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.
Midwest/Henderson--07/24/92)
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.
# # #
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
(Hen-Mid)