[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]


-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

[FR Doc. 94-3087 Filed 2-9-94; 8:45 am]
BILLING CODE 6750-01-M