[Federal Register Volume 61, Number 132 (Tuesday, July 9, 1996)]
[Notices]
[Pages 36065-36068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17465]


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

FEDERAL TRADE COMMISSION
[File No. D-9274]

RustEvader Corporation; David F. McCready; 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 or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would require, among other things, the Altoona, 
Pennsylvania-based former owner and president of RustEvader Corporation 
to pay $200,000 in consumer redress and would prohibit him from using 
the names ``Rust Evader'' or ``Rust Buster'' for any device that he 
markets as reducing corrosion in motor vehicle bodies. McCready is also 
prohibited from making any claims about the performance, efficacy, or 
attributes of any product for use in motor vehicles without having 
appropriate substantiation to back up the claim and from 
misrepresenting the existence or results of any test or study. The 
consent agreement settles allegations stemming from advertising for 
RustEvader's ``Rust Evader'' device that purportedly reduced corrosion 
in motor vehicle bodies.

DATES: Comments must be received on or before September 9, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Michael Milgrom, Federal Trade 
Commission, Cleveland Regional Office, 668 Euclid Avenue, Suite 520-A, 
Cleveland, OH 44114. (216) 522-4210.

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 With David F. McCready Containing Consent Order to Cease 
and Desist
    The agreement herein, by and between David F. McCready, 
individually and as an officer of RustEvader Corporation, a/k/a Rust 
Evader Corporation, sometimes d/b/a/ REC Technologies, a corporation, 
hereinafter sometimes referred to as respondent, and his attorney, and 
counsel for the Federal Trade Commission, is entered into in accordance 
with the Commission's Rule governing consent order procedures. In 
accordance therewith the parties hereby agree that:
    1. RustEvader Corporation, a/k/a Rust Evader Corporation, sometimes 
d/b/a REC Technologies (REC)is a corporation organized, existing, and 
doing business under and by virtue of the laws of the State of 
Pennsylvania, with its office and principal place of business located 
at 1513 Eleventh Avenue, Altoona, Pennsylvania 16603.
    Respondent David F. McCready has been an owner, officer and 
director of said corporation. At times material to the complaint 
herein, he formulated, directed, and controlled the policies, acts, and 
practices of said corporation. His address is RD 4 Box 92 B, Altoona, 
Pennsylvania 16601.
    2. Respondent has been served with a copy of the complaint issued 
by the Federal Trade Commission charging him with violations of Section 
5(a) of the Federal Trade Commission Act (15 U.S.C. Sec. 45(a)) and of 
Section 102(c) of the Magnuson-Moss Warranty-Federal Trade Commission 
Improvement Act (15 U.S.C. Sec. 2302(c)), and has filed an

[[Page 36066]]

answer to said complaint denying said charges.
    3. Respondent admits all the jurisdictional facts set forth in the 
Commission's complaint in this proceeding.
    4. Respondent waives:
    (a) Any further procedural steps;
    (b) The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions 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.
    5. This agreement shall not become a 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 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 respondent, 
in which event it will take such action as it may consider appropriate, 
or issue and serve its decision, in disposition of the proceeding.
    6. This agreement is for settlement purposes only and does not 
constitute an admission by respondent that the law has been violated as 
alleged in the complaint, or that the facts as alleged in the 
complaint, other than jurisdictional facts, are true.
    7. 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 3.25(f) of the 
Commission's Rules, the Commission may without further notice to 
respondent, (1) issue 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 decision 
containing the agreed-to order to respondent's address as stated in 
this agreement shall constitute service. Respondent waives any right he 
might 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 in the 
agreement may be used to vary or to contradict the terms of the order.
    8. Respondent has read the complaint and the order contemplated 
hereby. He understands that once the order has been issued, he will be 
required to file one or more compliance reports showing that he has 
fully complied with the order. Respondent further understands that he 
may be liable for civil penalties in the amount provided by law for 
each violation of the order after it becomes final.

Order

* * * * *

Definitions

    For the purposes of this Order, the following definitions shall 
apply:
    A. ``Electronic corrosion control device'' shall mean any device or 
mechanism that is intended, through the use of electricity, static or 
current, to control, retard, inhibit or reduce corrosion in motor 
vehicles.
    B. ``Rust Evader'' shall mean the electronic corrosion control 
device sold under the trade names Rust Evader, Rust Buster, Electro-
Image, Eco-Guard, and any other substantially similar product sold 
under any trade name.
    C. ``Competent and reliable scientific evidence'' shall mean tests, 
analyses, 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.

