President Obama frequently brags about Detroit-based Shinola, claiming its watches, bicycles, and other goods assembled in the US are a symbol of a revival in American manufacturing.
Unfortunately, the Federal Trade Commission seems to disagree with that characterization, and the company is now implementing a remedial action plan on recommendation from the FTC to avoid enforcement action.
The letter the commission sent to Shinola’s parent company, Bedrock Manufacturing, on June 16 detailed a prior FTC review of Shinola that “raised concerns that certain marketing materials overstated the extent to which certain Shinola … products … are ‘made’ or ‘built’ in the United States.”
The company is being forced to clarify its “Built in Detroit” slogan on all of its products and advertising copy, as the FTC says it could mislead customers to instead think they are purchasing a product made in the US.
In order for a product to be claimed to be “made in the US,” it must be assembled in the US from “all or virtually all” American parts. Shinola’s slogan attempted to avoid this FTC requirement, and the company is not secretive about using foreign parts for the products assembled in the Motor City while listing all part sources on its website.
- Reuters/Jonathan Ernst
The company has been criticized for touting American manufacturing while using mainly foreign parts to assemble. Notably, the company uses a Swiss- or Thai-manufactured movement for most of its watches, and in some cases, the parts used to assemble the watches were 100% from foreign sources.
The FTC saw a potentially misleading difference between a “made in the US” claim, which the FTC polices, and Shinola’s “Built in Detroit.”
The letter details the actions Shinola must implement and has implemented to remedy the situation, including: clarifying “Built in Detroit” in its website and all marketing and advertising materials; adding tags and materials detailing the sources of the parts used in products; redesigning watch-case backs to add “from Swiss and imported parts”; updating employee training manuals; and developing “enhanced policies and procedures, including additional legal review, to avoid future deception or mislabeling.”
The company must also stop using its “Where American is Made” slogan to describe itself, the FTC says.
- Reuters/Rebecca Cook
It’s notable that the “made in the US” requirement is stricter than manufacturing claims in other countries. Switzerland, which is still arguably the watchmaking capital of the world, requires only that a watch’s movement be Swiss-made and the watch cased and inspected in Switzerland to be called “Swiss made.” For a movement to be Swiss, it needs to be made with 60% of its component’s value from Switzerland.
In a statement, Shinola’s founder, Tom Kartsotis, said:
We have always believed that “Built in Detroit” most accurately describes the watches (and jobs) that are being created in Detroit and will continue to mark our watches as “Built in Detroit.” 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. We are thankful to the FTC for helping us identify some areas of improvement within some of our communication, which we began adopting over the last year.
Kartsotis criticized the inflexibility of the “made in the US” designation, saying that “the truth is that Shinola is and has been a leader in bringing as much of the manufacturing process back to the US as it can possibly achieve.”
“Many of the components and raw materials are simply not available in the US,” Kartsotis said in the statement, implying that American supply chains are just not up to the standard to create a “made in the US” watch to the FTC’s requirement.
“We found it confusing that a car, for example, isn’t held to the same standard as a watch,” 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.”
Shinola has carved a niche among consumers who are looking for a nice watch but aren’t willing or able to shell out the coin required for a high-end Swiss brand like Rolex. Shinola CMO Bridget Russo told NewCo that the company generated $100 million in revenue in 2015, up from $20 million in 2013 and $60 million in 2014.
Hodinkee first noted that “Built in Detroit” is already completely gone from Shinola’s website, replaced with a much tamer “The first watches assembled at scale in the United States in decades.”
Read the full FTC letter here.
Note: An earlier version of this article claimed Shinola was forced to drop it’s “Built in Detroit” slogan completely, but the company will continue to use it while clarifying parts used in its products.