FOR RELEASE: JULY 24, 1992
FTC CHARGES TWO WITH OVERSTATING OCTANE LEVEL OF GASOLINE: Defendants agree to settle charges
In two separate cases today, the Federal Trade Commission has charged a Missouri wholesaler and a Texas gasoline retailer with overstating the octane levels of the gasoline they sold, and with violating the FTC's Octane Rule. The complaints were filed in federal district court by the Department of Justice at the request of the FTC. The FTC has negotiated settlements, filed simultaneously with the complaints, with Midwest Petroleum Company, a Missouri-based gasoline wholesaler, and its subsidi- ary, Bolch Oil Company; and with Cameron D. Henderson of Corsi- cana, Texas, former president of the now-defunct Star Service & Petroleum Company. Both cases were developed in conjunction with the office of Missouri Attorney General William Webster, and similar consent decrees in each case also are being filed in State Court in Missouri today.
Under these settlements, Midwest has agreed to pay a total penalty of $100,000 -- $50,000 to the U.S. Treasury and $50,000 to the state of Missouri. Henderson would pay $10,000 in civil penalties -- half each to Missouri and the U.S. Treasury. In addition, both Henderson and Midwest have agreed to be bound by prohibitions on future violations of the FTC's Octane Rule.
- more - Midwest/Henderson--07/24/92)
Octane ratings are a measure of a gasoline's ability to resist automotive engine "knock" or "ping" which results from an uneven burning of the compressed fuel-air mixture, notes an FTC Fact Sheet on octane ratings. Using a gasoline with too low an octane rating can result in loss of power and sometimes engine damage. The disclosure requirements of the Commission's Octane Rule help consumers to select gasoline with an octane rating that is high enough to prevent inefficient and harmful engine knock, and avoid buying gasoline with an octane rating that is too high for their needs. Avoiding this practice, known as "octane over- buying," can save consumers money and lead to more efficient use of energy resources. (For the proper octane-level gasoline, consumers should consult their automobile owner's manual.)
The FTC's 1979 Octane Rule requires retailers to disclose the octane rating of their gasoline by posting the now-familiar bright yellow sticker on each pump. Under the rule, gasoline refiners and importers determine the octane rating. Then each entity in the distribution chain must certify the octane rating to the next recipient, based either on its own determination or the certification it received from its supplier. This process ensures that the retail station, and the purchasing consumer, can choose gasoline with the octane level they prefer. The rule applies to all gasoline, including gasoline blended with fuel oxygenates such as alcohol.
Midwest Petroleum Company
According to the FTC complaint, Midwest distributed its gasoline products to more than 100 retail gasoline stations in Missouri and Illinois -- including about 50 retail gasoline stations owned and operated by Bolch in the St. Louis area.
In its complaint, the FTC alleged that Midwest did not properly certify to retailers the octane level of the gas it delivered to the gas stations. The FTC further alleged that the gas Midwest pumped into the underground storage tanks at retail gas stations had lower octane levels than was indicated by the stickers posted on the pumps. The FTC charged that, by pumping the gas into those tanks and providing invoices to retailers stating that the gasoline was unleaded premium, Midwest falsely represented that the octane level of the gas it pumped into the tanks was the same as that indicated on the corresponding stickers on the gas pumps.
In addition, the FTC charged that in numerous instances Bolch failed to post on gasoline dispensers an octane rating consistent with either the rating certified to Bolch, or with its own determination, as required by the rule. In many instances, Bolch placed stickers on its gas pumps that overstated the octane level of the gas, according to the FTC's complaint.
The consent decree, approved by the court when it was filed this morning, permanently prohibits Midwest and Bolch from viola- ting the Octane Rule in the future. Specifically, the defendants are prohibited from misrepresenting the octane level of gasoline, including gasoline blended with alcohol, oxygenates or blending agents, and from claiming that the gasoline they sell has a particular octane level unless they have competent and reliable evidence to substantiate the claim.
The consent decree with the FTC also requires the defendants to pay $50,000 in four installments of $12,500, with the first payment due within 10 days after the court accepts the proposed settlement. The consent decree with the State of Missouri filed in State Court today in Missouri would require payment of an additional $50,000 to the State of Missouri, with payments on the same schedule.
Cameron D. Henderson/Star Service & Petroleum Company
Henderson is president of Cameron Henderson Oil Co., which owned all of Star's stock until Star was dissolved in 1991. According to the FTC, Star operated 94 retail gasoline stations and convenience stores under the names "STARMART," "Star Service" and "Pep Gas N Wash," in Missouri and several midwestern, southern, and southeastern states. In its complaint, filed simultaneously with the proposed consent decree to settle the charges, the FTC charged that Henderson failed to post on the face of each gasoline dispenser the correct octane rating of the gasoline, and in many instances, overstated the octane ratings displayed on the pumps. The Commission also charged that Henderson failed to keep on file for one year records of delivery tickets or letters of certification upon which the posted octane ratings were based.
The proposed consent decree would prohibit Henderson from violating the Octane Rule in the future and contains standard recordkeeping and notification provisions. The proposed consent decree also would require the defendant to pay a $5,000 civil penalty. The civil penalty must be paid within 10 days after the court accepts the settlement. The consent decree with the State of Missouri filed in State Court today in Missouri would require payment of an additional $5,000 to the State of Missouri in eight installments of $625, with the first payment due within one month from the date of entry of the consent decree.
The complaint and consent decree against Midwest were filed in the U.S. District Court for the Eastern District of Missouri in St. Louis, by the Department of Justice at the request of the FTC, on July 24. The FTC's Chicago Regional Office handled this investigation. (Midwest/Henderson--07/24/92)
The complaint and proposed consent decree against Henderson were filed in the U.S. District Court for the Northern District of Texas, in Dallas, by the Department of Justice at the request of the FTC, on July 24.
NOTE: The proposed consent decrees are for settlement purposes only and do not constitute admission of law violations. The consent decrees are subject to court approval.
Copies of the complaints and proposed consent decrees, as well as the FTC's free fact sheet on octane labeling, are avail- able from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326- 2222; TTY 1-866-653-4261.
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MEDIA CONTACT: Brenda A. Mack, Office of Public Affairs 202-326-2182
STAFF CONTACT: For Henderson: Elaine D. Kolish, Bureau of Consumer Protection, 202-326-3042 or Neil J. Blickman, Bureau of Consumer Protection, 202-326-3038
Henderson -- Civil Action No.: 392-CV-1487X FTC File No. 892 3198
For Midwest: C. Steven Baker or Nicholas J. Franczyk Chicago Regional Office 55 East Monroe Street Suite 1437 Chicago, Illinois 60603 312-353-8156
Midwest -- Civil Action No.: 4:92 CV 001438 GFG FTC File No. 892 3253