~camo .ii;camping •madeinusa 19 llk•s Loy in ~t' OI ll IT t'I I Exhibit C SANDPIPER OF CALIFORNIA, INC. 507 Decision and Order Exhibit D lllfflllpiparvf last day @sbo!show and last iJavtHntWttlel'adtMIJJ(!Kltoontest $18<1 \/alim},Comebyboolfi 32303 ~16 ~~#hunting~ DECISION The Federal Trade Commission ("Commission") initiated an investigation of certain acts and practices of the Respondents named in the caption. The Commission's Bureau of Consumer Protection ("BCP") prepared and furnished to Respondents 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 Respondents with violations of the Federal Trade Commission Act.

VOLUME 167 Decision and Order Respondents and BCP thereafter executed an Agreement Containing Consent Order ("Consent Agreement"). The Consent Agreement includes: 1) statements by Respondents that they neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Decision and Order, and that only for purposes of this action, they admit 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 Respondents have 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. The Commission duly considered any comments received from interested persons pursuant to Section 2.34 of its Rules, 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. The Respondents are:

a. Sandpiper of California, Inc., a California corporation with its principal office or place of business at 687 Anita Street, Suite A, Chula Vista, CA 91911.

b. PiperGear USA, Inc., a California corporation with its principal office or place of business at 687 Anita Street, Suite A, Chula Vista, CA 91911. 2. The Commission has jurisdiction over the subject matter of this proceeding and over Respondents, and the proceeding is in the public interest. 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 SANDPIPER OF CALIFORNIA, INC. 509 Decision and Order 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. 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 face-to­ 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" means 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 representati on that such product or service is "made," "manufactured," "built," or "produced" in the United States or in America, or any other U.S.-origin claim.

C. "Respondents" means Sandpiper of California, Inc. and PiperGear USA, Inc. and their successors and assigns, individually, collectively, or in any combination. VOLUME 167 Decision and Order Provisions I.

PROHIBITED MISREPRESENTATIONS REGARDING U.S. ORIGIN CLAIMS IT IS ORDERED that Respondents, and Respondents' 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 connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any backpack or travel bag, 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 or components, and/or processing; or C. For a claim that a product is assembled in the United States, the product is last substantially transformed in the United States, the product's principal assembly takes place in the United States, and United States assembly operations are substantial.

II.

SUBSTANTIATION IT IS FURTHER ORDERED that Respondents, Respondents' 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 connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale or distribution of any product or service, must not make any representation, expressly or by implication, regarding the country of origin of any product or service unless the representation is non-misleading, including that, at the time it is made, Respondents possess and rely upon a reasonable basis for the representation.

III.

ACKNOWLEDGMENTS OF THE ORDER IT IS FURTHER ORDERED that Respondents obtain acknowledgments of receipt of this Order:

SANDPIPER OF CALIFORNIA, INC. 511 Decision and Order A. Each 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.

B. For 20 years after the issuance date of this Order, each Respondent must deliver a copy of this Order to: (1) all principals, officers, directors, and LLC managers and members; (2) all employees having managerial responsibilities for conduct related to the subject matter of the Order, and all agents and representatives having managerial responsibilities for 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 within 10 days of when they assume their responsibilities.

C. From each individual or entity to which a Respondent delivered a copy of this Order, that 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 Respondents make timely submissions to the Commission:

A. One year after the issuance date of this Order, each Respondent must submit a compliance report, sworn under penalty of perjury, in which each 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 that 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, and the involvement of any other Respondent; (d) describe in detail whether and how that Respondent is in compliance with each Provision of this Order, including a discussion of all of the changes the Respondent made to comply with the Order; and (e) provide a copy of each Acknowledgment of the Order obtained pursuant to this Order, unless previously submitted to the Commission. B. Each 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 any 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, VOLUME 167 Decision and Order or dissolution of the entity or any subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order.

C. Each Respondent must submit notice of the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding by or against such 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 Sandpiper of California, Inc. V.

RECORDKEEPING IT IS FURTHER ORDERED that Respondents 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, each Respondent must create and retain the following records: A. Accounting records showing the revenues from all goods or services sold, the costs incurred in generating those revenues, and resulting net profit or loss; 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 applicable) the reason for termination;

C. Copies or records of all consumer complaints and refund requests concerning the subject matter of the Order, 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 SANDPIPER OF CALIFORNIA, INC. 513 Decision and Order 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 each Respondent's possession, custody, or control that contradicts, qualifies, or otherwise calls into question the representation, or the basis 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 Respondents' compliance with this Order:

A. Within 10 days of receipt of a written request from a representative of the Commission, each 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 each Respondent. Respondents must permit representatives of the Commission to interview anyone affiliated with any 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 Respondents or any individual or entity affiliated with Respondents, 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 (fie.gov) as a final order. This Order will terminate 20 years from the date of its issuance (which date may be stated at the end of this Order, near the Commission's seal), 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:

VOLUME 167 Analysis to Aid Public Comment A. Any Provision in this Order that terminates in less than 20 years; B. This Order's application to any Respondent that is not named as a defendant in such complaint; and C. 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 Sandpiper of California, Inc. and PiperGear USA, Inc. ("Respondents").

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.

This matter involves Respondents' marketing, sale, and distribution of bags and wallets with claims that the products are made in the United States. According to the FTC's complaint, Respondents represented that all of their products are all or virtually all made in the United States. In fact, more than 95% of Respondent Sandpiper's products are imported as finished goods, and approximately 80% of Respondent PiperGear' s products are either imported as finished goods or contain significant imported components. Based on the foregoing, the complaint alleges that Respondents 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 Respondents from engaging in similar acts and practices in the future. Consistent with the FTC's Enforcement SANDPIPER OF CALIFORNIA, INC. 515 Analysis to Aid Public Comment Policy Statement on U.S. Origin Claims, Part I prohibits Respondents from making U.S.-origin claims for their 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; (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 or components, and/or processing; or (3) for a claim that a product is assembled in the United States, the product is last substantially transformed in the United States, the product's principal assembly takes place in the United States, and United States assembly operations are substantial.

Part II prohibits Respondents from making any country-of-origin claim about a product or service unless the claim is true, not misleading, and Respondents have a reasonable basis substantiating the representation.

Parts III through VI are reporting and compliance provisions. Part III requires Respondents 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 each Respondent to file a compliance report within one year after the order becomes final and to notify the Commission within 14 days of certain changes that would affect compliance with the order. Part V requires Respondents to maintain certain records, including records necessary to demonstrate compliance with the order. Part VI requires Respondents 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.

VOLUME 167 Complaint