Deceptive Advertising and Labeling of Previously Used Lubricating Oil

FEDERAL TRADE COMMISSION

16 CFR Part 406

Deceptive Advertising and Labeling of Previously Used Lubricating

Oil

AGENCY: Federal Trade Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Federal Trade Commission (the ``Commission'') proposes to

commence a rulemaking proceeding to repeal its Trade Regulation Rule on

Deceptive Advertising and Labeling of Previously Used Lubricating Oil

(``the Used Oil Rule'' or ``the Rule''), 16 CFR Part 406. The

Commission is soliciting written comments, data, and arguments

concerning this proposal. The Commission also is requesting comments

about the overall costs and benefits of the Rule and its overall

regulatory and economic impact as a part of its systematic review of

all current Commission regulations and guides.

DATES: Written comments must be submitted on or before May 3, 1996.

ADDRESSES: Written comments should be identified as ``16 CFR Part 406

Comment'' and sent to Secretary, Federal Trade Commission, room 159,

Sixth Street and Pennsylvania Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Neil Blickman, Attorney, Federal Trade Commission, Bureau of Consumer

Protection, Division of Enforcement, Washington, DC 20580, (202) 326-

3038.

SUPPLEMENTARY INFORMATION:

Part A--Background Information

This notice is being published pursuant to Section 18 of the

Federal Trade Commission (``FTC'') Act, 15 U.S.C. 57a et seq., the

provisions of Part 1, Subpart B of the Commission's Rules of Practice,

16 CFR 1.7 et seq., and 5 U.S.C. 551 et seq. This authority permits the

Commission to promulgate, modify, and repeal trade regulation rules

that define with specificity acts or practices that are unfair or

deceptive in or affecting commerce within the meaning of Section

5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1)

seq., the

provisions of Part 1, Subpart B of the Commission's Rules of Practice,

16 CFR 1.7 et seq., and 5 U.S.C. 551 et seq. This authority permits the

Commission to promulgate, modify, and repeal trade regulation rules

that define with specificity acts or practices that are unfair or

deceptive in or affecting commerce within the meaning of Section

5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

Based on the Commission's finding that the new or used status of a

lubricant was material to consumers, the Used Oil Rule was promulgated

by the Commission on August 14, 1964 to prevent deception of those who

prefer new and unused lubricating oil. The Rule requires that

advertising, promotional material, and labels for lubricant made from

used oil disclose such previous use. The Rule prohibits any

representation that used lubricating oil is new or unused. In addition,

it prohibits use of the term ``re-refined,'' or any similar term, to

describe previously used lubricating oil unless the physical and

chemical contaminants have been removed by a refining process.

On October 15, 1980, the Used Oil Recycling Act suspended the

provision of the Used Oil Rule requiring labels to disclose the origin

of lubricants made from used oil,\1\ until the Commission issued rules

under the Energy Policy and Conservation Act of 1975 (``EPCA''). The

legislative history indicates congressional concern that the Used Oil

Rule's labeling requirement had an adverse impact on consumer

acceptance of recycled oil, provided no useful information to consumers

concerning the performance of the oil, and inhibited recycling.

Moreover, the origin labeling requirements in the Used Oil Rule may be

inconsistent with the intent of section 383 of EPCA, which is that

``oil should be labeled on the basis of performance characteristics and

fitness for intended use, and not on the basis of the origin of the

oil.'' \2\

ovided no useful information to consumers

concerning the performance of the oil, and inhibited recycling.

Moreover, the origin labeling requirements in the Used Oil Rule may be

inconsistent with the intent of section 383 of EPCA, which is that

``oil should be labeled on the basis of performance characteristics and

fitness for intended use, and not on the basis of the origin of the

oil.'' \2\

\1\ 42 U.S.C. 6363 note.

\2\ See Legislative History Pub. L. 96-463, U.S. Code Cong. and

Adm. News, pp. 4354-4356 (1980).

