[Federal Register Volume 59, Number 28 (Thursday, February 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3087]
[[Page Unknown]]
[Federal Register: February 10, 1994]
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FEDERAL TRADE COMMISSION
[File No. 922 3123]
Unocal Corporation, et al.; Proposed Consent Agreement With
Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
prohibit, among other things, the three companies from making claims
about the attributes or performance of any gasoline without first
having scientific evidence to substantiate their claims. In addition,
the respondents would be required to mail their credit-card customers,
in certain states, a notice stating that most cars do not need a high
octane gasoline to perform properly, and to remind them to check their
owner's manual to determine the proper octane level of gasoline to
purchase.
DATES: Comments must be received on or before April 11, 1994.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
room 159, 6th Street and Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
Sue Frauens, FTC/Los Angeles Regional Office, 11000 Wilshire Blvd.,
Suite 13209, Los Angeles, CA. 90024. (310) 575-7890.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of
Practice (16 CFR 4.9(b)(6)(ii)).
Agreement Containing Consent Order To Cease and Desist
In the matter of Unocal Corporation, a corporation, Union Oil
Company of California, a corporation, and Leo Burnett Company, Inc.,
a corporation.
The Federal Trade Commission having initiated an investigation of
certain acts and practices of Unocal Corporation, a corporation, Union
Oil Company of California, a corporation, and Leo Burnett Company,
Inc., a corporation, hereinafter sometimes referred to as proposed
respondents, and it now appears that proposed respondents are willing
to enter into an agreement containing an order to cease and desist from
the use of the acts and practices being investigated.
It is hereby agreed That by and between Unocal Corporation, a
corporation, Union Oil Company of California, a corporation, and Leo
Burnett Company, Inc., a corporation, and counsel for the Federal Trade
Commission that:
1. Respondent Unocal Corporation is a corporation organized,
existing, and doing business under and by virtue of the laws of the
State of Delaware, with its office and principal place of business
at 1201 West Fifth Street, Los Angeles, California 90017.
2. Respondent Union Oil Company of California is a corporation
organized, existing, and doing business under and by virtue of the
laws of the State of California, with its office and principal place
of business at 1201 West Fifth Street, Los Angeles, California
90017.
3. Respondent Leo Burnett Company, Inc. is a corporation
organized, existing, and doing business under and by virtue of the
laws of the State of Delaware, with its office and principle place
of business at 35 West Wacker Drive, Chicago, Illinois 60601.
4. Proposed respondents admit all the jurisdictional facts set
forth in the draft complaint here attached.
5. Proposed respondents waive:
(a) Any procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusion of law;
(c) All rights to seek judicial review or otherwise to challenge
or contest the validity of the order entered pursuant to this
agreement; and
(d) Any claim under the Equal Access To Justice Act.
6. This agreement shall not become part of the public record of
the proceeding unless and until it is accepted by the Commission. If
this agreement is accepted by the Commission, it, together with the
draft complaint contemplated thereby, will be placed on the public
record for a period of sixty (60) days and information in respect
thereto publicly released. The Commission thereafter may either
withdraw its acceptance of this agreement and so notify the proposed
respondents, in which event it will take such action as it may
consider appropriate, or issue and serve its complaint (in such form
as the circumstances may require) and decision, in disposition of
the proceeding.
7. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondents of facts, other than
jurisdictional facts, or of violations of law as alleged in the
draft complaint here attached.
8. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by
the Commission pursuant to the provisions of Section 2.34 of the
Commission's Rules, the Commission may, without further notice to
proposed respondents: (1) Issue its complaint corresponding in form
and substance with the draft complaint here attached and its
decision containing the following order to cease and desist in
disposition of the proceeding; and (2) make information public in
respect thereto. When so entered, the order to cease and desist
shall have the same force and effect and may be altered, modified or
set aside in the same manner and within the same time provided by
statute for other orders. The order shall become final upon service.
Delivery by the U.S. Postal Service of the complaint and decision
containing the agreed-to-order to proposed respondents' address as
stated in this agreement shall constitute service. Proposed
respondents waive any rights they may have to any other manner of
service. The complaint may be used in construing the terms of the
order, and no agreement, understanding, representation, or
interpretation not contained in the order or the agreement may be
used to vary or contradict the terms of the order.
