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UNITED STATES OF AMERICA
BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of
DURA LUBE CORPORATION,
AMERICAN DIRECT MARKETING, INC.,
HOWE LABORATORIES, INC.,
CRESCENT MANUFACTURING, INC.,
NATIONAL COMMUNICATIONS CORPORATION,
THE MEDIA GROUP, INC., corporations, and
HERMAN S. HOWARD and
SCOTT HOWARD, individually and as officers of the corporations.
Docket No. 9292
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission has conducted an investigation of certain acts and
practices of Dura Lube Corporation, American Direct Marketing, Inc., Howe Laboratories,
Inc., Crescent Manufacturing, Inc., The Media Group, Inc., and National Communications
Corporation, corporations; Herman S. Howard, individually and as an officer and director
of the corporations; and Scott Howard, individually and as an officer and director of the
corporations ("respondents"). Respondents, having been represented by counsel,
are willing to enter into an agreement containing a consent order resolving the
allegations contained in the attached complaint. Therefore,
IT IS HEREBY AGREED by and between Dura Lube Corporation, American Direct Marketing,
Inc., Howe Laboratories, Inc., Crescent Manufacturing, Inc., The Media Group, Inc., and
National Communications Corporation, by their duly authorized officers; Herman S. Howard,
individually and as an officer of the corporations; and Scott Howard, individually and as
an officer of the corporations, and counsel for the Federal Trade Commission that:
- 1.a. Respondent Dura Lube Corporation ("DLC") is a New York corporation with
its principal office or place of business at 102-3 Hamilton Avenue, Stamford, Connecticut
06902.
-
- 1.b. Respondent American Direct Marketing, Inc. ("ADM") is a Delaware
corporation with its office and principal place of business located at 1000 Apex Street,
Nashville, Tennessee 37210.
-
- 1.c. Respondent Howe Laboratories, Inc. ("Howe") is a Delaware Corporation
with its office and principal place of business located at 102-3 Hamilton Avenue,
Stamford, Connecticut 06902.
-
- 1.d. Respondent Crescent Manufacturing, Inc. ("Crescent") is a New York
corporation with its office and principal place of business located at 8800 South Main
Street, Eden, New York 14057.
-
- 1.e. Respondent The Media Group, Inc. ("Media Group") is a New York
corporation with its office and principal place of business located at 102-3 Hamilton
Avenue, Stamford, Connecticut 06902.
-
- 1.f. National Communications Corporation ("National") is a Delaware
corporation with its office and principal place of business located at 102-3 Hamilton
Avenue, Stamford, Connecticut 06902.
-
- 1.g. Respondent Herman S. Howard is or was at relevant times herein an officer of the
corporate respondents. Individually or in concert with others, he has formulated,
directed, or controlled the acts and practices of the corporate respondents, including the
acts or practices alleged in this complaint. His principal office or place of business is
the same as that of DLC, Howe, Media Group, and National.
-
- 1.h. Respondent Scott Howard is or was at relevant times herein an officer of the
corporate respondents. Individually or in concert with others, he has formulated,
directed, or controlled the acts and practices of the corporate respondents, including the
acts or practices alleged in this complaint. His principal office or place of business is
the same as that of DLC, Howe, Media Group, and National.
-
- 2. Respondents have been served with a copy of the complaint issued by the Federal Trade
Commission charging them with violations of Section 5(a) of the Federal Trade Commission
Act, and have filed answers to the complaint.
-
- 3. Respondents admit all the jurisdictional facts set forth in the complaint.
-
- 4. Respondents waive:
-
- a. Any further procedural steps;
-
- b. The requirement that the Commission's decision contain a statement of findings of
fact and conclusions of law;
-
- c. All rights to seek judicial review or otherwise to challenge or contest the validity
of the order entered pursuant to this agreement; and
-
- d. Any claim under the Equal Access to Justice Act.
-
- 5. This agreement shall not become part of the public record of the proceeding unless
and until it is accepted by the Commission. If this agreement is accepted by the
Commission, it, together with the complaint, will be placed on the public record for a
period of thirty (30) days and information about it publicly released. The Commission
thereafter may either withdraw its acceptance of this agreement and so notify respondents,
in which event it will take such action as it may consider appropriate, or issue and serve
its decision in disposition of the proceeding.