I

    It is ordered that respondent David F. McCready, individually and 
as an officer of RustEvader Corporation, directly or through any 
corporation, subsidiary, division or other device, in connection with 
the manufacturing, packaging, labeling, advertising, promotion, 
offering for sale, sale, or distribution of the Rust Evader, in or 
affecting commerce, as ``commerce'' is defined in the Federal Trade 
Commission Act, shall forthwith cease and desist from representing, in 
any manner, directly or by implication, that such product is effective 
in preventing or substantially reducing corrosion in motor vehicle 
bodies.

II

    It is further ordered that respondent David F. McCready, 
individually and as an officer of RustEvader Corporation, directly or 
through any corporation, subsidiary, division or other device, in 
connection with the manufacturing, packaging, labeling, advertising, 
promotion, offering for sale, sale, or distribution of any product for 
use in motor vehicles in or affecting commerce, as ``commerce'' is 
defined in the Federal Trade Commission Act, shall forthwith cease and 
desist from making any representation, directly or by implication, 
concerning the performance, efficacy or attributes of such product 
unless such representation is true and, at the time such representation 
is made, respondent possesses and relies upon competent and reliable 
evidence, which, when appropriate, must be competent and reliable 
scientific evidence, that substantiates the representation.

III

    It is further ordered that respondent David F. McCready, 
individually and as an officer of RustEvader Corporation, directly or 
through any corporation, subsidiary, division or other device, in 
connection with the manufacturing, packaging, labeling, advertising, 
promotion, offering for sale, sale, or distribution of any product for 
use in motor vehicles in or affecting commerce, as ``commerce'' is 
defined in the Federal Trade Commission Act, shall forthwith cease and 
desist from misrepresenting, in any manner, directly or by implication, 
the existence, contents, validity, results, conclusions, 
interpretations or purpose of any test, study, or survey.

IV

    It is further ordered that respondent David F. McCready, 
individually and as an officer of RustEvader Corporation, directly or 
through any corporation, subsidiary, division or other device, in 
connection with the manufacturing, packaging, labeling, advertising, 
promotion, offering for sale, sale, or distribution of any product for 
use in motor vehicles in or affecting commerce, as ``commerce'' is 
defined in the Federal Trade Commission Act, shall forthwith cease and 
desist from misrepresenting, in any manner, directly or by implication, 
that any demonstration, picture, experiment or test proves, 
demonstrates or confirms any material quality, feature or merit of such 
product.

V

    It is further ordered that respondent David F. McCready, 
individually and as an officer of RustEvader Corporation, directly or 
through any corporation, subsidiary, division or other device, in 
connection with the manufacturing, packaging, labeling, advertising,

[[Page 36067]]

promotion, offering for sale, sale, or distribution of the Rust Evader 
in or affecting commerce, as ``commerce'' is defined in the Federal 
Trade Commission Act, shall forthwith cease and desist from employing 
the terms Rust Evader or Rust Buster in conjunction with or as part of 
the name for such product or the product logo.

VI

    It is further ordered that respondent David F. McCready, 
individually and as an officer of RustEvader Corporation, directly or 
through any corporation, subsidiary, division or other device, in 
connection with the manufacturing, packaging, labeling, advertising, 
promotion, offering for sale, sale, or distribution of any consumer 
product in or affecting commerce, as ``commerce'' is defined in the 
Federal Trade Commission Act and actually costing the consumer more 
than five dollars ($5.00), shall forthwith cease and desist from 
conditioning any written or implied warranty of such product on the 
consumer's purchase or use, in connection with such product, of any 
article or service (other than article or service provided without 
charge under the terms of the warranty) which is identified by brand, 
trade, or corporate name.

