Agreement Prohibits Use of Brand Name, Includes $200,000 in Consumer Redress
The inventor of the “Rust Evader,” a device costing up to $600 that purportedly reduced corrosion in motor vehicle bodies, would have to pay $200,000 in consumer redress and abide by a ban on use of the names “Rust Evader” or “Rust Buster” for this or similar devices, as part of an agreement he has signed with the Federal Trade Commission. Last year, the FTC had charged David F. McCready and his firm, RustEvader Corporation, with false advertising. The settlement announced today follows an initial decision declaring a default judgment against the company announced on June 7, and would end the FTC’s litigation against McCready.
At the time the deceptive claims were made, McCready was president of RustEvader Corporation, which is based in Altoona, Pennsylvania. He later stepped down and sold his interest in the company. For the most part, the FTC settlement provisions would govern his future efforts to market products for use in motor vehicles.
The product at issue in the FTC case purported to impress an electron bath on a vehicle’s surface that interferes with oxygen’s ability to couple with ferrous metals, according to an advertisement cited in the FTC complaint. This and other advertisements and promotional materials allegedly made the false representation that the product substantially reduces motor vehicle body corrosion. The FTC also charged the respondents with falsely representing that a salt-water tank demonstration of the product’s efficacy accurately reflected how it protects motor vehicle bodies from corrosion when, in truth, the process used in the demonstration is much more effective under water than under conditions that a motor vehicle normally encounters. In addition, the FTC charged, the respondents falsely claimed that lab and other tests performed on the Rust Evader constituted scientific proof that the product substantially reduces auto body corrosion.
Finally, the FTC challenged as illegal a provision in the RustEvader warranty, which conditioned warranty coverage on the consumer paying the labor costs of having the vehicle inspected every 24 months by an authorized Rust Evader dealer. The FTC said it is a violation of federal warranty law to condition coverage for products costing more than $5 on consumers paying for a service identified by a brand, trade or corporate name.
The proposed consent agreement McCready has signed to settle these charges requires him to pay the $200,000 in two payments, the first upon Commission final approval of the settlement and the second within six months thereafter. The settlement also would bar McCready from using the names “Rust Evader” or “Rust Buster” for the device, and from claiming that it prevents or substantially reduces corrosion. Moreover, McCready would be required to have appropriate substantiation to back up any claim he makes about the performance, efficacy or attributes of any product for use in motor vehicles. In addition, the order prohibits McCready from misrepresenting the existence or results of any test or study, or that any demonstration or picture proves any material feature or quality of any product for use in motor vehicles.
To address the warranty problem, McCready would be prohibited from conditioning warranty coverage for any consumer product he sells on the purchase by consumers of a certain brand-named or trade-named product or service.
The Commission vote to announce the proposed consent agreement for public comment was 5-0. It 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 $10,000.
Copies of the proposed consent agreement and other documents associated with this case are available 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 news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
(Docket No. 9274)
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