Companies Allegedly Made Unsubstantiated Performance Claims for Building Coatings
Dealers of Multi-Gard "liquid siding" have agreed to settle Federal Trade Commission charges that ads claiming their product provided consumers with an insulation value of R-20 were unsubstantiated and violated federal law.
According to the FTC, Kryton Coatings International, Inc. (Kryton) and its distributor Procraft, Inc. (Procraft), both headquartered in Knoxville, Tennessee, claimed that their "Multi-Gard" liquid coating not only worked as well as fiberglass insulation, but could save consumers up to 40 percent on their energy bills. The FTC alleged that Kryton and Procraft did not substantiate adequately the performance claims for the product, which is also advertised under the names "Liquid Siding," "Liquid Vinyl," and "Multi-Gard R-20." Under the terms of the consent order, which requires final Commission approval, the companies would be barred from making similar unsubstantiated claims in the future - including comparisons of their coating products to any type of insulation or other material.
"Companies have a responsibility to provide accurate information about their products and must be able to back up their claims with solid verifiable evidence," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "Whether it's an ad for instant oatmeal or 'insulating' paint, consumers should not be left guessing as to the accuracy of the claims presented."
The Commission's Complaint
In its complaint, the FTC alleged that the companies' advertising represented that the residential coating product: 1) provides insulation equivalent to seven inches of fiberglass batting; 2) provides an insulation value of R-20; 3) reduces energy loss, energy costs, or utility bills up to 40 percent; and 4) performs the same insulation functions as the ultra-thin ceramic technology on the space shuttle. The FTC alleged that the companies did not have a reasonable basis for making the claims.
The Proposed Consent Order
The proposed order announced today for public comment would prohibit Kryton and Procraft from making any representations about the benefits, performance, or effectiveness of any liquid coating product unless, at the time the representations are made, the companies have reliable scientific evidence to back up their claims. This provision would cover claims that the product reduces energy loss, energy costs, energy consumption, or utility bills. It would also cover R-value claims and claims comparing the product's insulation qualities to that of other materials.
In addition, Kryton and Procraft would be required to send a notice letter regarding this matter, as well as a copy of the order, to anyone who purchased Multi-Gard for resale (e.g., distributors and wholesalers). Finally, to ensure that the terms of the order are enforced and that the companies comply with its terms, it contains order-distribution and record-keeping requirements, and a provision requiring Commission notification if the defendants' corporate structures change in a way that may affect their compliance obligations.
FTC Energy and Environmental Information For Consumers
Consumers should be careful when considering energy-related claims for home products. In the complaint, the FTC alleged that, while the companies' coating product (in combination with caulk) may seal air leaks and cracks in buildings and, as a result, may reduce energy costs in some cases, they did not have a reasonable basis for their R-value and significant energy-savings (e.g., "up to 40%") claims. Good maintenance and other measures can help consumers get the most out of their energy dollars. For more information on how consumers can weather the high costs of heating and cooling their homes, the FTC's Energy and Environment Web site connects to FTC resources on insulation and home energy issues, energy labeling for consumer products, and other related topics. The FTC Energy and Environment Web site can be accessed at http://www.ftc.gov/bcp/conline/edcams/eande/index.html.
The Commission vote to accept the Part II consent order was 5-0. A summary of the consent order will be published in the Federal Register shortly. The order will be subject to public comment until May 1, 2002, after which the Commission will vote on whether to make it final. Comments can be sent to: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Ave., 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 $11,000.
Copies of the Commission's complaint and Part II consent order and an analysis to aid public comment 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. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
(FTC File No. 012-3060)
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