[Federal Register Volume 62, Number 127 (Wednesday, July 2, 1997)]
[Notices]
[Pages 35816-35818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17280]
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FEDERAL TRADE COMMISSION
[Docket No. 9281]
Exxon Corporation; Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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summary: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft amended
complaint that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
dates: Comments must be received on or before September 2, 1997.
addresses: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
for further information contact: Joel Winston, Federal Trade
Commission, S-4002, 6th & Pennsylvania Ave., NW, Washington, DC 20580.
(202) 326-3153. Michael Dershowitz, Federal Trade Commission, S-4002,
6th & Pennsylvania Ave., NW, Washington, DC 20580. (202) 326-3158.
supplementary information: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 3.25 of
the Commission's Rules of Practice (16 CFR 3.25), notice is hereby
given that the above-captioned 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. The following Analysis to Aid
Public Comment describes the terms of the consent agreement, and the
allegations in the accompanying
[[Page 35817]]
complaint. An electronic copy of the full text of the consent agreement
package can be obtained from the Commission Actions section of the FTC
Home Page (for June 24, 1997), on the World wide Web, at ``http://
www.ftc.gov/os/actions/htm.'' A paper copy can be obtained from the FTC
Public Reference Room, Room H-130, Sixth Street and Pennsylvania
Avenue, NW., Washington, DC 20580, either in person or by calling (202)
326-3627. 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 Rule of Practice (16 CFR
4.9(b)(6)(ii)).
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade commission has accepted, subject to final
approval, an agreement containing a consent order from Exxon
Corporation (``Exxon''). Among other things, Exxon is engaged in the
manufacture and sale of automobile gasolines.
The proposed consent order has been placed on the public record for
sixty (60) days for reception 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 or make final the agreement's proposed
order.
This matter concerns allegedly deceptive advertising claims
regarding the performance attributes of Exxon gasolines. On September
11, 1996, the Commission issued a complaint challenging as
unsubstantiated Exxon's advertising claims that switching to Exxon 93
Supreme gasoline from other gasoline brands and from lower octane
grades of Exxon gasoline will significantly reduce automobile
maintenance costs for consumers generally. The complaint also
challenged as unsubstantiated Exxon's claim that switching to Exxon
gasolines from other brands will significantly reduce automobile
maintenance costs for consumers generally. The case was withdrawn from
litigation on April 25, 1997.
The proposed consent order contains both injunctive and consumer
education provisions designed to prevent respondent from engaging in
similar acts and practices in the future.
Part I of the proposed order prohibits respondent from making
unsubstantiated representations concerning the engine cleaning ability
of any gasoline or the effect of any gasoline on automobile maintenance
or maintenance costs.
Part I includes several ``safe harbors'' defining permissible
substantiation for certain types of engine cleaning claims. First, it
provides that any representation that a gasoline will keep clean or
clean up fuel injector deposits to a level that engine performance is
not adversely affected will be deemed to be substantiated if Exxon
possesses competent and reliable testing demonstrating no more than 5
percent flow restriction in each injector over the accumulation of
10,000 miles. In addition, Part I provides that any representation that
a gasoline will keep clean or clean up intake valve deposits to a level
that engine performance is not adversely affected will be deemed to be
substantiated by competent and reliable testing demonstrating intake
valve deposit weight of less than 100 mg-per-valve on average over the
accumulation of 10,000 miles. Finally, Part I of the proposed order
also allows truthful representations regarding the numerical octane
rating of any gasoline.
Part II and III of the proposed order contain a consumer education
remedy designed to educate drivers about how to determine their car's
octane needs. Part II requires Exxon to produce and disseminate a 15
second television message stating that most cars run properly on
regular octane, and that drivers should check their owner's manual. The
message must be broadcast in eighteen designated markets in two
separate waves beginning in September 1997. The order establishes a
performance standard that Exxon must meet in terms of the audience
exposure achieved by the ad for each market and in each wave. Exxon
must purchase sufficient air time so that the ad reaches 65% of the
target audience (adults ages 18-49) an average of 2.7 times per person
in the first wave, and 51% of the target audience an average of 2 times
in the second wave. Exxon must monitor the actual exposure the ad
achieves in each market, and should it fail to achieve at least 90
percent of the exposure levels specified in the order for each market,
it must seek additional spots from the television stations to meet the
specified targets.
Part III of the order requires Exxon to produce and disseminate a
consumer brochure that is mentioned in the 15 second broadcast message
required in Part II of the order. The brochure, which will be made
available free of charge at Exxon service stations, informs consumers
that most cars will not benefit from higher octane gasoline, and also
explains that consumers may need higher octane gasoline if their
owner's manual recommends it or if their car engine consistently knocks
or pings.
