[Federal Register Volume 61, Number 145 (Friday, July 26, 1996)]
[Proposed Rules]
[Pages 39101-39104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19009]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 61, No. 145 / Friday, July 26, 1996 / 
Proposed Rules  

[[Page 39101]]



FEDERAL TRADE COMMISSION

16 CFR Part 406


Deceptive Advertising and Labeling of Previously Used Lubricating 
Oil

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Trade Commission (the ``Commission'') announces 
the commencement of a rulemaking proceeding for the 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 proceeding will address whether or not the Used Oil Rule 
should be repealed. The Commission invites interested parties to submit 
written data, views, and arguments on how the Rule has affected 
consumers, businesses and others, and on whether there currently is a 
need for the Rule. This document includes a description of the 
procedures to be followed, an invitation to submit written comments, a 
list of questions and issues upon which the Commission particularly 
desires comments, and instructions for prospective witnesses and other 
interested persons who desire to participate in the proceeding.

DATES: Written comments must be submitted on or before August 26, 1996. 
Notifications of interest in testifying must be submitted on or before 
August 26, 1996. If interested parties request the opportunity to 
present testimony, the Commission will publish a document in the 
Federal Register stating the time and place at which the hearings will 
be held and describing the procedures that will be followed in 
conducting the hearings. In addition to submitting a request to 
testify, interested parties who wish to present testimony must submit, 
on or before August 26, 1996, a written comment or statement that 
describes the issues on which the party wishes to testify and the 
nature of the testimony to be given.

ADDRESS: Written comments and requests to testify should be submitted 
to Office of the Secretary, Federal Trade Commission, Room H-159, Sixth 
Street and Pennsylvania Ave., NW., Washington, DC 20580, telephone 
number (202) 326-2506. Comments and requests to testify should be 
identified as ``16 CFR Part 406 Comment--Used Oil Rule'' and ``16 CFR 
Part 406 Request to Testify--Used Oil Rule,'' respectively. If 
possible, submit comments both in writing and on a personal computer 
diskette in Word Perfect or other word processing format (to assist in 
processing, please identify the format and version used). Written 
comments should be submitted, when feasible and not burdensome, in five 
copies.

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

SUPPLEMENTARY INFORMATION:

I. Introduction

    Pursuant to the Federal Trade Commission Act (``FTC Act''), 15 
U.S.C. 41-58, and the Administrative Procedure Act, 5 U.S.C. 551-59, 
701-06, by this Notice of Proposed Rulemaking (``NPR'') the Commission 
initiates a proceeding to consider whether the Used Oil Rule should be 
repealed or remain in effect.\1\ The Commission is undertaking this 
rulemaking proceeding as part of the Commission's ongoing program of 
evaluating trade regulation rules and industry guides to determine 
their effectiveness, impact, cost and need. This proceeding also 
responds to President Clinton's National Regulatory Reinvention 
Initiative, which, among other things, urges agencies to eliminate 
obsolete or unnecessary regulations.
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    \1\ In accordance with section 18 of the FTC Act, 15 U.S.C. 57a, 
the Commission submitted this NPR to the Chairman of the Committee 
on Commerce, Science, and Transportation, United States Senate, and 
the Chairman of the Committee on Commerce, United Stats House of 
Representatives, 30 days prior to its publication in the Federal 
Register.
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II. Background Information

    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 consumers 
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,\2\ 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 
arguably are 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.'' \3\
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    \2\ 42 U.S.C. 6363 note.
    \3\ 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.\4\
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    \4\ 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.\5\ To achieve these 
goals, section 383 of EPCA directs the National Institute of Standards 
and Technology (``NIST'') to develop test procedures for the 
determination of the substantial

[[Page 39102]]

