[Federal Register Volume 62, Number 127 (Wednesday, July 2, 1997)]
[Notices]
[Pages 35816-35818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17280]


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FEDERAL TRADE COMMISSION

[Docket No. 9281]


Exxon Corporation; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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summary: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft amended 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

dates: Comments must be received on or before September 2, 1997.

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

for further information contact: Joel Winston, Federal Trade 
Commission, S-4002, 6th & Pennsylvania Ave., NW, Washington, DC 20580. 
(202) 326-3153. Michael Dershowitz, Federal Trade Commission, S-4002, 
6th & Pennsylvania Ave., NW, Washington, DC 20580. (202) 326-3158.

supplementary information: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 3.25 of 
the Commission's Rules of Practice (16 CFR 3.25), notice is hereby 
given that the above-captioned 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. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the accompanying

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complaint. An electronic copy of the full text of the consent agreement 
package can be obtained from the Commission Actions section of the FTC 
Home Page (for June 24, 1997), on the World wide Web, at ``http://
www.ftc.gov/os/actions/htm.'' A paper copy can be obtained from the FTC 
Public Reference Room, Room H-130, Sixth Street and Pennsylvania 
Avenue, NW., Washington, DC 20580, either in person or by calling (202) 
326-3627. 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 Rule of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade commission has accepted, subject to final 
approval, an agreement containing a consent order from Exxon 
Corporation (``Exxon''). Among other things, Exxon is engaged in the 
manufacture and sale of automobile gasolines.
    The proposed consent order has been placed on the public record for 
sixty (60) days for reception 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 the comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    This matter concerns allegedly deceptive advertising claims 
regarding the performance attributes of Exxon gasolines. On September 
11, 1996, the Commission issued a complaint challenging as 
unsubstantiated Exxon's advertising claims that switching to Exxon 93 
Supreme gasoline from other gasoline brands and from lower octane 
grades of Exxon gasoline will significantly reduce automobile 
maintenance costs for consumers generally. The complaint also 
challenged as unsubstantiated Exxon's claim that switching to Exxon 
gasolines from other brands will significantly reduce automobile 
maintenance costs for consumers generally. The case was withdrawn from 
litigation on April 25, 1997.
    The proposed consent order contains both injunctive and consumer 
education provisions designed to prevent respondent from engaging in 
similar acts and practices in the future.
    Part I of the proposed order prohibits respondent from making 
unsubstantiated representations concerning the engine cleaning ability 
of any gasoline or the effect of any gasoline on automobile maintenance 
or maintenance costs.
    Part I includes several ``safe harbors'' defining permissible 
substantiation for certain types of engine cleaning claims. First, it 
provides that any representation that a gasoline will keep clean or 
clean up fuel injector deposits to a level that engine performance is 
not adversely affected will be deemed to be substantiated if Exxon 
possesses competent and reliable testing demonstrating no more than 5 
percent flow restriction in each injector over the accumulation of 
10,000 miles. In addition, Part I provides that any representation that 
a gasoline will keep clean or clean up intake valve deposits to a level 
that engine performance is not adversely affected will be deemed to be 
substantiated by competent and reliable testing demonstrating intake 
valve deposit weight of less than 100 mg-per-valve on average over the 
accumulation of 10,000 miles. Finally, Part I of the proposed order 
also allows truthful representations regarding the numerical octane 
rating of any gasoline.
    Part II and III of the proposed order contain a consumer education 
remedy designed to educate drivers about how to determine their car's 
octane needs. Part II requires Exxon to produce and disseminate a 15 
second television message stating that most cars run properly on 
regular octane, and that drivers should check their owner's manual. The 
message must be broadcast in eighteen designated markets in two 
separate waves beginning in September 1997. The order establishes a 
performance standard that Exxon must meet in terms of the audience 
exposure achieved by the ad for each market and in each wave. Exxon 
must purchase sufficient air time so that the ad reaches 65% of the 
target audience (adults ages 18-49) an average of 2.7 times per person 
in the first wave, and 51% of the target audience an average of 2 times 
in the second wave. Exxon must monitor the actual exposure the ad 
achieves in each market, and should it fail to achieve at least 90 
percent of the exposure levels specified in the order for each market, 
it must seek additional spots from the television stations to meet the 
specified targets.
    Part III of the order requires Exxon to produce and disseminate a 
consumer brochure that is mentioned in the 15 second broadcast message 
required in Part II of the order. The brochure, which will be made 
available free of charge at Exxon service stations, informs consumers 
that most cars will not benefit from higher octane gasoline, and also 
explains that consumers may need higher octane gasoline if their 
owner's manual recommends it or if their car engine consistently knocks 
or pings.
    Parts IV, V, VI, and VII of the order require Exxon to maintain 
copies of all materials relied upon in making any representation 
covered by the order; to provide copies of the order to certain of the 
company's personnel; to notify the Commission of any change in the 
corporate structure that might affect compliance with the order; and to 
file compliance reports with the Commission. Part VIII of the order is 
a ``sunset'' provision, dictating that the order will terminate twenty 
years from the date it is issued or twenty years after a complaint is 
filed in federal court, by either the United States or the FTC, 
alleging any violation of the order.
    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.
Benjamin I. Berman,
Acting Secretary.

