Exxon Settles FTC charges: Ground-breaking Educational Ad Campaign Ordered

Consumers who were exposed to ads that claimed that Exxon high octane gasoline would reduce auto maintenance costs will get important new information from Exxon soon. In a landmark settlement of Federal Trade Commission charges that the ads were unsubstantiated and misleading, Exxon will run an extensive consumer education campaign, including television ads throughout the United States. The message of the campaign will be that the right octane for most cars is regular octane, and most cars will not benefit from more expensive high octane fuels. The 15 second television ads will run in 18 major metropolitan markets, including New York City, Orlando and Dallas, where Exxon aired the allegedly deceptive ads. Exxon will also make available informational brochures at up to 8,700 Exxon service stations nationwide.

Exxon, the largest oil company in the United States, does business in more than 100 countries worldwide and had revenues of $134 billion in 1996. It is based in Irving, Texas.

"This is a precedent-setting solution that sends a clear message," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "Consumers can save money if they understand that most cars won’t run longer, faster, cleaner or better on ?premium’ gasoline. Now the largest oil company in the country will give consumers the straight story. Exxon will produce materials and run TV ads to let consumers know their cars don’t need and won’t benefit from premium gasoline unless their owner’s manual recommends it, or their engine is knocking."

In September 1996, the FTC issued a complaint charging that Exxon had misled consumers by making unsubstantiated advertising claims about the ability of Exxon gasoline to clean engines and reduce auto maintenance costs. According to the FTC complaint, Exxon aired television and radio ads that promoted Exxon gasolines, including Exxon 93 Supreme. The ads included statements such as "Exxon gasoline keeps your engine cleaner...So it can help drive down maintenance costs," and "Exxon 93 Supreme...with the power to drive down maintenance costs. Gas that can save you money. For more reliable performance."

Through the advertising, the FTC complaint alleged, Exxon represented that consumers can reduce significantly their automobile maintenance costs by:

• switching to Exxon from other gasoline brands; and
• switching to Exxon 93 Supreme from lower octane Exxon gasolines.

According to the complaint, Exxon did not have a reasonable basis for these claims. Government regulations require that all octane levels of all gasolines sold in the U.S. contain cleaning additives that prevent the accumulation of harmful levels of deposits in engines or fuel supply systems.

The settlement was reached prior to a trial on the FTC’s charges. The settlement will bar Exxon from making unsubstantiated claims about the engine cleaning ability of any gasoline or the effect of any gasoline on auto maintenance or maintenance costs. In addition, Exxon will produce a 15-second television ad featuring an Exxon official who states, "Most cars will run properly on regular octane, so check your owner’s manual and stop by Exxon for this helpful pamphlet." The ad will run in two waves of several weeeks each, the first wave in September and the second in November 1997. The ads will be broadcast in Austin, Baltimore, Baton Rouge, Boston, Charleston- Huntington, Corpus Christi, Dallas, Houston, Nashville, New York, Norfolk, Orlando, Philadelphia, Pittsburgh, Richmond, San Antonio, Tampa and Washington, D.C. The settlement requires that Exxon run the ads frequently enough to reach 75 percent of the target audience (adults ages 18 - 49 in the 18 cities) an average of nearly four times per person.

The agreement also requires that Exxon produce a free consumer brochure to be distributed to Exxon’s 8,700 service stations nationwide. The brochure, which Exxon must distribute for two years, lists questions and answers about octane. It advises that "[o]rdinarily, your car will not benefit from using a higher octane than is recommended in the owner’s manual," which is usually unleaded regular (87 octane). The brochure also explains that higher octane gasoline may be needed for the small percentage of cars that experience heavy or continuous engine knock at the recommended octane level.

The agreement also contains certain recordkeeping and monitoring provisions.

This case is the latest in a series of FTC actions challenging deceptive advertising claims for high octane fuel. Amoco Oil Company, Sun Company and Unocal Corporation have previously settled FTC charges in connection with superiority claims for their high octane gasolines.

The Commission vote to accept the proposed consent agreement was 4-0, with Commissioner Mary Azecuenaga concurring in part and dissenting in part and Commissioner Roscoe B. Starek, III, recused.

Commissioner Azcuenaga said in her partial dissent that the order "provides 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." Agreeing that "the core provision of the proposed order barring the allegedly deceptive claims is appropriate," she said, "I cannot agree to the omission of a broader [injunctive] provision . . . . 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."

Commissioner Azcuenaga explained, "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." She observed, "Unfortunately, I do not believe that this particular campaign is likely to be effective. . . . 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." Noting that "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," she concluded, "On balance, I believe that the notice order is stronger."

The settlement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, proposed consent, Commissioner Azcuenaga’s statement, an analysis to aid public comment and a free FTC brochure, "Penny Wise or Pump Fuelish," are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. D09281)