-
- 6. This agreement is for settlement purposes only and does not constitute an admission
by respondents that the law has been violated as alleged in the complaint, or that the
facts as alleged in the complaint, other than the jurisdictional facts, are true.
-
- 7. This agreement contemplates that, if it is accepted by the Commission, and if such
acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of
Section 3.25(f) of the Commission's Rules, the Commission may, without further notice to
respondents, (1) issue its decision containing the following order in disposition of the
proceeding, and (2) make information about it public. When so entered, the order shall
have the same force and effect and may be altered, modified, or set aside in the same
manner and within the same time provided by statute for other orders. The order shall
become final upon service. Delivery of the decision and order to respondents' addresses as
stated in this agreement by any means specified in Section 4.4(a) of the Commission's
Rules shall constitute service. Respondents waive any right they may have to any other
manner of service. The complaint may be used in construing the terms of the order. No
agreement, understanding, representation, or interpretation not contained in the order or
in the agreement may be used to vary or contradict the terms of the order. The Commission
will not file an action pursuant to Section 19 of the Federal Trade Commission Act based
on this consent agreement.
-
- 8. Respondents have read the complaint and consent order. They understand that they may
be liable for civil penalties in the amount provided by law and other appropriate relief
for each violation of the order after it becomes final.
ORDER
Definitions
For purposes of this Order, the following definitions shall apply:
- "Dura Lube" shall mean the aftermarket motor oil additive known as Super Dura
Lube Engine Treatment, Advanced Dura Lube Engine treatment, or any product of
substantially similar composition marketed as a motor oil product.
-
- "Motor oil product" shall mean a product for use in conjunction with or in
place of fully formulated motor oil.
-
- "Competent and reliable scientific evidence" shall mean tests, analyses,
research, studies, or other evidence based on the expertise of professionals in the
relevant area, that has been conducted and evaluated in an objective manner by persons
qualified to do so, using procedures generally accepted in the profession to yield
accurate and reliable results.
-
- Unless otherwise specified, "respondents" shall mean Dura Lube Corporation,
American Direct Marketing, Inc., Howe Laboratories, Inc., Crescent Manufacturing, Inc.,
The Media Group, Inc., and National Communications Corporation, corporations, their
successors and assigns, and their officers, agents, attorneys, representatives, and
employees; and Herman S. Howard and Scott Howard, individually and as officers of the
corporations, whether acting directly or through any corporation, subsidiary, division,
trust or other device, or any of them.
-
- "Commerce" shall be as defined in Section 4 of the Federal Trade Commission
Act, 15 U.S.C. § 44.
I.
IT IS ORDERED that respondents, in connection with the manufacturing, advertising,
labeling, packaging, offering for sale, sale, or distribution of Dura Lube, in or
affecting commerce, shall not represent, in any manner, expressly or by implication, that:
- A. Dura Lube contains no chlorinated compound unless such is the case;
-
- B. Dura Lube has been tested by the U.S. Environmental Protection Agency unless such is
the case; or
-
- C. Dura Lube meets the specifications, requirements or standards of any governmental or
standard setting organization, unless, at the time of making such representation,
respondents possess and rely upon competent and reliable evidence, which when appropriate
must be competent and reliable scientific evidence, that substantiates the representation.
II.
IT IS FURTHER ORDERED that respondents, in connection with the manufacturing,
advertising, labeling, packaging, offering for sale, sale, or distribution of any product
for use in any motor vehicle, in or affecting commerce, do forthwith cease and desist
from:
- A. Making any representation, in any manner, expressly or by implication:
-
- 1. That, compared to motor oil alone or motor oil treated with any other product, using
such product:
-
- a. Reduces engine wear;
-
- b. Reduces engine wear by any percentage, dollar or other figure;
-
- c. Prolongs engine life;
-
- d. Reduces emissions;
-
- e. Reduces the risk of serious engine damage when oil pressure is lost;
-
- f. Improves gas mileage;
-
- g. Improves gas mileage by any percentage, miles per gallon, dollar, or other figure;
-
- 2. That one or any other number of treatments of such product reduces wear for 50,000 or
any other number of miles; or,
3. Regarding the performance, benefits, efficacy, attributes or use of such product,
-
- unless, at the time of making such representation, respondents possess and rely upon
competent and reliable evidence, which when appropriate must be competent and reliable
scientific evidence, that substantiates the representation.