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.\6\ 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.\7\ 
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.\8\
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    \5\ 42 U.S.C. 6363(a).
    \6\ 42 U.S.C. 6363(c).
    \7\ 42 U.S.C. 6363(d).
    \8\ 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. Accordingly, to 
implement EPCA's statutory directive, on October 31, 1995, the 
Commission issued a rule (covering recycled engine oil) entitled Test 
Procedures and Labeling Standards for Recycled Oil (``Recycled Oil 
Rule''), 16 CFR part 311.\9\ 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.
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    \9\ 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.\10\ 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.\11\
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    \10\ 42 U.S.C. 6363(e)(1).
    \11\ 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.'' In light 
of the ongoing stays, when the Commission published the Recycled Oil 
Rule in October 1995, it stated that, as part of its regulatory review 
process, it would consider the continuing need for the Used Oil 
Rule.\12\
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    \12\ 60 FR 55414, 55417.
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    Based on the foregoing, on April 3, 1996, the Commission published 
an Advance Notice of Proposed Rulemaking (``ANPR'') stating that it had 
tentatively determined that a separate Used Oil Rule is no longer 
necessary, and seeking comments on the proposed repeal of the Rule.\13\ 
In accordance with section 18 of the FTC Act, 15 U.S.C. 57a, the ANPR 
was sent to the Chairman of the Committee on Commerce, Science, and 
Transportation, United States Senate, and the Chairman of the Committee 
on Commerce, United States House of Representatives.
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    \13\ 61 FR 14686.
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    The ANPR comment period closed on May 3, 1996. The Commission 
received one comment in response to the ANPR.\14\ The comment was 
submitted by the Safety-Kleen Corporation (``Safety-Kleen''), a re-
refiner of used oil. Safety-Kleen supports repeal of the Commission's 
Used Oil Rule, stating that it has been superseded effectively in the 
marketplace by the FTC's Recycled Oil Rule.\15\
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    \14\ The comment submitted in response to the ANPR has been 
placed on the public record, Commission Rulemaking Record No. 
R511959, and is coded ``D'' indicating that it is a public comment. 
In this notice, the comment is cited by identifying the commenter 
(by abbreviation), the comment number, and the relevant page number.
    \15\ Safety-Kleen, D-1, 1.
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    Accordingly, after reviewing the comment submitted, and in light of 
promulgation of the Recycled Oil Rule, the Commission has determined 
that to eliminate unnecessary duplication, and any inconsistency with 
EPCA's goals, a separate Used Oil Rule is no longer necessary.\16\ The 
Commission, therefore, seeks comments on the proposed repeal of the 
Used Oil Rule.
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    \16\ 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. Nevertheless, 
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. Although this Rule does not further 
address re-refined oil or provide penalties for misrepresenting used 
oil as ``re-refined,'' it defines for the public how the Commission 
interprets this term. Any significant problems that may 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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III. Rulemaking Procedures

    The Commission finds that the public interest will be served by 
using expedited procedures in this proceeding. First, there do not 
appear to be any material issues of disputed fact to resolve in 
determining whether to repeal the Rule. Second, the use of expedited 
procedures will support the Commission's goal of eliminating obsolete 
or unnecessary regulations without an undue expenditure of resources, 
while ensuring that the public has an opportunity to submit data, views 
and arguments on whether the Commission should repeal the Rule.
    The Commission, therefore, has determined, pursuant to 16 CFR 1.20, 
to use the procedures set forth in this notice. These procedures 
include: (1) Publishing this Notice of Proposed Rulemaking; (2) 
soliciting written comments on the Commission's proposal to repeal the 
Rule; (3) holding an informal hearing, if requested by interested 
parties; (4) obtaining a final recommendation from staff; and (5) 
announcing final Commission action in a notice published in the Federal 
Register.

IV. Invitation To Comment and Questions for Comment

    Interested persons are requested to submit written data, views or 
arguments on any issue of fact, law or policy they believe may be 
relevant to the Commission's decision on whether to repeal the Rule. 
The Commission requests that commenters provide representative factual 
data in support of their comments. Individual firms' experiences are 
relevant to the extent they typify industry experience in general or 
the experience of similar-sized firms. Commenters opposing the proposed 
repeal of the Rule should explain the reasons they believe the Rule is 
still needed and, if appropriate, suggest specific alternatives. 
Proposals for alternative requirements should include reasons and data 
that indicate why the alternatives would better protect consumers from 
unfair or

[[Page 39103]]

deceptive acts or practices under section 5 of the FTC Act, 15 U.S.C. 
45.
    Although the Commission welcomes comments on any aspect of the 
proposed repeal of the Rule, the Commission is particularly interested 
in comments on questions and issues raised in this Notice. All written 
comments should state clearly the question or issue that the commenter 
is addressing.
    Before taking final action, the Commission will consider all 
written comments timely submitted to the Secretary of the Commission 
and testimony given on the record at any hearings scheduled in response 
to requests to testify. Written comments submitted will be available 
for public inspection in accordance with the Freedom of Information 
Act, 5 U.S.C. 552, and Commission regulations, on normal business days 
between the hours of 8:30 a.m. to 5 p.m. at the Federal Trade 
Commission, Public Reference Room, Room H-130, Federal Trade 
Commission, Sixth Street and Pennsylvania Avenue, NW., Washington, DC 
20580, telephone number (202) 326-2222.

Questions

    (1) Should the Used Oil Rule be kept in effect, or should it be 
repealed?
    (2) What benefits do consumers derive from the Rule?
    (3) How would repealing the Rule affect the benefits experienced by 
consumers?
    (4) How would repealing the Rule affect the benefits and burdens 
experienced by firms subject to the Rule's requirements?
    (5) Is misrepresentation of used oil as ``re-refined'' a 
significant problem in the marketplace?
    (6) Are there any other federal, state, or local laws or 
regulations, or private industry standards, that eliminate the need for 
the Rule?
    (7) Is the Commission's Recycled Oil Rule likely to provide all or 
most of the benefits now provided by the Used Oil Rule?