VII

    It is further ordered that respondent David F. McCready, 
individually and as an officer of RustEvader Corporation, his 
successors and assigns, shall be liable for consumer redress in the 
amount of two hundred thousand dollars ($200,000.00) as provided 
herein:
    A. Not later than five (5) days from the date this Order becomes 
final, respondent shall deposit into an escrow account to be 
established by the Commission for the purpose of receiving payment due 
under this Order (``Commission escrow account''), the sum of two 
hundred thousand dollars ($200,000.00).
    B. Provided however, that if, at the time this Order becomes final, 
respondent has not completed the sale of respondent's property known as 
RD 4 Box 92B, Altoona, Pennsylvania 16601, then respondent shall 
deposit, into the Commission escrow account, not later than five 
(5)days from the date this Order becomes final, the sum of forty 
thousand dollars ($40,000.00). Respondent shall deposit the remaining 
one hundred sixty thousand dollars ($160,000.00) into the Commission 
escrow account upon the sale of respondent's property known as RD 4 Box 
92B, Altoona, Pennsylvania 16601 at the time of the sale of said 
property or six months from the date that this Order becomes final, 
whichever first occurs. Respondent shall provide security for the one 
hundred sixty thousand dollars ($160,000.00) by means of a mortgage on 
the property known as RD 4 Box 92B, Altoona, Pennsylvania 16601. Such 
mortgage shall be in a form, and shall be entered into by such date as 
agreed to by the parties, but no later than five (5) days from the date 
this Order becomes final.
    C. In the event of any default in payment to the Commission escrow 
account, which default continues for more than ten (10) days beyond the 
date of payment, respondent shall also pay interest as computed under 
28 U.S.C. Section 1961, which shall accrue on the unpaid balance from 
the date of default until the date the balance is fully paid.
    D. The funds deposited by respondent in the Commission escrow 
account, together with accrued interest, shall, in the discretion of 
the Commission, be used by the Commission to provide direct redress to 
purchasers of the Rust Evader in connection with the acts or practices 
alleged in the complaint, and to pay any attendant costs of 
administration. If the Commission determines, in its sole discretion, 
that redress to purchasers of this product is wholly or partially 
impracticable or is otherwise unwarranted, any funds not so used shall 
be paid to the United States Treasury. Respondent shall be notified as 
to how the funds are distributed, but shall have no right to contest 
the manner of distribution chosen by the Commission. No portion of the 
payment as herein provided shall be deemed a payment of any fine, 
penalty, or punitive assessment.
    E. At any time after this Order becomes final, the Commission may 
direct the agent for the Commission escrow account to transfer funds 
from the escrow account, including accrued interest, to the Commission 
to be distributed as herein provided. The Commission, or its 
representative, shall, in its sole discretion, select the escrow agent.
    F. Respondent relinquishes all dominion, control and title to the 
funds paid into the Commission escrow account, and all legal and 
equitable title to the funds vests in the Treasurer of the United 
States and in the designated consumers. Respondent shall make no claim 
to or demand for return of the funds, directly or indirectly, through 
counsel or otherwise; and in the event of bankruptcy of respondent, 
respondent acknowledges that the funds are not part of the debtor's 
estate, nor does the estate have any claim or interest therein.

VIII

    It is further ordered that for five (5) years after the last date 
of dissemination of any representation covered by this Order, 
respondent David F. McCready, or his successors and assigns, shall 
maintain and upon request make available to the Federal Trade 
Commission for inspection and copying:
    I. All materials that were relied upon in disseminating such 
representation; and
    B. All tests, reports, studies, surveys, demonstrations or other 
evidence in their possession or control that contradict, qualify, or 
call into question such representation, or the basis relied upon for 
such representation, including complaints from consumers.

IX

    It is further ordered that respondent David F. McCready shall, for 
a period of ten (10) years from the date of issuance of this Order, 
notify the Federal Trade Commission within thirty (30) days of the 
discontinuance of his present business or employment and of his 
affiliation with any new business or employment. Each notice of 
affiliation with any new business or employment shall include the 
respondent's new business address and telephone number, current home 
address, and a statement describing the nature of the business or 
employment and his duties and responsibilities.

X

    It is further ordered that this Order will terminate twenty (20) 
years from the date of its issuance, or twenty (20) years from the most 
recent date that the United States or the Federal Trade Commission 
files a complaint (with or without an accompanying consent decree) in 
federal court alleging any violation of the Order, whichever comes 
later; provided, however, that the filing of such complaint will not 
affect the duration of:
    A. Any paragraph in this Order that terminates in less than twenty 
(20) years;
    B. This Order's application to any respondent that is not named as 
a defendant in such complaint; and
    C. This Order if such complaint is filed after the Order has 
terminated pursuant to this paragraph.