Statement of Commissioner Mary L. Azcuenaga Concurring in Part and 
Dissenting in Part in Exxon Corporation, Docket No. 9281

    Last year, the Commission issued a complaint against Exxon 
Corporation and, in accordance with its practice, a Notice of 
Contemplated Relief, the title of which is self-explanatory. The 
complaint alleged that Exxon had made certain deceptive claims 
concerning the need for its premium gasoline. Today the Commission 
accepts for public comment a settlement that provide less relief than 
the Commission contemplated when it issued the complaint and less 
relief than it ordered against other companies that previously have 
settled similar charges.\1\ I agree that the core provision of the 
proposed order barring the allegedly deceptive claims is 
appropriate,\2\ but I cannot agree to the omission of a broader 
provision barring Exxon from making unsubstantiated claims concerning 
``the relative or absolute attributes of any gasoline with respect to 
engine performance, power [or] * * * acceleration.''
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    \1\ See Sun Company, Inc., Docket C-3381 (consent order, May 6, 
1992); Unocal Corporation, Inc., Docket C-3492 (consent order, April 
24, 1994); Amoco Oil Company, Docket C-3655 (consent order, May 7, 
1996).
    \2\ Order para.Sec. I.
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    An injunctive provision covering not just the specific claims 
challenged in the complaint, but also, future deceptive claims of a 
similar nature is a common feature in Commission advertising

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orders. It provides an important deterrent, because any future 
advertising claims that do not comport with it are punishable by 
substantial civil penalties. The Commission previously has challenged 
similar advertising claims by three other gasoline companies, all of 
which, unlike Exxon, agreed to settlements without litigation, and all 
of which consented to inclusion of the broader injunctive relief 
omitted from this order.
    Exxon's advertisements seem likely to have contributed to consumer 
misperceptions about the attributes of and the need for premium 
gasoline as much as gasoline advertisements run by the other companies. 
The more lenient injunctive coverage in Exxon's order will be less 
effective in deterring future deception and may create perverse 
incentives. In the future, companies may believe it is in their 
interest to decline negotiated settlement until after litigation has 
commenced if they think that the Commission will reward greater 
intransigence.
    Narrowing the injunction might be worthwhile if some other 
effective remedy were added, and the proposed order adds a provision 
that requires Exxon to produce and disseminate a 15-second television 
commercial and distribute a certain number of copies of a brochure.\3\ 
Given the apparently entrenched consumer misperceptions allegedly 
created by Exxon's challenged claims about the need for and attributes 
of premium gasoline, a consumer education remedy is justified. The goal 
of the consumer education campaign, to correct apparently widespread 
and assuredly costly consumer misperceptions about the benefits of high 
octane gasoline, is laudable. Unfortunately, I do not believe that this 
particular campaign is likely to be effective. The Commission has 
extensive experience with advertising techniques, and that experience 
should tell us that there is a good deal more to creating a successful 
advertisement than first meets the eye.\4\ The commercial is uninspired 
at best, and we have no basis for concluding that it will be effective 
in conveying the desired message to consumers or in changing their 
misperceptions. The order does not provide a performance standard or 
other means of assuring that this goal will be met.\5\
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    \3\ The text of the negotiated advertisement is:
    Hi, I'm Sherri Stuewer. I run Exxon's Baytown Refinery. We offer 
three octane grades. Which is right for you? Most cars will run 
properly on regular octane, so check your owner's manual * * * and 
stop by Exxon for this helpful pamphlet.
    \4\ The advertisement required by the order has not been 
copytested.
    \5\ The order could have specified survey methodology and 
required that the advertisement be revised as needed until the 
survey results showed that a minimum number or percentage of 
consumers actually took the intended educational message from the 
advertising spot. The Commission has taken this approach in the 
past. RJR Foods, Inc., 83 F.T.C. 7, 16-21 (consent order, July 13, 
1973).
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    Although it may be argued that we similarly have no assurance of 
the effectiveness of the broader injunction that was included in the 
Notice of Contemplated Relief, we have, at least, the assurance that 
further deceptive claims covered by the order may result in substantial 
civil penalties and, therefore, that the company may think twice before 
running advertisements that might mislead reasonable consumers about 
the attributes of particular gasoline products. In addition, the 
injunctive relief would remain in place for 20 years, far longer than 
the likely effects of a single short-lived advertising campaign like 
the one proposed. On balance, I believe that the notice order is 
stronger. Perhaps the fact that Exxon was willing to sign this order 
rather than the notice order should tell us something.
    To the extent that the proposed order is more narrow than the 
notice order, I respectfully dissent.

[FR Doc. 97-17280 Filed 7-1-97; 8:45 am]
BILLING CODE 6750-01-M