[Federal Register Volume 61, Number 65 (Wednesday, April 3, 1996)]
[Proposed Rules]
[Pages 14686-14687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8180]



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FEDERAL TRADE COMMISSION
16 CFR Part 406


Deceptive Advertising and Labeling of Previously Used Lubricating 
Oil

AGENCY: Federal Trade Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Federal Trade Commission (the ``Commission'') proposes to 
commence a rulemaking proceeding to repeal its Trade Regulation Rule on 
Deceptive Advertising and Labeling of Previously Used Lubricating Oil 
(``the Used Oil Rule'' or ``the Rule''), 16 CFR Part 406. The 
Commission is soliciting written comments, data, and arguments 
concerning this proposal. The Commission also is requesting comments 
about the overall costs and benefits of the Rule and its overall 
regulatory and economic impact as a part of its systematic review of 
all current Commission regulations and guides.

DATES: Written comments must be submitted on or before May 3, 1996.

ADDRESSES: Written comments should be identified as ``16 CFR Part 406 
Comment'' and sent to Secretary, Federal Trade Commission, room 159, 
Sixth Street and Pennsylvania Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Neil Blickman, Attorney, Federal Trade Commission, Bureau of Consumer 
Protection, Division of Enforcement, Washington, DC 20580, (202) 326-
3038.

SUPPLEMENTARY INFORMATION:

Part A--Background Information

    This notice is being published pursuant to Section 18 of the 
Federal Trade Commission (``FTC'') Act, 15 U.S.C. 57a et seq., the 
provisions of Part 1, Subpart B of the Commission's Rules of Practice, 
16 CFR 1.7 et seq., and 5 U.S.C. 551 et seq. This authority permits the 
Commission to promulgate, modify, and repeal trade regulation rules 
that define with specificity acts or practices that are unfair or 
deceptive in or affecting commerce within the meaning of Section 
5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).
    Based on the Commission's finding that the new or used status of a 
lubricant was material to consumers, the Used Oil Rule was promulgated 
by the Commission on August 14, 1964 to prevent deception of those who 
prefer new and unused lubricating oil. The Rule requires that 
advertising, promotional material, and labels for lubricant made from 
used oil disclose such previous use. The Rule prohibits any 
representation that used lubricating oil is new or unused. In addition, 
it prohibits use of the term ``re-refined,'' or any similar term, to 
describe previously used lubricating oil unless the physical and 
chemical contaminants have been removed by a refining process.
    On October 15, 1980, the Used Oil Recycling Act suspended the 
provision of the Used Oil Rule requiring labels to disclose the origin 
of lubricants made from used oil,\1\ until the Commission issued rules 
under the Energy Policy and Conservation Act of 1975 (``EPCA''). The 
legislative history indicates congressional concern that the Used Oil 
Rule's labeling requirement had an adverse impact on consumer 
acceptance of recycled oil, provided no useful information to consumers 
concerning the performance of the oil, and inhibited recycling. 
Moreover, the origin labeling requirements in the Used Oil Rule may be 
inconsistent with the intent of section 383 of EPCA, which is that 
``oil should be labeled on the basis of performance characteristics and 
fitness for intended use, and not on the basis of the origin of the 
oil.'' \2\

    \1\ 42 U.S.C. 6363 note.
    \2\ See Legislative History Pub. L. 96-463, U.S. Code Cong. and 
Adm. News, pp. 4354-4356 (1980).
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    Accordingly, on April 8, 1981, the Commission published a notice 
announcing the statutory suspension of the origin labeling requirements 
of the Used Oil Rule. In the same notice, the Commission suspended 
enforcement of those portions of the Used Oil Rule requiring that 
advertising and promotional material disclose the origin of lubricants 
made from used oil.\3\

    \3\ 46 FR 20979.
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    The purposes of the recycled oil section of EPCA are to encourage 
the recycling of used oil, to promote the use of recycled oil, to 
reduce consumption of new oil by promoting increased utilization of 
recycled oil, and to reduce environmental hazards and wasteful 
practices associated with the disposal of used oil.\4\ To achieve these 
goals, section 383 of EPCA directs the National Institute of Standards 
and Technology

[[Page 14687]]
(``NIST'') to develop test procedures for the determination of the 
substantial equivalency of re-refined or otherwise processed used oil 
or blend of oil (consisting of such re-refined or otherwise processed 
used oil and new oil or additives) with new oil distributed for a 
particular end use and to report such test procedures to the 
Commission.\5\ Within 90 days after receiving such report from NIST, 
the Commission is required to prescribe, by rule, the substantial 
equivalency test procedures, as well as labeling standards applicable 
to containers of recycled oil.\6\ EPCA further requires that the 
Commission's rule permit any container of processed used oil to bear a 
label indicating any particular end use, such as for use as engine 
lubricating oil, so long as a determination of ``substantial 
equivalency'' with new oil has been made in accordance with the test 
procedures prescribed by the Commission.\7\

    \4\ 42 U.S.C. 6363(a).
    \5\ 42 U.S.C. 6363(c).
    \6\ 42 U.S.C. 6363(d)
    \7\ 42 U.S.C. 6363(d) (1) (B).
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    On July 27, 1995, NIST reported to the Commission test procedures 
for determining the substantial equivalency of re-refined or otherwise 
processed used engine oils with new engine oils. To implement EPCA's 
statutory directive, therefore, the Commission issued, and thereafter 
published on October 31, 1995, a rule (covering recycled engine oil) 
entitled Test Procedures and Labeling Standards for Recycled Oil 
(``Recycled Oil Rule''), 16 CFR Part 311.\8\ The Recycled Oil Rule 
adopts the test procedures developed by NIST, and allows (although it 
does not require) a manufacturer to represent on a recycled engine-oil 
container label that the oil is substantially equivalent to new engine 
oil, as long as the determination of equivalency is based on the NIST 
test procedures.