V. Requests for Public Hearings

    Because there does not appear to be any dispute as to the material 
facts or issues raised by this proceeding and because written comments 
appear adequate to present the views of all interested parties, a 
public hearing has not been scheduled. If any person would like to 
present testimony at a public hearing, he or she should follow the 
procedures set forth in the DATES and ADDRESS sections of this notice.

VI. Preliminary Regulatory Analysis

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-12, requires 
an analysis of the anticipated impact of the proposed repeal of the 
Rule on small businesses.\17\ The analysis must contain, as applicable, 
a description of the reasons why action is being considered, the 
objectives of and legal basis for the proposed action, the class and 
number of small entities affected, the projected reporting, 
recordkeeping and other compliance requirements being proposed, any 
existing federal rules which may duplicate, overlap or conflict with 
the proposed action, and any significant alternatives to the proposed 
action that accomplish its objectives and, at the same time, minimize 
its impact on small entities.
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    \17\ Section 22 of the FTC Act, 15 U.S.C. 57b-3, also requires 
the Commission to issue a preliminary regulatory analysis relating 
to proposed rules when the Commission publishes a notice of proposed 
rulemaking. The Commission has determined that a preliminary 
regulatory analysis is not required by section 22 in this proceeding 
because the Commission has no reason to believe that repeal of the 
Rule: (1) Will have an annual effect on the national economy of 
$100,000,000 or more; (2) will cause a substantial change in the 
cost or price of goods or services that are used extensively by 
particular industries, that are supplied extensively in particular 
geographical regions, or that are acquired in significant quantities 
by the Federal Government, or by State or local governments; or (3) 
otherwise will have a significant impact upon persons subject to the 
Rule or upon consumers.
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    A description of the reasons why action is being considered and the 
objectives of the proposed repeal of the Rule have been explained 
elsewhere in this Notice. Repeal of the Rule would appear to have 
little or no effect on any small business. The Commission is not aware 
of any existing federal laws or regulations that would conflict with 
repeal of the Rule.
    For these reasons, the Commission certifies, pursuant to section 
605 of RFA, 5 U.S.C. 605, that if the Commission determines to repeal 
the Rule that action will not have a significant impact on a 
substantial number of small entities. To ensure that no substantial 
economic impact is being overlooked, however, the Commission requests 
comments on this issue. After reviewing any comments received, the 
Commission will determine whether it is necessary to prepare a final 
regulatory flexibility analysis.

VII. Paperwork Reduction Act

    The Used Oil Rule imposes third-party disclosure requirements that 
constitute ``information collection requirements'' under the Paperwork 
Reduction Act, 44 U.S.C. 3501 et seq. On October 15, 1980, however, 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,\18\ until the Commission issued rules under EPCA. Further, 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.\19\ Since 1981, therefore, the Rule effectively has imposed no 
paperwork burdens on marketers of used lubricating oil. In any event, 
repeal of the Used Oil Rule would permanently eliminate any burdens on 
the public imposed by these disclosure requirements.
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    \18\ 42 U.S.C. 6363 note.
    \19\ 46 FR 20979.
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VIII. Additional Information For Interested Persons

A. Motions or Petitions

    Any motions or petitions in connection with this proceeding must be 
filed with the Secretary of the Commission.

B. Communications by Outside Parties to Commissioners or Their 
Advisors.

    Pursuant to Rule 1.18(c) of the Commission's rules of practice, 16 
CFR 1.18(c), communications with respect to the merits of this 
proceeding from any outside party to any Commissioner or Commissioner's 
advisor during the course of this rulemaking shall be subject to the 
following treatment. Written communications, including written 
communications from members of Congress, shall be forwarded promptly to 
the Secretary for placement on the public record. Oral communications, 
not including oral communications from members of Congress, are 
permitted only when such oral communications are transcribed verbatim 
or summarized at the discretion of the Commissioner or Commissioner's 
advisor to whom such oral communications are made, and are promptly 
placed on the public record, together with any written communications 
relating to such oral communications. Memoranda prepared by a 
Commissioner or Commissioner's advisor setting forth the contents of 
any oral communications from members of Congress shall be placed 
promptly on the public record. If the communication with a member of 
Congress is transcribed verbatim or summarized, the

[[Page 39104]]

transcript or summary will be placed promptly on the public record.

    Authority: 15 U.S.C. 41-58.

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. 96-19009 Filed 7-25-96; 8:45 am]
BILLING CODE 6750-01-M