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Home products retailer Williams-Sonoma will have to pay almost $3.2 million for violating a Federal Trade Commission “Made in USA” order.
Williams-Sonoma was charged with advertising multiple products as being “Made in USA” when they were in fact manufactured in other countries, including China. That violated a 2020 commission order requiring the San Francisco-based company to be truthful about whether its products were in fact made in the U.S.
The FTC said Friday that Williams-Sonoma has agreed to a settlement, which includes a $3.175 million civil penalty. That marks the largest-ever civil penalty seen in a “Made in USA” case, the commission said.
“Williams-Sonoma’s deception misled consumers and harmed honest American businesses,” FTC Chair Lina M. Khan said. “Today’s record-setting civil penalty makes clear that firms committing Made-in-USA fraud will not get a free pass.”
In addition to paying the penalty, the seller of cookware and home furnishings will be required to submit annual compliance reports, the FTC said. The settlement also imposes and reinforces a number of requirements about manufacturing claims the company can make.
https://www.statista.com/statistics/246591/net-revenue-of-williams-sonoma-worldwide/
Once again, a corporation breaking the law can just write it off as the cost of doing business.
All I’m hearing is that made in USA is a meaningless label because it’s cost-effective to simply apply it and pay the fine if they ever get to you. Corporations mis using the label can breathe a sigh of relief. No real punishment inbound.
Hey, that’s not telling the whole story!
Made in the USA can mean unpaid prison slave labor too.
The bottom line is operating income, not revenue. And WSM had an operating income of ~$1.5 billion last year.
The FTC found seven products were falsely advertised, starting with a mattress cover. But Pottery Barn sells over 10,000 products, in fact there are over 500 products in their bedding section alone. And Pottery Barn is just one part of WSM.
It’s near certain that a $3 million fine wiped out whatever profit these seven products made for WSM, and then cut into profits made by other products. So breaking the law was not a profitable strategy for WSM.
The punishment should be calculated based on gross revenue from the product. Not net profit. 50% of gross revenue sounds good.
Why? We want to disincentivize malicious business practices, and fines proportional or greater to earnings from those practices are more than enough to convince a for-profit corporation to keep it clean.
Lol. This is the real world, and it’s already proven that the current system is inadequate, it is not enough to stop companies from doing it.
The fact that companies keep continuing to do it is the proof. The fines are NOT enough to disincentivize the practice. The current fines are still less than the benefit the company receives from the act, otherwise they wouldn’t be doing it.
Bullshit like false advertising should have a dramatic punishment, not a slap on the wrist. I don’t give a shit if it bankrupts a business. A business lying to their customers should destroy it. If they want to take a chance at destroying the entire business over something as small as a fake label, they can decide to roll those dice, but don’t be surprised when they lose it all.
As a whole you’re correct, it often is inadequate, but in this very specific case of 7 products including some teen bed-padding, then the fines seem pretty proportional.
It depends on how much they made from these products. If the profit from the sale of those products is more than the $3.2M in fines, it is still just a cost that can be planned for when determining sale price and margins. The penalty needs to be higher than the profit from the deceptive practice or else it’s just a cost that can be planned for, not a real deterrent.
According to their 10-K end of year SEC Filing they made $1.7 Bn cash inflow profits, which resulted in a $1.3 Bn cash balance.
So, hypothetically, if they had made 3.175 Million net profit on selling one of their hundreds of types of bedding products, one of thousands of types of products total, then it would be 1/500th of their total profits across their many brand names and stores, or another possible scenario would be if everything else they sold at a cost and they actually did make this much profit from this specific bedding.
They actually saw a 9.9% decline in net revenue that year, attributed to store closures.
Of course 50% of gross revenue would immediately bankrupt WSM.
But if you still think that’s an appropriate deterrent, what if we imposed the same penalty on cannabis dispensaries? After all, they are not simply violating FTC regulations, they are engaged in federal felonies.
And? Is a housewares store too big to fail?
No, but causing a business to fail is not necessarily the best response to a violation. I don’t want WSM to fail over “made in the USA” labels for the same reason I don’t want dispensaries to shut down.
If a dispensary lied for years about where it sourced its weed and went bankrupt due to the fines, I wouldn’t shed any tears there either.
False advertising should be given zero tolerance. And it isn’t, which is why people keep dying in Teslas using the Autopilot mode.
OK, and if the dispensary violated DEA regulations for years should it likewise be fined out of existence?
No, because that doesn’t kill people in some circumstances. Seems like a big difference.
If punishment are severe then the corporations would look twice before committing fraud and deception. If not it’s just another slap on the wrist
I think a fine of $3 million is more than a slap on the wrist. It’s a lot more than whatever benefit WSM got from “made in the USA” labels.
That’s the problem the companies don’t fear the consequences for their action. If the fine was huge enough to bankrupt a company. Then the other companies will take a second guess before committing any fraud or deception against the consumers like you and me.
I wish people would be open to changing their opinions when new information is introduced, instead they’re just downvoting you because they don’t want justice they want to be mad.
The important part, to me, is that they must now submit annual compliance reports.
But the fine for lying in the reports is the same as this fine: much, much lower than the profits. The fines are inconsequential, so fake reports are also inconsequential.
The FTC has no teeth here. No one will be jailed. The fines will never be more than a fraction of a penny on the dollar. So, the required reports and even the fines mean nothing at all. Nothing. Even the bad press is likely to help them sell more goods.
Laws without teeth are not laws.
That’s wrong, actually. The fine they got last time was much smaller than this one, the fine they get next time can be expected to be even larger. The $3.175 Mn penalty for the 7 specific items sold with improper labeling is a new record for this specific violation.
Fines are not tax deductible. So no it’s not a cost of doing business.
https://www.investopedia.com/ask/answers/102915/are-irs-penalties-tax-deductible.asp#:~:text=Fines and penalties a person,federal laws are never deductible.
What? Sure you can’t deduct them, but if I make $200 million doing something illegal, and the government catches me and fines me $10 million, then that’s just a “cost” I can account for. Make $190 million even after spending $10 million in fines.
Did they make 200 million selling those products ?
7.7b in revenue for the year, probably.
On a handful of products? Doubtful.
At least the government gave them a fine which is a step in the right direction. Country of origin is important to me. I buy based on those labels
The conversational phrase “cost of doing business” does not mean the same thing as the tax law phrase “business expense”.
Write off means write off the books. Otherwise it makes no sense as that the dictionary term for the phrase. You can’t write off a fine. It isn’t “written off”.
Real the whole paragraph. It’s idiotic talk
“Write off” has evolved to have an additional, more casual meaning, and I think it was clear to most of us that the author you’re referring to was using it in that sense.
Edit: Since you’re being pedantic, I checked three dictionaries. This sense of the phrase is in all of them.
Tax deductibility is irrelevant; the cost of the practice pales in comparison to the profit of the practice, making the cost one of doing business.
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Words do have meaning. It isn’t our fault that you don’t know what those words mean.
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You don’t seem to understand what “write it off” means though, which is why you’re getting piled on.
Nobody is talking about taxes except you.
Well they should pick up a dictionary and learn what the word means.
It’s an idiom, not a word in the dictionary. You might even notice there are three words in “write it off” if you look carefully and count them out. At this point I’m going to assume you’re just trolling but in case you want to educate yourself: https://idioms.thefreedictionary.com/to+write+it+off