-
- B. Misrepresenting, in any manner, expressly or by implication, the existence, contents,
validity, results, conclusions, or interpretations of any test or study.
III.
IT IS FURTHER ORDERED that respondents, in connection with the manufacturing,
advertising, labeling, packaging, offering for sale, sale, or distribution of any product,
in or affecting commerce, shall not misrepresent, in any manner, expressly or by
implication, that any demonstration, picture, experiment, illustration or test proves,
demonstrates or confirms any material quality, feature or merit of such product, or the
superiority or comparability of the product in a material respect relative to any other
product.
IV.
IT IS FURTHER ORDERED that, respondents, in connection with the manufacturing,
advertising, labeling, packaging, offering for sale, sale, or distribution of any product
for use in any motor vehicle, in or affecting commerce, shall cease and desist from
representing, directly or by implication, that such product has been endorsed by a person,
group or organization that is an expert with respect to the endorsement message, unless:
- A. The endorser's qualifications give the endorser the expertise that the endorser is
represented as possessing with respect to the endorsement; and
-
- B. The endorsement is supported by an objective and valid evaluation or test using
procedures generally accepted by experts in that science or profession to yield accurate
and reliable results.
V.
IT IS FURTHER ORDERED that, for five (5) years after the last date of dissemination of
any representation covered by this order, respondents shall maintain and upon request make
available to the Federal Trade Commission for inspection and copying:
- A. All labeling, packaging, advertisements and promotional materials setting forth any
representation covered by this order;
-
- B. All materials that were relied upon to substantiate any representation covered by
this order; and
-
- C. All tests, reports, studies, surveys, demonstrations or other evidence in their
possession or control, or of which they have knowledge, that contradict, qualify, or call
into question such representation, or the basis relied upon for the representation,
including complaints and other communications with consumers, third-party dispute
mediators, or governmental or consumer protection organizations.
VI.
IT IS FURTHER ORDERED that:
- A. The corporate respondents and their successors and assigns shall notify the Federal
Trade Commission at least thirty (30) days prior to any change in the corporate
respondents that may affect compliance obligations arising under this order, including but
not limited to dissolution, assignment, sale, merger or other action that would result in
the emergence of a successor corporation, the creation or dissolution of a subsidiary,
parent, or affiliate that engages in any acts or practices subject to this order, the
proposed filing of a bankruptcy petition, or a change in the corporate name or address. Provided,
however, that with respect to any proposed change in the corporation about which
respondents learn less than thirty (30) days prior to the date such action is to take
place, respondents shall notify the Commission as soon as practicable after obtaining such
knowledge.
-
- B. Each of the individual respondents, for a period of ten (10) years after the date of
issuance of this order, shall notify the Federal Trade Commission of the discontinuance of
his current business or employment, or his affiliation with any new business or
employment. The notice shall include the respondent's new business address and telephone
number and a description of the nature of the business or employment and his duties and
responsibilities.
All notices required by this Part shall be sent by certified mail to the Associate
Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission,
Washington, D.C. 20580.
VII.
IT IS FURTHER ORDERED that the corporate respondents and their successors and assigns
and the individual respondents shall deliver a copy of this order to all current and
future principals, officers, directors, and managers, and to all current and future
employees, agents, and representatives having responsibilities with respect to the subject
matter of this order, and shall secure from each such person a signed and dated statement
acknowledging receipt of this order. Respondents shall deliver this order to current
personnel within thirty (30) days after the service of this order, and to future personnel
within thirty (30) days after the person assumes such position and responsibilities.
VIII.
IT IS FURTHER ORDERED that respondents shall:
- A. Within fifteen (15) days after the date of service of this order, send by first class
certified mail, return receipt requested, to each purchaser for resale of Dura Lube with
which respondents have done business since January 1, 1994, notice of this order in the
form attached as Attachment A. The mailing shall not include any other documents;
-
- B. By May 15, 2000, send a representative to all facilities operated by each purchaser
for resale to which respondents sent Attachment A to replace the Dura Lube labels and
packaging with labels and packaging that comply with this order.