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Accordingly, on April 8, 1981, the Commission published a notice

announcing the statutory suspension of the origin labeling requirements

of the Used Oil Rule. In the same notice, the Commission suspended

enforcement of those portions of the Used Oil Rule requiring that

advertising and promotional material disclose the origin of lubricants

made from used oil.\3\

\3\ 46 FR 20979.

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The purposes of the recycled oil section of EPCA are to encourage

the recycling of used oil, to promote the use of recycled oil, to

reduce consumption of new oil by promoting increased utilization of

recycled oil, and to reduce environmental hazards and wasteful

practices associated with the disposal of used oil.\4\ To achieve these

goals, section 383 of EPCA directs the National Institute of Standards

and Technology

rticular end use, such as for use as engine

lubricating oil, so long as a determination of ``substantial

equivalency'' with new oil has been made in accordance with the test

procedures prescribed by the Commission.\7\

\4\ 42 U.S.C. 6363(a).

\5\ 42 U.S.C. 6363(c).

\6\ 42 U.S.C. 6363(d)

\7\ 42 U.S.C. 6363(d) (1) (B).

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On July 27, 1995, NIST reported to the Commission test procedures

for determining the substantial equivalency of re-refined or otherwise

processed used engine oils with new engine oils. To implement EPCA's

statutory directive, therefore, the Commission issued, and thereafter

published on October 31, 1995, a rule (covering recycled engine oil)

entitled Test Procedures and Labeling Standards for Recycled Oil

(``Recycled Oil Rule''), 16 CFR Part 311.\8\ The Recycled Oil Rule

adopts the test procedures developed by NIST, and allows (although it

does not require) a manufacturer to represent on a recycled engine-oil

container label that the oil is substantially equivalent to new engine

oil, as long as the determination of equivalency is based on the NIST

test procedures.

\8\ 60 FR 55414 (Oct. 31, 1995).

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The EPCA further provides that once the Recycled Oil Rule becomes

final, no Commission order or rule, and no law, regulation, or order of

any State (or political subdivision thereof), may remain in effect if

it has labeling requirements with respect to the comparative

characteristics of recycled oil with new oil that are not identical to

the labels permitted by this rule.\9\ Also, no rule or order of the

Commission may require any container of recycled oil to also bear a

label containing any term, phrase, or description connoting less than

substantial equivalency of such recycled oil with new oil.\10\

s labeling requirements with respect to the comparative

characteristics of recycled oil with new oil that are not identical to

the labels permitted by this rule.\9\ Also, no rule or order of the

Commission may require any container of recycled oil to also bear a

label containing any term, phrase, or description connoting less than

substantial equivalency of such recycled oil with new oil.\10\

\9\ 42 U.S.C. 6363(e)(1).

\10\ 42 U.S.C. 6363(e)(2).

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Under EPCA, the Recycled Oil Rule preempts the Used Oil Rule's

labeling and advertising requirements for engine oils. For non-engine

oils, the Used Oil Rule's labeling disclosure provisions continue to be

subject to the Congressional stay, and the advertising disclosure

provisions continue to be subject to the Commission's stay. The only

part of the Used Oil Rule not affected by the stays is that section

which prohibits the deceptive use of the term ``re-refined.'' When the

Commission published the Recycled Oil Rule in October 1995, it also

stated that as part of its regulatory review process, it would consider

the continuing need for the Used Oil Rule.\11\

\11\ 60 FR 55414, 55417.

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Part B--Objectives

Based on the foregoing, the Commission has tentatively determined

that to eliminate unnecessary duplication, and any inconsistency with

EPCA's goals, a separate Used Oil Rule is no longer necessary.\12\ The

objective of this notice is to solicit comment on whether the

Commission should initiate a rulemaking proceeding to repeal the Used

Oil Rule.

