[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