Shell and Castrol Settle FTC Charges

In the latest of a series of Federal Trade Commission cases alleging that ad claims for motor oil and fuel additives were deceptive, Castrol North America Inc., the marketer of gas additive Castrol Syntec Power System, and Shell Chemical Company, the developer and supplier of the Castrol Syntec Power System’s active ingredient, have agreed to settle FTC charges. Castrol is charged with deceptively advertising on television, in magazines, and on the product’s label, that Castrol Syntec Power System significantly improves engine power and acceleration and is superior to other gas additives; and with falsely claiming that tests prove these claims. Shell is alleged to have provided its trade customers, like Castrol, with allegedly deceptive advertising and promotional materials, and to have made allegedly false or misleading representations about tests it conducted on its VEKTRON™ 3000 fuel additives. Based on these actions, Shell is charged with providing the "means and instrumentalities" to its trade customers to deceive the public.

The settlements would require that Castrol and Shell have competent and reliable scientific evidence to support power and acceleration claims, as well as any performance, benefits or efficacy claims for fuel additives marketed by Castrol, and fuel additive products or ingredients marketed by Shell in the future. In addition, misrepresentations about tests, studies or research are prohibited. Shell also would be required to notify its other trade customers of the FTC’s complaint and order.

The FTC has previously halted allegedly deceptive ads for Valvoline Engine Treatment, Slick 50 Engine Treatment, and STP Engine Treatment and unsubstantiated claims for Prolong. Motor Up Corporation, and the marketers of DuraLube are awaiting administrative trial on charges that their ads were unsubstantiated.

Shell Chemical developed, tested and patented a new chemical compound it used in an additive product line, which it marketed to aftermarket gas additive manufacturers. Advertising and marketing materials for the product claimed that scientific tests prove that it significantly improves engine power and acceleration and is superior to other fuel system treatments. Castrol used Shell’s additive in its Syntec Power System, claiming that it improves engine power and acceleration and is superior to other, similar products. Castrol ads also claimed that tests proved the claims. The FTC alleged that neither Shell nor Castrol has a reasonable basis to substantiate such performance claims or the claims that products containing these additives are superior to similar products. The agency also alleged that the ‘laboratory tests’ cited by Shell and Castrol do not prove the performance and superiority claims made in their advertising, and that these claims are false. Finally, the FTC charged that by using deceptive ads and falsely representing test data, Shell provided the means for its trade customers to deceive the public, in violation of law.

The settlements with the FTC would prohibit Shell and Castrol from making any claims about power, acceleration, performance, benefits, efficacy, or superiority of fuel additives, unless the claims are substantiated by competent and reliable scientific evidence. In addition, the settlements would prohibit misrepresentations about the existence, contents, validity, results, conclusions, or interpretations of any test, study or research done on any fuel additive. The settlement with Shell also would require that it notify each trade customer that purchased VEKTRON™ 3000 additives of the details of the FTC complaint and order. Both settlements contain record keeping requirements to allow the FTC to monitor compliance. Shell Chemical Company is a wholly-owned subsidiary of Shell Oil Company. Since Shell Oil Company controls the acts and practices of Shell Chemical, it is also charged by the FTC with having violated the law.

The Commission vote to accept the proposed consent agreement with Castrol was 4_0. The vote to accept the proposed consent agreement with Shell was 3_1, with Commissioner Orson Swindle dissenting. In his dissenting statement, Commissioner Swindle acknowledged that Shell provided Castrol with materials that described a test which showed an improvement in acceleration when gasoline bulk treated with Shell’s VEKTRON ingredient was used in an engine for 5,000 miles. He emphasized, however, that Shell had instructed Castrol (and its other customers) that it must make its own assessment of the acceleration benefits obtained when the VEKTRON ingredient is included (along with other substances) in its final product, which purports to improve acceleration after the product has been used in a single tank of gasoline (roughly 300 miles). Commissioner Swindle concluded that Castrol understood that product-specific tests of Castrol Syntec Power System were needed because it paid Shell to conduct three acceleration tests.

According to Commissioner Swindle,clearly none of the test results supported the claim that Castrol Syntec Power System would cause a significant increase in acceleration in motor vehicles generally, but Castrol nevertheless created and disseminated advertising that made the claim. Commissioner Swindle stressed that there was no allegation that Shell reviewed or approved Castrol’s deceptive advertisements prior to their dissemination.

Based on Shell’s role concerning the unsubstantiated claims that were made in Castrol’s advertising for Castrol Syntec Power System, Commissioner Swindle concluded that Shell was not making deceptive claims to consumers through Castrol. He thus did not have reason to believe that Shell was liable for the deceptive claims in Castrol’s advertising under a means and instrumentalities theory. Commissioner Swindle finally expressed the hope that this case would not result in an expansion of the scope of liability under a means and instrumentalities theory for other input suppliers and testing laboratories.

Chairman Robert Pitofsky and Commissioners Sheila F. Anthony and Mozelle W. Thompson issued a majority statement which said, "After reviewing the record developed in this case, we conclude that there is ample evidence to find reason to believe that the proposed consent agreement with Shell Oil Company ("Shell") should be accepted. The facts show that Shell provided promotional materials to its customers that contained unsubstantiated claims that ultimately appeared in its customers ads. There is also evidence that Shell actively encouraged its customers to repeat the claims contained in its promotional materials and actively supported customers’ efforts to do so. In fact, the similarities between promotional materials used by Shell and its customers are quite striking. Finally, we do not find that Shell used a disclaimer -- either clearly or conspicuously. Accordingly, we conclude that Shell was properly alleged to have violated Section 5 because it "put into the hands of others the means by which they may mislead the public."

A summary of the consent agreement will be printed in the Federal Register shortly and will be subject to a 60 day public comment period, after which the Commission will determine whether to make it final. Comments should be addressed to FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

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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 complaints, consents, an analysis to aid public comment and the Commissioners’ statements are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD 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. 982 3107-Shell)

(FTC File No. 972-3209-Castrol) (shell/castrol)