WASHINGTON — Shinola, the popular American watch brand worn by current and former presidents, has come under scrutiny by the Federal Trade Commission for its “Made in USA” claims.
While the FTC said it has declined to pursue enforcement action at this time, the agency did conduct a review of the company’s marketing and advertising claims, prompting Shinola’s parent company, Bedrock Manufacturing Co., to implement “a remedial action plan.”
Tom Kartsotis, founder of Shinola and its parent Bedrock Manufacturing Co., defended Shinola’s practices and blamed the government for implementing “subjective” standards that make it hard for companies to communicate to consumers about the scope of the products that are made here.
In separate news on Friday, Shinola restructured its senior management. Steve Bock — president of Bedrock Manufacturing Co., parent company of Shinola and Filson, and chief executive officer of Shinola — has become ceo of Filson, the accessories and apparel brand, and relocated to Seattle. He continues as president of Bedrock.
Tom Lewand, president of the Detroit Lions for the past 20 years, has succeeded Bock as Shinola’s ceo. He reports to Kartsotis.
Lewand’s appointment will enable Jacques Panis, president of Shinola, to pursue some new initiatives at the Detroit-based watch, leather-goods, bicycle and accessories brand. Panis will report to Lewand and Kartsotis.
Kartsotis said, “Bringing Tom Lewand onto the team is enabling us to expand the reach of Jacques Panis into some interesting new initiatives that we are pursuing. Jacques does something that amazes me every single week. He also does something that makes me crazy every week, so our customers and supporters can continue to expect the unexpected from Shinola.”
In addition, Christopher Hull has been named chief merchant and will partner with Daniel Caudill, creative director. Both Hull and Caudill report to Kartsotis.
Shinola also has tapped several executives to senior management roles. Shannon Washburn has been named vice president of watch product development; Kara Berg has been tapped as vice president of sales; Whitney Delgado has been named vice president, design, and Trish O’Callaghan has been appointed vice president, communications.
In the FTC matter, a letter agency staff attorneys sent to the company came to light on Friday.
The company’s Shinola watches have been worn by President Obama and former President Clinton. Hillary Clinton, the presumptive Democratic presidential candidate, gave a shout-out to Shinola at a campaign event in Detroit earlier this year, holding up the company as a model of job creation.
But the FTC said it has concerns about the scope of what the company makes here.
“During our review, we raised concerns that certain marketing materials overstated the extent to which certain Shinola and Filson-branded products, including, but not limited to, watches and certain leather goods and bicycles, are ‘made’ or ‘built’ in the United States,” two FTC attorneys stated in the letter to Bedrock’s general counsel, Lisa Gold. “As we have discussed, unqualified ‘Made in USA’ or ‘Built in USA’ claims likely suggest to consumers that products are ‘all or virtually all’ made in the United States.”
The FTC said it found in its review that the company sources “significant inputs” for its products abroad.
“For example, 100 percent of the cost of materials used to make certain watches is attributable to imported materials,” the FTC attorneys said. “Similarly, more than 70 percent of the cost of the materials used to make certain belts is attributable to imported materials such as decorative buckles. Additionally, Bedrock sources the steel used to make certain bicycle forks overseas.”
Kartsotis responded on Friday: “Shinola has always tried to be a company that brings jobs to America by training individuals here to handle as much of the manufacturing process as possible, while at the same time attempting to remain competitive on a global scale. We believe that our mission is, and our marketing implies, that we are a job creation vehicle and not a ‘Made in America’ play.”
The company will continue to mark the watches “Built in Detroit” with the clarification that they contain “Swiss and imported parts,” he said.
“While the FTC did show us some flaws in our communication, we believe that we have genuinely tried to be completely transparent as to the origin (and mission) of our products from the outset,” he said, adding that with the FTC’s help, the company has adopted improvements over the past year.
But Kartsotis took the government to task for its “Made in the USA” regulations, which he said “create somewhat subjective policies and standards that hinder the ability of any given company to communicate effectively to the consumer the overall effort and scope of what they are manufacturing in America in order to separate themselves from the majority of companies that completely import their products.”
Shinola, he said, has been a leader in bringing as much of the manufacturing process as it can back to the U.S.
“But as you can imagine, many of the components and raw materials are simply not available in the U.S. and because of that we are unable to meet the almost unattainable Made in USA” standards created by the government,” he said.
“The inconsistency of the policies and laws, as well as the subjective nature of some of the process, renders it difficult to navigate as a U.S. company and compete against other companies, U.S. or foreign, who benefit from the overall lower costs in offshore production,” Kartsotis said. “Until a change in policy clarifies for the consumer what it truly means to be Made in the USA, Shinola will always strive to do as much as it can in America with the benefit of an American workforce.”
The FTC said Bedrock’s plan included applying “corrective” hangtags and information cards to watches, bicycles and other products identified to alert consumers that those products contained “significant imported content”; redesigning its watch case backs; updating embossed claims in those leather good that were affected; updating Internet and advertising materials to qualify the claims, and updating employee training manuals and advertising materials for third-party retailers.
Bedrock also “transitioned” away from its “Where American Is Made” slogan, as part of the plan, according to the FTC, and is developing enhanced policies and procedures, including a legal review to “avoid future deception or mislabeling.”
The FTC said it analyzes a number of factors to determine whether a product is “all or virtually all” made in the U.S., including the proportion of manufacturing costs attributable to U.S. parts and processing of a product, how “far removed any foreign content is from the finished product and the importance of the foreign content or processing to the overall function of the product.”
The FTC said it will continue to monitor the company’s advertising closely for potential “deceptive U.S.-origin claims” in the future and said it reserved the right to take further action where it is warranted.