FTC Finalizes Exxon Settlement

The Federal Trade Commission has approved as final a consent agreement with Exxon Corporation that has triggered the launch of a massive consumer education and advertising campaign. The campaign is informing consumers that regular gasoline, not high octane, is the right fuel for most cars. Exxon is running fifteen-second television ads carrying that message in 18 major metropolitan markets, including New York City, Orlando, Washington, D.C. and Dallas. Exxon also will distribute consumer information brochures at Exxon service stations nationwide.

"Many consumers buy high octane gas believing it is a 'treat' or a 'treatment' for their cars," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "But it's the consumers getting the treatment, not the cars. Most cars don't need and won't benefit from hi-test gas, so paying extra for premium gas is wasting money," she said. "Now Exxon will join the FTC and the American Automobile Association to get the word out to consumers: Unless your owner's manual calls for high octane fuel or your engine is knocking, there's no reason to pay for premium gasoline," she said. "This is a precedent-setting law enforcement remedy that will save American consumers money."

In September 1996, the FTC issued a complaint charging Exxon with making unsubstantiated advertising claims about the ability of Exxon gasoline, including Exxon 93 Supreme, to clean engines and reduce auto maintenance costs. As part of a consent agreement to settle the charges, announced for a public comment period in June, Exxon agreed to produce a 15 second television ad featuring an Exxon official who will say, "Most cars 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 weeks each; the first wave is running this month and the second will run in November.

The ads will be broadcast in those cities where Exxon aired the original ads: 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 adult viewing audience in each city, 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 cars that are designed to run on higher octane or the small percentage of cars that experience heavy or continuous engine knock at the recommended octane level.

In addition to the consumer education remedy, the order prohibits Exxon from making claims about the engine cleaning ability of any gasoline or the effect of any gasoline on automobile maintenance or maintenance costs without adequate scientific evidence to back them up.

The FTC and the American Automobile Association ("AAA") have joined together to issue "Facts for Consumers: The Low Down on High Octane Gasoline." It and another FTC consumer publication -- "Saving Dollars at the Pump" -- will be sent to the nation's newspaper and magazine writers that cover automotive issues. These materials will also be sent to almost 100 local and syndicated radio talk shows that discuss automobiles. Through these additional contacts, the FTC hopes to reach the public with the simple message: For most people, regular gasoline is all you need. In fact, AAA has stated: "Premium gasoline won't enhance car performance."

The Commission vote to accept the proposed consent agreement was 3-0, with Commissioner Mary L.Azcuenaga 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." She added, "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." She concluded, "On balance, I believe that the notice order is stronger."

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.

(FTC File No. D09281)