-
- C. In the event that respondents receive any information that subsequent to its receipt
of notice of this order any purchaser for resale is using or disseminating any
advertisement or promotional material specified in Attachment A, respondents shall: (1)
immediately send such purchaser for resale a letter requesting that it stop using or
disseminating any item specified in Attachment A and notifying it that the respondents
will report its use or dissemination of any item specified in Attachment A to the
Commission; and (2) within thirty (30) days notify the Associate Director for Enforcement,
Bureau of Consumer Protection, Federal Trade Commission, in writing, of such purchaser for
resale's identity and its use or dissemination of any item specified in Attachment A.
IX.
IT IS FURTHER ORDERED that respondents shall, for five (5) years after the last
correspondence to which they pertain, maintain and upon request make available to the
Federal Trade Commission for inspection and copying:
- A. Copies of all signed statements obtained from persons or entities pursuant to part
VII of this order;
-
- B. Copies of all notification letters sent to purchasers for resale pursuant to
subparagraph A of part VIII of this order; and
-
- C. Copies of all communications with purchasers for resale pursuant to subparagraph C of
part VIII of this order.
X.
IT IS FURTHER ORDERED that:
- A. Not later than five (5) days after the date this Order becomes final, respondents
shall deposit by electronic funds transfer into an escrow account to be established by the
Federal Trade Commission for the purpose of receiving the payment due under the provisions
of this order, the sum of two million dollars ($2,000,000). In the event of any default on
any obligation to make payment under this Part, interest, computed pursuant to 28 U.S.C.
§ 1961(a) shall accrue from the date of default to the date of payment. In the event of
default, respondents shall be jointly and severally liable for the two million dollar
($2,000,000) payment required by this paragraph and any interest on such payment.
-
- B. The funds paid by respondents pursuant to subpart A above, together with accrued
interest, less any amount necessary to pay the costs of administering the redress program
herein, shall be used by the Federal Trade Commission or a Redress Administrator
designated by the Federal Trade Commission to provide refunds to Dura Lube purchasers.
Payment to such persons represents redress and is intended to be compensatory in nature,
and no portion of such payment shall be deemed a payment of any fine, penalty, or punitive
assessment. A consumer shall have the right to participate in the redress distribution
only upon signing a waiver of rights and release of all claims against respondents. The
Federal Trade Commission has sole discretion to determine how any redress funds are
administered and distributed. Respondents shall be notified as to how the funds are
disbursed, but shall have no right to contest the manner of distribution chosen by the
Federal Trade Commission. The Federal Trade Commission, or its designated Redress
Administrator, shall in its sole discretion select the escrow agent.
-
- C. Respondents relinquish all dominion, control and title to the funds paid into the
escrow account, and all legal and equitable title to the funds shall vest in the Treasurer
of the United States unless and until such funds are disbursed to the designated
purchasers of Dura Lube. Respondents shall make no claim to or demand for the return of
the funds, directly or indirectly, through counsel or otherwise; and in the event of
bankruptcy of any respondent, respondents acknowledge that the funds are not part of the
debtor's estate, nor does the estate have any claim or interest therein.
-
- D. Not later than the date this Order becomes final, respondents shall, to the extent
available, provide to the Federal Trade Commission, in computer readable form (standard
MS-DOS diskettes or IBM-mainframe compatible tape) and in computer print-out form, a list
of the name and address of all consumers in the United States who purchased Dura Lube from
January 1, 1994, to December 31, 1999.
-
- E. The Redress Administrator shall destroy all records relating to this matter six (6)
years after the transfer of any remaining redress funds to the U.S. Treasury or the
closing of the account from which such funds were disbursed, whichever is earlier,
provided that no records shall be destroyed unless and until a representative of the
Federal Trade Commission has received and approved the Administrator's final accounting
report. Records shall be destroyed in accordance with disposal methods and procedures to
be specified by the Federal Trade Commission. The Federal Trade Commission may, in its
sole discretion, require that such records, in whole or in part, be transferred, in lieu
of destruction, to the Federal Trade Commission.
XI.
IT IS FURTHER ORDERED that respondents shall, within sixty (60) days after service of
this order, file with the Federal Trade Commission a report, in writing, setting forth in
detail the manner and form in which they have complied or intend to comply with this
order.
XII.