9. Proposed respondents have read the proposed complaint and
order contemplated hereby. They understand that once the order has
been issued, they will be required to file one or more compliance
reports showing that they have fully complied with the order.
Proposed respondents further understand that they may be liable for
civil penalties in the amount provided by law for each violation of
the order after it becomes final.
Order
I
It is Ordered That respondents Unocal Corporation, Union Oil
Company of California and Leo Burnett Company, Inc., corporations,
their successors and assigns, and their officers, agents,
representatives, and employees, directly or through any corporation,
subsidiary, division, or other device, in connection with the
advertising, labelling, packaging, offering for sale, sale or
distribution of Unocal 92 and 89 octane gasolines or any other
gasoline in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
making any representation, directly or by implication, about:
A. The superiority of Unocal 92 or 89 octane in providing engine
power or acceleration for any automobile;
B. The superiority of Unocal 92 or 89 octane in prolonging the
longevity of an engine for any automobile; or
C. The relative or absolute attributes or performance of any
gasoline with respect to vehicle engine power, acceleration,
longevity, or any other performance characteristic, unless at the
time of making such representation, respondents possess and rely
upon competent and reliable scientific evidence that substantiates
the representation. For purposes of this Order, ``competent and
reliable scientific evidence'' shall mean tests, analysis, research,
studies or other evidence based on the expertise of professionals in
the relevant area, that has been conducted and evaluated in an
objective manner by persons qualified to do so, using procedures
generally accepted in the profession to yield accurate and reliable
results.
Provided That, nothing in this Order shall prohibit respondents
from truthfully representing the numerical octane rating of any
gasoline.
Provided further that, it shall be a defense hereunder that
respondent Leo Burnett Company, Inc. neither knew nor had reason to
know of an inadequacy of substantiation for the representation.
It is further ordered That for three (3) years after the date of
the last dissemination of the representation to which they pertain,
respondents Unocal Corporation, Union Oil Company of California and
Leo Burnett Company, Inc. shall maintain and upon request make
available to the Federal Trade Commission or its staff for
inspection and copying:
A. All materials relied upon to substantiate any claim or
representation covered by this Order; and
B. All tests, reports, studies or surveys in respondents'
possession or control that contradict any representation covered by
this Order.
III
It is further rodered That respondents Unocal Corporation, Union
Oil Company of California and Leo Burnett Company, Inc. shall
forthwith distribute a copy of this Order to all operating
divisions, subsidiaries, franchisees, officers, managerial
employees, and all of their employees or agents engaged in the
preparation or placement of advertisements or promotional materials
covered by this Order and shall obtain from each such employee a
signed statement acknowledging receipt of the order.
IV
It is further ordered That respondents Unocal Corporation, Union
Oil Company of California and Leo Burnett Company, Inc. shall notify
the Commission at least thirty (30) days prior to any proposed
change in the corporation(s) such as a dissolution, assignment or
sale resulting in the emergence of a successor corporation, the
creation or dissolution of subsidiaries or any other change in the
corporation(s) that may affect compliance obligatings under this
Order.
V
It is further ordered That respondents Unocal Corporation, Union
Oil Company of California and Leo Burnett Company, Inc. shall,
within sixty (60) days after service upon them of this Order and at
such other times as the Commission may require, file with the
Commission a report, in writing, setting forth in detail the manner
and form in which they have complied with this Order.
It is further ordered That respondents Unocal Corporation and
Union Oil Company of California shall mail to the last known address
of all consumers who hold an active Unocal credit card on the date
this Order becomes final, and who reside in any of the states of
Oregon, Washington, Nevada, California, or Hawaii, an exact copy of
the Notice which is incorporated by reference as Appendix A.
The mailing shall not include any other documents that
contradict or in any way mitigate the information in the Notice.
Respondents Unocal Corporation and Union Oil Company of California
shall bear all costs of printing and disseminating the Notice. The
Notice shall be mailed by first class mail within 30 days of the
date of this Order becomes final.