Parts IV, V, VI, and VII of the order require Exxon to maintain
copies of all materials relied upon in making any representation
covered by the order; to provide copies of the order to certain of the
company's personnel; to notify the Commission of any change in the
corporate structure that might affect compliance with the order; and to
file compliance reports with the Commission. Part VIII of the order is
a ``sunset'' provision, dictating that the order will terminate twenty
years from the date it is issued or twenty years after a complaint is
filed in federal court, by either the United States or the FTC,
alleging any violation of the order.
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.
Benjamin I. Berman,
Acting Secretary.
Statement of Commissioner Mary L. Azcuenaga Concurring in Part and
Dissenting in Part in Exxon Corporation, Docket No. 9281
Last year, the Commission issued a complaint against Exxon
Corporation and, in accordance with its practice, a Notice of
Contemplated Relief, the title of which is self-explanatory. The
complaint alleged that Exxon had made certain deceptive claims
concerning the need for its premium gasoline. Today the Commission
accepts for public comment a settlement that provide less relief than
the Commission contemplated when it issued the complaint and less
relief than it ordered against other companies that previously have
settled similar charges.\1\ I agree that the core provision of the
proposed order barring the allegedly deceptive claims is
appropriate,\2\ but I cannot agree to the omission of a broader
provision barring Exxon from making unsubstantiated claims concerning
``the relative or absolute attributes of any gasoline with respect to
engine performance, power [or] * * * acceleration.''
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\1\ See Sun Company, Inc., Docket C-3381 (consent order, May 6,
1992); Unocal Corporation, Inc., Docket C-3492 (consent order, April
24, 1994); Amoco Oil Company, Docket C-3655 (consent order, May 7,
1996).
\2\ Order para.Sec. I.
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An injunctive provision covering not just the specific claims
challenged in the complaint, but also, future deceptive claims of a
similar nature is a common feature in Commission advertising
[[Page 35818]]
orders. It provides an important deterrent, because any future
advertising claims that do not comport with it are punishable by
substantial civil penalties. The Commission previously has challenged
similar advertising claims by three other gasoline companies, all of
which, unlike Exxon, agreed to settlements without litigation, and all
of which consented to inclusion of the broader injunctive relief
omitted from this order.
Exxon's advertisements seem likely to have contributed to consumer
misperceptions about the attributes of and the need for premium
gasoline as much as gasoline advertisements run by the other companies.
The more lenient injunctive coverage in Exxon's order will be less
effective in deterring future deception and may create perverse
incentives. In the future, companies may believe it is in their
interest to decline negotiated settlement until after litigation has
commenced if they think that the Commission will reward greater
intransigence.
Narrowing the injunction might be worthwhile if some other
effective remedy were added, and the proposed order adds a provision
that requires Exxon to produce and disseminate a 15-second television
commercial and distribute a certain number of copies of a brochure.\3\
Given the apparently entrenched consumer misperceptions allegedly
created by Exxon's challenged claims about the need for and attributes
of premium gasoline, a consumer education remedy is justified. The goal
of the consumer education campaign, to correct apparently widespread
and assuredly costly consumer misperceptions about the benefits of high
octane gasoline, is laudable. Unfortunately, I do not believe that this
particular campaign is likely to be effective. The Commission has
extensive experience with advertising techniques, and that experience
should tell us that there is a good deal more to creating a successful
advertisement than first meets the eye.\4\ The commercial is uninspired
at best, and we have no basis for concluding that it will be effective
in conveying the desired message to consumers or in changing their
misperceptions. The order does not provide a performance standard or
other means of assuring that this goal will be met.\5\
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\3\ The text of the negotiated advertisement is:
Hi, I'm Sherri Stuewer. I run Exxon's Baytown Refinery. We offer
three octane grades. Which is right for you? Most cars will run
properly on regular octane, so check your owner's manual * * * and
stop by Exxon for this helpful pamphlet.
\4\ The advertisement required by the order has not been
copytested.
\5\ The order could have specified survey methodology and
required that the advertisement be revised as needed until the
survey results showed that a minimum number or percentage of
consumers actually took the intended educational message from the
advertising spot. The Commission has taken this approach in the
past. RJR Foods, Inc., 83 F.T.C. 7, 16-21 (consent order, July 13,
1973).
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Although it may be argued that we similarly have no assurance of
the effectiveness of the broader injunction that was included in the
Notice of Contemplated Relief, we have, at least, the assurance that
further deceptive claims covered by the order may result in substantial
civil penalties and, therefore, that the company may think twice before
running advertisements that might mislead reasonable consumers about
the attributes of particular gasoline products. In addition, the
injunctive relief would remain in place for 20 years, far longer than
the likely effects of a single short-lived advertising campaign like
the one proposed. On balance, I believe that the notice order is
stronger. Perhaps the fact that Exxon was willing to sign this order
rather than the notice order should tell us something.
To the extent that the proposed order is more narrow than the
notice order, I respectfully dissent.
[FR Doc. 97-17280 Filed 7-1-97; 8:45 am]
BILLING CODE 6750-01-M