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Part B--Objectives

Based on the foregoing, the Commission has tentatively determined

that to eliminate unnecessary duplication, and any inconsistency with

EPCA's goals, a separate Used Oil Rule is no longer necessary.\12\ The

objective of this notice is to solicit comment on whether the

Commission should initiate a rulemaking proceeding to repeal the Used

Oil Rule.

\12\ Repealing the used Oil Rule would eliminate the

Commission's ability to obtain civil penalties for any future

misrepresentations of the re-refined quality of oil. However, the

Commission has tentatively determined that repealing the Rule would

not seriously jeopardize the Commission's ability to act

effectively. The Recycled Oil Rule defines re-refined oil to mean

used oil from which physical and chemical contaminants acquired

through use have been removed. Any significant problems that might

arise could be addressed on a case-by-case basis, administratively

under Section 5 of the FTC Act, 15 U.S.C. 45, or through Section

13(b) actions, 15 U.S.C. 53(b), filed in federal district court.

Prosecuting serious misrepresentations in district court allows the

Commission to obtain injunctive relief as well as equitable

remedies, such as redress or disgorgement.

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Part C--Alternative Actions

The Commission is not considering any alternative other than the

possibility of repealing the Used Oil Rule.

Part D--Request for Comments

misrepresentations in district court allows the

Commission to obtain injunctive relief as well as equitable

remedies, such as redress or disgorgement.

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Part C--Alternative Actions

The Commission is not considering any alternative other than the

possibility of repealing the Used Oil Rule.

Part D--Request for Comments

Members of the public are invited to comment on any issues or

concerns they believe are relevant or appropriate to the Commission's

review of the Used Oil Rule. The Commission requests that factual data

upon which the comments are based be submitted with the comments. In

this section, the Commission identifies the issues on which it solicits

public comments. The identification of issues is designed to assist the

public and should not be construed as a limitation on the issues on

which public comment may be submitted.

Questions

(1) Is there a continuing need for the Rule?

(a) What benefits has the Rule provided to purchasers of the

products affected by the Rule?

(b) Has the Rule imposed costs on purchasers?

(2) What changes, if any, should be made to the Rule to increase

the benefits of the Rule to purchasers?

(a) How would these changes affect the costs the Rule imposes on

firms subject to its requirements?

(3) What significant burdens or costs, including costs of

compliance, has the Rule imposed on firms subject to its requirements?

(a) Has the Rule provided benefits to such firms?

(4) What changes, if any, should be made to the Rule to reduce the

burdens or costs imposed on firms subject to its requirements?

these changes affect the costs the Rule imposes on

firms subject to its requirements?

(3) What significant burdens or costs, including costs of

compliance, has the Rule imposed on firms subject to its requirements?

(a) Has the Rule provided benefits to such firms?

(4) What changes, if any, should be made to the Rule to reduce the

burdens or costs imposed on firms subject to its requirements?

(a) How would these changes affect the benefits provided by the

Rule?

(5) Does the Rule overlap or conflict with other federal, state, or

local laws or regulations?

(6) Since the Rule was issued, what effects, if any, have changes

in relevant technology or economic conditions had on the Rule?

(7) Is misrepresentation of the re-refined quality of used

lubricating oil by manufacturers and distributors of such oil a

significant problem in the marketplace?

(8) Should the Rule, or any portion of it, be kept in effect, or

should it be repealed?

(9) How would repealing the Rule affect the benefits experienced by

consumers?

(10) How would repealing the Rule affect the benefits and burdens

experienced by firms subject to the Rule's requirements?

(11) Is the Recycled Oil Rule likely to provide all or most of the

benefits now provided by the Used Oil Rule?

Authority: Section 18(d)(2)(B) of the Federal Trade Commission

Act, 15 U.S.C. 57a(d)(2)(B).

List of Subjects in 16 CFR Part 406

Advertising, Labeling, Trade practices, Used lubricating oil.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 96-8180 Filed 4-2-96; 8:45 am]

BILLING CODE 6750-01-M