Appendix A--Important Information About the Octane Needs of Your Car
As a Unocal customer, you probably know that Unocal offers three
grades of unleaded gasoline at its service stations: 87 octane
regular, 89 octane mid-grade, and 92 octane premium. The 89 and 92
octane grades are formulated primarily for vehicles that are
designed to operate on higher octanes (high-performance vehicles)
and for vehicles that may be experiencing engine knocking and
pinging.
In July 1991, the Federal Trade Commission issued a brochure
that advises consumers to purchase the lowest octane gasoline that
their cars can use without engine knocking or pinging. The brochure
notes that ``many experts believe that most cars do not need a high
octane gasoline to perform properly and efficiently.'' The brochure
also advises consumers to ``first check your owner's manual for the
recommended octane level.'' According to the brochure, if your
vehicle runs without knocking or pinging it generally does not need,
and will not perform better with, higher octane gasoline.
The octane requirements of your vehicle can vary over time or
under certain weather, altitude and driving conditions. If your car
is knocking or pinging at the octane level recommended in your
owner's manual, you may need a higher octane gasoline.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted, subject to final
approval, an agreement to a proposed consent order from Unocal
Corporation, Union Oil Company of California, and Leo Burnette Company,
Inc. (``Respondents'').
The proposed consent order has been placed on the public record for
sixty (60) days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After sixty (60) days, the Commission will again review the agreement
and the comments received and will decide whether it should withdraw
from the agreement and take other appropriate action, or make final the
proposed order contained in the agreement.
Unocal Corporation and its wholly-owned subsidiary, Union Oil
Company of California, Inc. (collectively, ``Unocal'') are marketers of
gasoline and other petroleum products, including Unocal 89 and 92
octane gasolines. Leo Burnette Company, Inc. (``Leo Burnett) is an
advertising agency and prepared and disseminated advertisements for
Unocal gasoline.
The Commission's complaint in this matter charges Respondents with
making unsubstantiated claims in advertisements and promotional
materials for Unocal 89 and 92 octane gasolines. Specifically, the
complaint alleges that Respondents represented that Unocal 89 and 92
provide superior engine performance and longevity as compared to
regular unleaded gasoline, that would be significant to consumers, for
automobiles generally. The complaint alleges that Respondents
represented that they had a reasonable basis for these claims when, in
fact, they did not. The complaint further charges that Leo Burnett knew
or should have known that the claims were unsubstantiated.
The consent order contains provisions designed to remedy the
alleged violations. Part I of the order requires Respondents to cease
from making any representations regarding (a) the superiority of Unocal
89 or 92 octane gasolines in providing engine power or acceleration or
prolonging engine longevity, or (b) the relative or absolute attributes
or performance of any gasoline with respect to any performance
characteristic, unless they possess competent and reliable scientific
evidence to substantiate the claim. Part I states that nothing in the
order prohibits Respondents from truthfully representing the numerical
octane rating of any gasoline. Part I also provides that Leo Burnett
would have a defense to an alleged violation of the order if it neither
knew nor had reason to know that the substantiation for any
representation was inadequate.
Part II of the order requires Respondents to maintain and make
available to the Federal Trade Commission material relating to the
support for their representations. Part III requires Respondents to
provide a copy of the order to, and obtain a signed acknowledgement
from, their divisions, subsidiaries, franchisees, officers, managerial
employees and all other employees involved in advertising covered by
the order. Part IV requires Respondents to notify the Commission of
certain changes in corporate structure. Part V requires Respondents to
file written compliance reports with the Commission.
Part VI of the order requires Unocal to mail a notice to active
Unocal credit card holders in five states within thirty days after the
order is final. The five states are Oregon, Washington, Nevada,
California, and Hawaii.
The notice explains that Unocal sells three octane levels of
unleaded gasoline--87 regular, 89 mid-grade and 92 premium, and that
the last two grades are designed primarily for high performance
vehicles and vehicles that are experiencing engine knocking or pinging.
The notice then refers to a 1991 FTC brochure which advises consumers
to check their owner's manual for the recommended octane level and
purchase the lowest octane gasoline that does not result in knocking.
