[Federal Register Volume 61, Number 207 (Thursday, October 24, 1996)]
[Rules and Regulations]
[Pages 55095-55097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27181]
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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: Repeal of rule.
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SUMMARY: The Federal Trade Commission (the ``Commission'') announces
the repeal of the Trade Regulation Rule on Deceptive Advertising and
Labeling of Previously Used Lubricating Oil (``the Used Oil Rule'' or
``the Rule''). After reviewing the rulemaking record, and in light of
Commission promulgation of the Recycled Oil Rule in 1995, pursuant to
the Energy Policy and Conservation Act (``EPCA''), the Commission has
determined that the Used Oil Rule is no longer necessary or in the
public interest, and that its repeal will eliminate unnecessary
duplication, and any inconsistency with EPCA's goals. This document
contains a Statement of Basis and Purpose for repealing the Used Oil
Rule.
EFFECTIVE DATE: October 24, 1996.
ADDRESSES: Requests for copies of the Statement of Basis and Purpose
should be sent to the FTC's Public Reference Branch, Room 130, Sixth
Street and Pennsylvania Ave., N.W., Washington, DC 20580, (202) 326-
2222; TTY for the hearing impaired (202) 326-2502.
FOR FURTHER INFORMATION CONTACT:
Neil Blickman, Attorney, Federal Trade Commission, Bureau of Consumer
Protection, Division of Enforcement, Sixth Street and Pennsylvania
Ave., N.W., Washington, DC 20580, (202) 326-3038.
SUPPLEMENTARY INFORMATION: .
Statement of Basis and Purpose
I. Background
Based on the Commission's finding that the new or used status of a
lubricant was material to consumers, the Used Oil Rule, 16 CFR Part
406, was promulgated by the Commission on August 14, 1964 (29 FR
11650), 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,\1\ until the Commission issued rules
under 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 were 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\
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\1\ 42 U.S.C. 6363 note.
\2\ See Pub. L. No. 96-463, U.S. Code Cong. & Adm. News, pp.
4354-4356 (1980).
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[[Page 55096]]
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\
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\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 (``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 proposed 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\
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\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. 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.\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.
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\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\
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\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.'' 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.\11\
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\11\ 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 (61
FR 14686).\12\ The ANPR comment period closed on May 3, 1996.
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\12\ 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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The Commission received one comment in response to the ANPR.\13\
The comment was submitted by the Safety-Kleen Corporation, a re-refiner
of used oil. Safety-Kleen supported 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.\14\
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\13\ 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.
\14\ Safety-Kleen, D-1, 1.
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After reviewing the comment filed in response to the ANPR, on July
26, 1996, 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, the Commission published a Notice of Proposed Rulemaking
(``NPR'') initiating a proceeding to consider whether the Used Oil Rule
should be repealed or remain in effect (61 FR 39101).\15\ In the NPR,
the Commission announced its determination, pursuant to 16 CFR 1.20, to
use expedited procedures in this proceeding.\16\ The NPR comment period
closed on August 26, 1996.
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\15\ In accordance with section 18 of the FTC Act, 15 U.S.C.
57a, the Commission submitted the NPR 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, 30 days prior to its publication in the
Federal Register.
\16\ These procedures included: publishing a Notice of Proposed
Rulemaking; soliciting written comments on the Commission's proposal
to repeal the Rule; holding an informal hearing, if requested by
interested parties; receiving a final recommendation from Commission
staff; and announcing final Commission action in the Federal
Register.
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In response to the NPR, the Commission received two comments and no
requests to hold an informal hearing.\17\ One comment was submitted by
Evergreen Holding, Inc., a collector and re-refiner of used oil in the
state of California. Evergreen supported repeal of the Used Oil Rule,
stating that the Commission's Recycled Oil Rule adequately addresses
the major issues of concern to the used oil and re-refining industries,
and renders the Used Oil Rule duplicative unnecessary.\18\ The other
comment was submitted by Safety-Kleen. In its comment on the NPR,
Safety-Kleen reiterated its support for repeal of the Used Oil Rule,
stating that ``repealing the rule not only eliminates an antiquated
rule replaced by a more modern one, but also responds to the
President's National Regulatory Reinvention initiative by eliminating
both an unnecessary and an obsolete rule.'' \19\ Safety-Kleen further
stated that the consumer is better protected and the industry better
served
[[Page 55097]]
by the Commission's Recycled Oil Rule.\20\
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\17\ The comments submitted in response to the NPR also have
been placed on the public record, Commission Rulemaking Record No.
R511959, and are coded ``D'' indicating that they are public
comments. The comments are cited by identifying the commenter (by
abbreviation), the comment number, and the relevant page number.
\18\ Evergreen, D-2, 2.
\19\ Safety-Kleen, D-3, 1.
\20\ Id. at 2.
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II. Basis for Repeal of Rule
The Commission has decided to repeal the Used Oil Rule for the
reasons discussed in the NPR. In sum, after reviewing the rulemaking
record, and in light of promulgation of the Recycled Oil Rule, the
Commission has determined that a separate Used Oil Rule is no longer
necessary, and that its repeal will eliminate unnecessary duplication,
and any inconsistency with EPCA's goals. While 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, the
Commission has 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 enforcement actions under Section 13(b), 15 U.S.C. 53(b), in
federal district court. Prosecuting serious or knowing
misrepresentations in district court allows the Commission to seek
injunctive relief as well as equitable remedies, such as redress or
disgorgement. Any necessary administrative or district court actions
also would serve to provide industry members with additional guidance
about what practices are unfair or deceptive. In addition, the
Commission has concluded that eliminating the Used Oil Rule not only
reduces duplication, but also streamlines the regulatory scheme,
thereby responding to President Clinton's National Regulatory
Reinvention Initiative, which, among other things, urges agencies to
eliminate obsolete or unnecessary regulations. Accordingly, the
Commission hereby announces the repeal of the Used Oil Rule.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-12, requires
an analysis of the anticipated impact of the repeal of the Used Oil
Rule on small businesses. The reasons for repeal of the Rule have been
explained in this notice. Repeal of the Used Oil Rule would appear to
have little or no effect on small businesses. Moreover, the Commission
is not aware of any existing federal laws or regulations that would
conflict with repeal of the Used Oil Rule. Further, no comments
suggested any adverse effect on small business from repeal. For these
reasons, the Commission certifies, pursuant to Section 605 of the RFA,
5 U.S.C. 605, that this action will not have a significant economic
impact on a substantial number of small entities.
IV. 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,\21\ 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.\22\ 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 will permanently eliminate any burdens on
the public imposed by these disclosure requirements.
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\21\ U.S.C. 6363 note.
\22\ 46 FR 20979.
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List of Subjects in 16 CFR Part 406
Advertising, Labeling, Trade practices, Used lubricating oil.
PART 406--[REMOVED]
The Commission, under authority of section 18 of the Federal Trade
Commission Act, 15 U.S.C. 57a, amends chapter I of title 16 of the Code
of Federal Regulations by removing part 406.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 96-27181 Filed 10-23-96; 8:45 am]
BILLING CODE 6750-01-M