    \8\ 60 FR 55414 (Oct. 31, 1995).
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    The EPCA further provides that once the Recycled Oil Rule becomes 
final, no Commission order or rule, and no law, regulation, or order of 
any State (or political subdivision thereof), may remain in effect if 
it has labeling requirements with respect to the comparative 
characteristics of recycled oil with new oil that are not identical to 
the labels permitted by this rule.\9\ Also, no rule or order of the 
Commission may require any container of recycled oil to also bear a 
label containing any term, phrase, or description connoting less than 
substantial equivalency of such recycled oil with new oil.\10\

    \9\ 42 U.S.C. 6363(e)(1).
    \10\ 42 U.S.C. 6363(e)(2).
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    Under EPCA, the Recycled Oil Rule preempts the Used Oil Rule's 
labeling and advertising requirements for engine oils. For non-engine 
oils, the Used Oil Rule's labeling disclosure provisions continue to be 
subject to the Congressional stay, and the advertising disclosure 
provisions continue to be subject to the Commission's stay. The only 
part of the Used Oil Rule not affected by the stays is that section 
which prohibits the deceptive use of the term ``re-refined.'' When the 
Commission published the Recycled Oil Rule in October 1995, it also 
stated that as part of its regulatory review process, it would consider 
the continuing need for the Used Oil Rule.\11\

    \11\ 60 FR 55414, 55417.
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Part B--Objectives

    Based on the foregoing, the Commission has tentatively determined 
that to eliminate unnecessary duplication, and any inconsistency with 
EPCA's goals, a separate Used Oil Rule is no longer necessary.\12\ The 
objective of this notice is to solicit comment on whether the 
Commission should initiate a rulemaking proceeding to repeal the Used 
Oil Rule.

    \12\ Repealing the used Oil Rule would eliminate the 
Commission's ability to obtain civil penalties for any future 
misrepresentations of the re-refined quality of oil. However, the 
Commission has tentatively determined that repealing the Rule would 
not seriously jeopardize the Commission's ability to act 
effectively. The Recycled Oil Rule defines re-refined oil to mean 
used oil from which physical and chemical contaminants acquired 
through use have been removed. Any significant problems that might 
arise could be addressed on a case-by-case basis, administratively 
under Section 5 of the FTC Act, 15 U.S.C. 45, or through Section 
13(b) actions, 15 U.S.C. 53(b), filed in federal district court. 
Prosecuting serious misrepresentations in district court allows the 
Commission to obtain injunctive relief as well as equitable 
remedies, such as redress or disgorgement.
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Part C--Alternative Actions

    The Commission is not considering any alternative other than the 
possibility of repealing the Used Oil Rule.

Part D--Request for Comments

    Members of the public are invited to comment on any issues or 
concerns they believe are relevant or appropriate to the Commission's 
review of the Used Oil Rule. The Commission requests that factual data 
upon which the comments are based be submitted with the comments. In 
this section, the Commission identifies the issues on which it solicits 
public comments. The identification of issues is designed to assist the 
public and should not be construed as a limitation on the issues on 
which public comment may be submitted.

Questions

    (1) Is there a continuing need for the Rule?
    (a) What benefits has the Rule provided to purchasers of the 
products affected by the Rule?
    (b) Has the Rule imposed costs on purchasers?
    (2) What changes, if any, should be made to the Rule to increase 
the benefits of the Rule to purchasers?
    (a) How would these changes affect the costs the Rule imposes on 
firms subject to its requirements?
    (3) What significant burdens or costs, including costs of 
compliance, has the Rule imposed on firms subject to its requirements?
    (a) Has the Rule provided benefits to such firms?
    (4) What changes, if any, should be made to the Rule to reduce the 
burdens or costs imposed on firms subject to its requirements?
    (a) How would these changes affect the benefits provided by the 
Rule?
    (5) Does the Rule overlap or conflict with other federal, state, or 
local laws or regulations?
    (6) Since the Rule was issued, what effects, if any, have changes 
in relevant technology or economic conditions had on the Rule?
    (7) Is misrepresentation of the re-refined quality of used 
lubricating oil by manufacturers and distributors of such oil a 
significant problem in the marketplace?
    (8) Should the Rule, or any portion of it, be kept in effect, or 
should it be repealed?
    (9) How would repealing the Rule affect the benefits experienced by 
consumers?
    (10) How would repealing the Rule affect the benefits and burdens 
experienced by firms subject to the Rule's requirements?
    (11) Is the Recycled Oil Rule likely to provide all or most of the 
benefits now provided by the Used Oil Rule?

    Authority: Section 18(d)(2)(B) of the Federal Trade Commission 
Act, 15 U.S.C. 57a(d)(2)(B).

List of Subjects in 16 CFR Part 406

    Advertising, Labeling, Trade practices, Used lubricating oil.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 96-8180 Filed 4-2-96; 8:45 am]
BILLING CODE 6750-01-M