It notes that, according to the brochure, if the car runs without
knocking or pinging, it generally will not perform better with higher
octane. The notice further states that octane requirements can vary
under different conditions, and that if the car is knocking at the
recommended octane level, it may need a higher octane.
The purpose of this analysis is to facilitate public comment on the
proposed order. It is not intended to constitute an official
interpretation of the agreement and proposed order or to modify in any
way their terms.
Donald S. Clark,
Secretary.
Separate Statement of Commissioner Deborah K. Owen, Concurring In Part,
and Dissenting in Part, in the Matter of Unocal Corporation, et al.
(File No. 922-3123)
I concur in the Commission's action to accept for public comment
an administrative complaint against, and consent agreement with,
Unocal Corporation and its advertising agency, Leo Burnett Company,
Inc., for allegedly making unsubstantiated octane performance and
longevity claims. However, based on the ad itself and the available
extrinsic evidence, I do not find reason to believe that Exhibit A
to the complaint (commonly referred to as the ``Love Is Forever''
ad) conveys the message alleged in Paragraph 8, that Unocal 92
octane provides significantly superior engine performance and
longevity for automobiles generally, as opposed to for high
performance automobiles. Accordingly, I respectfully dissent as to
Exhibit A, Paragraph 8, and all references to 92 octane gasoline in
the administrative complaint.
Statement of Roscoe B. Starek, III Concurring in Part and Dissenting in
Part, in Unocal Corporation, et al., Matter No. 922-3123
I support the decision to charge Unocal Corporation with
unsubstantiated representations regarding its 89 octane and 92 octane
gasoline. I further support the decision to charge Leo Burnett Company,
Inc. for unsubstantiated representations regarding 92 octane gasoline.
I dissent, however, from issuance of this complaint insofar as it
charges Leo Burnett with liability for the Unocal 89 octane claims.
Complaint paras. 9, 11, 12. In recent years, the Commission has
prosecuted three advertising agencies for very significant, even
egregious violations of Section 5 of the Federal Trade Commission Act
(FTC Act). Here, I think the record supports the conclusion that Leo
Burnett made substantial, good faith pre-dissemination efforts to
determine whether its 89 octane claim was substantiated. Hence, it is
my view that inclusion of the 89 octane allegation in the complaint
represents a significant and unnecessary departure from recent
precedent regarding advertising agency liability.
I also oppose inclusion of this allegation against Leo Burnett on
legal grounds. The FTC Act requires the Commission to make a two-step
determination before it issues a complaint: It must conclude first,
that it has reason to believe that an unfair or deceptive act or
practice has been committed, and second, that a proceeding would be in
the interest of the public. FTC Act, Section 5(b), 15 U.S.C. 45(b). The
record supports the conclusion that Leo Burnett requested and was
presented with factual information in support of the claim for 89
octane gasoline, although it also possessed some information that would
tend to undermine the general nature of the benefit provided by 89
octane gasoline. The Commission previously has held, with respect to a
claim requiring complex scientific substantiation, that where an
advertising agency requested and relied upon evidence that provided
some scientific basis for the claim, possession of additional
information tending to undermine the substantiation did not put the
agency on notice that substantiation was inadequate. Bristol-Myers Co.,
102 F.T.C. 21, 365-66 (1983). Given this precedent, and on the record
before us, I am not able to conclude that there is reason to believe
that Leo Burnett engaged in actionable conduct in connection with the
89 octane claims.
Moreover, elimination of the 89 octane charge from the complaint
would have simplified the complaint without the need for any
significant change in order coverage.\1\ Under these circumstances, it
does not appear that it is in the public interest to include this
charge in the complaint.
\1\While it would have appeared appropriate to exempt Leo
Burnett from Parts 1A and 1B of the order insofar as they
specifically pertained to engine power, acceleration and longevity
claims for 89 octane gasoline, Part 1C still would have fenced-in
these and other performance claims regarding any gasoline.
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[FR Doc. 94-3087 Filed 2-9-94; 8:45 am]
BILLING CODE 6750-01-M