Provided further, that if such complaint is dismissed or a federal 
court rules that the respondent did not violate any provision of the 
Order, and the dismissal or ruling is either not appealed or upheld on 
appeal, then the

[[Page 36068]]

Order will terminate according to this paragraph as though the 
complaint was never filed, except that the Order will not terminate 
between the date such complaint is filed and the later of the deadline 
for appealing such dismissal or ruling and the date such dismissal or 
ruling is upheld on appeal.

XI

    It is further ordered that respondent David F. McCready shall, 
within sixty (60) days after the date of service of this Order, file 
with the Commission a report, in writing, setting forth in detail the 
manner and form in which he has complied with this Order.

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a proposed consent order from David 
F. McCready (McCready).
    On August 30, 1995, the Commission issued an administrative 
complaint in this matter (described below). The administrative 
complaint was withdrawn from adjudication, with respect to McCready, on 
April 11, 1996, for the purpose of considering the proposed consent 
agreement.
    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 take other appropriate action, or make final the proposed order 
contained in the agreement.
    This matter concerns advertisements and other promotional practices 
by Rust Evader Corporation (REC) in connection with the promotion and 
sale of the Rust Evader, a device purported to reduce corrosion in 
motor vehicle bodies. The complaint alleges that McCready directed, 
formulated and controlled the acts and practices of REC during the 
period when the violations occurred.
    The complaint alleges that REC and McCready engaged in deceptive 
advertising in violation of Section 5 of the Federal Trade Commission 
Act by falsely claiming that the Rust Evader is effective to 
substantially reduce corrosion in motor vehicle bodies. The complaint 
also alleges that the advertising implied, falsely, that REC and 
McCready had scientific substantiation for this claim.
    The complaint also alleges that REC and McCready used a product 
demonstration of the Rust Evader that was deceptive because it used 
conditions that an automobile would not encounter in practice and that 
improved the operation of the device. The complaint also alleges that 
the respondents used test results to promote the Rust Evader with the 
representation that such test results constituted scientific proof of 
the efficacy of the device. In fact, according to the complaint, the 
test results did not constitute such proof.
    The complaint also alleged that REC and McCready violated Section 
102(c) of the Magnuson-Moss Warranty Act by using a warranty that was 
conditioned on the consumer having the Rust Evader inspected every two 
years and that required the consumer to pay for the inspection.
    Finally, the complaint alleged that REC and McCready provided the 
means and instrumentalities for others to violate Section 5 of the 
Federal Trade Commission Act.
    The proposed consent order contains provisions designed to prevent 
misrepresentations related to these specific matters and others. Part I 
of the order prohibits McCready from representing that the Rust Evader 
is effective in preventing or substantially reducing corrosion in motor 
vehicle bodies.
    Part II prohibits McCready from making any representation 
concerning the performance, efficacy or attributes of a product 
intended for use with motor vehicles unless there is competent and 
reliable evidence to substantiate the representation.
    Part III prohibits McCready from misrepresenting the existence, 
contents, validity, results, conclusions, interpretations or purpose of 
any test, study, or survey in connection with the sale or advertising 
of any product for use in motor vehicles.
    Part IV prohibits McCready from misrepresenting, in connection with 
the sale of any product for use in motor vehicles, that any 
demonstration, picture, experiment or test proves, demonstrates or 
confirms any material quality, feature or merit of such product.
    Part V prohibits McCready from using the names Rust Evader and Rust 
Buster in connection with future sale of the Rust Evader or any 
substantially similar product.
    Part VI prohibits future violations of Section 102(c) of the 
Magnuson-Moss Warranty Act.
    Part VII requires McCready to pay the sum of $200,000 to provide a 
fund for redress of consumers who purchased the Rust Evader. McCready 
will pay $40,000 within five days of final issuance of the order by the 
Commission, and will pay the remaining $160,000 no later than six 
months after final issuance of the order. His obligation to pay the 
latter sum will be secured by a mortgage on real estate he now owns.
    Parts VIII, IX, and XI are compliance and reporting provisions that 
require McCready to: retain all records that would bear on his 
compliance with the order, notify the Commission of any changes in his 
business affiliation, and report to the Commission his compliance with 
the terms of the order.
    Part X provides that the order will terminate automatically twenty 
years from the date it becomes final unless the Commission has brought 
an action in federal court alleging a violation of the order. In that 
case, the order will terminate twenty years from the date that the 
federal court action is filed.
    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.
[FR Doc. 96-17465 Filed 7-8-96; 8:45 am]
BILLING CODE 6750-01-P