Caulking Company Declared Liable for False Advertising and Unfair CompetitionAugust 31st, 2020 by Jordan Scott
A judge for the U.S. District Court of New Jersey has ruled that Albion Engineering is liable for false advertising and unfair competition due to wrongly labeling its manual caulk dispensing guns as made in America. The claim was brought forth by Albion’s competitor, Newborn Bros. Co. Inc., under the Lanham Act in May 2012.
According to the opinion, Newborn’s founder, Peter Chang, began producing caulking guns in his factory in Korea in the early 1970s before creating Newborn to distribute those guns in the U.S. It began making caulking guns for the industrial/professional market in 1990 to compete with Albion’s products, but current president Albert Lee, Chang’s son-in-law, said the company experienced limited success and began to investigate the cause.
“Lee testified that a salesperson told him that while the salesman believed Newborn created a superior and less expensive product, Newborn had trouble competing in the industrial/professional market because Albion, Newborn’s competitor, manufactured its products in America,” reads the complaint. “Lee testified that one of Newborn’s independent sales representatives, Mike Dekker, confirmed that many customers had inquired whether Newborn products were made in America like Albion products. In an email to Lee, Dekker stated that ‘ever since the legislation of American Recovery and Reinvestment Act the “Buy American” concept has become popular and Albion has benefited from this.’”
Lee testified that during his research into Albion’s products, he discovered that Albion was importing some products from Taiwan, including parts for the caulking guns in question.
One of Albion’s independent sales representatives testified that he had attempted unsuccessfully to sell Newborn products to Giroux Glass sometime between 2012 and 2017. According to the testimony, Giroux would not consider Newborn products because they are made in China and that when Newborn sent Giroux samples, the company’s project manager threw away the caulking guns. Another company, Midwest Sealant & Supply, also was hesitant to purchase Newborn’s products, according to the testimony, but ordered products from Newborn after discovering a “Made in Taiwan” marking on Albion’s spatulas in September 2012.
U.S. District Judge Noel Hillman’s opinion says Albion manufactured all of its guns and accessories at its plant in Philadelphia from 1929 until 2000 when the company began importing “low-cost overseas manufacturing alternatives.” The company placed its first order for 20,000 dispensing guns from Taiwan in late 2001 and eventually began to import more products from Asia throughout the 2000s, according to the opinion.
“[President Mark] Schneider testified that it was his belief that it was appropriate to identify products as being ‘Made in America’ if over 50% of the cost of the tool were incurred within the United States,” reads the opinion. “Schneider also testified that he did assessments of his products and their manufacturing costs to ensure that Albion met this standard for labeling items as ‘Made in America.’ Schneider’s formula for calculating production costs included labor, overhead at the manufacturing plant, items made in the United States, and post-production packaging.”
In his opinion, Judge Hillman wrote that, when pressed, Schneider had no explanation of where this formula came from or why he felt it justified the continued use of a “Made in America” label.
“The Court concluded that Albion deliberately kept its head in the sand content to free-ride on, and at times promote, the false illusion that it was a purely ‘Made in the USA’ company,” reads the opinion.
The Judge said that the court determined that disgorgement of properties is appropriate in this case. He also said the court does not need to determine with certainty the amount of damages Newborn is entitled to at this moment as it is enough that Newborn has shown an actual injury. The parties have until September 11 to advise it as to how they wish to proceed regarding Albion’s asserted affirmative defenses.
Read the full opinion here.