IT IS FURTHER ORDERED that this order will terminate twenty (20) years from the date of
its issuance, or twenty years from the most recent date that the United States or the
Federal Trade Commission files a complaint (with or without an accompanying consent
decree) in federal court alleging any violation of the order, whichever later occurs; provided,
however, that the filing of such complaint will not affect the duration of:
- A. Any paragraph in this order that terminates in less than twenty years;
-
- B. This order's application to any respondent that is not named as a defendant in such
complaint; and
-
- C. This order if such complaint is filed after the order has terminated pursuant to this
paragraph.
Provided further, that if such complaint is dismissed or a federal court rules
that the respondent did not violate any provision of the order, and the dismissal or
ruling is either not appealed or upheld on appeal, then the order will terminate according
to this paragraph as though the complaint had never been filed, except that the order will
not terminated between the date such complaint is filed and the later of the deadline for
appealing such dismissal or ruling and the date such dismissal or ruling is upheld on
appeal.
This Agreement Containing Consent Order is signed the _____ day of January 2000.
DURA LUBE CORPORATION
By:
______________________________________
Name:
Title:
AMERICAN DIRECT MARKETING, INC.
By:
______________________________________
Name:
Title:
HOWE LABORATORIES, INC.
By:
______________________________________
Name:
Title:
CRESCENT MANUFACTURING, INC.
By:
_____________________________________
Name:
Title:
THE MEDIA GROUP, INC.
By:
______________________________________
Name:
Title:
NATIONAL COMMUNICATIONS CORPORATION
By:
______________________________________
Name:
Title:
__________________________________________
HERMAN S. HOWARD, individually
nd as an officer of said corporations
__________________________________________
SCOTT HOWARD, individually
and as an officer of said corporations
__________________________________________
LEWIS ROSE, Attorney for Respondents
__________________________________________
GINA SCHAAR HOWARD,
Counsel for the Federal Trade Commission
APPROVED:
___________________________________
HEATHER HIPPSLEY, Assistant Director
Enforcement Division, Bureau of Consumer Protection
___________________________________
ELAINE D. KOLISH, Associate Director
Enforcement Division, Bureau of Consumer Protection
___________________________________
JOAN Z. BERNSTEIN
Director, Bureau of Consumer Protection
ATTACHMENT A
BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[To be printed on respondents' letterhead]
[date]
Dear [purchaser for resale]:
As you may be aware, on April 29, 1999, the Federal
Trade Commission ("FTC") issued a complaint against Dura Lube Corporation,
American Direct Marketing, Inc., Howe Laboratories, Inc., Crescent Manufacturing, Inc.,
National Communications Corporation, The Media Group, Inc., Herman S. Howard, and Scott
Howard.
In its complaint, the FTC alleged that
advertisements for Dura Lube Engine Treatment have made unsubstantiated claims that,
compared to motor oil alone or motor oil treated with any other product, using Dura Lube
Engine Treatment: (1) Reduces engine wear; (2) Reduces engine wear by more than 50%; (3)
Prolongs engine life; (4) Reduces emissions; (5) Reduces the risk of serious engine damage
when oil pressure is lost; (6) Improves gas mileage; and (7) Improves gas mileage by up to
35%. In addition, the FTC alleged that Dura Lube Engine Treatment advertisements made an
unsubstantiated claim that one treatment of Dura Lube Engine Treatment continues to
protect the engine for up to 50,000 miles.
Further, the FTC alleged that Dura Lube Engine Treatment
advertisements falsely claimed that tests prove that, compared to motor oil alone, using
Dura Lube Engine Treatment: (1) Improves gas mileage; (2) Improves gas mileage by up to
35%; (3) Reduces emissions;
(4) Prolongs engine life; (5) Reduces engine wear;
and (6) Reduces the risk of serious engine damage when oil pressure is lost. The FTC also
alleged that Dura Lube Engine Treatment advertisements falsely claimed that tests prove
that one treatment of Dura Lube Engine Treatment continues to protect the engine for up to
50,000 miles. Finally, the FTC alleged that Dura Lube Engine Treatment advertisements set
forth two deceptive demonstrations and a deceptive expert endorsement.
The FTC also alleged that advertisements for Dura
Lube Engine Treatment have made false and unsubstantiated claims that: (1) Dura Lube
Engine Treatment does not contain any chlorinated compound; and (2) Dura Lube Engine
Treatment has been tested by the U.S. Environmental Protection Agency.
On [date] the FTC issued a consent order to cease
and desist which prohibits certain claims for Dura Lube Engine Treatment. We consented to
the issuance of the order for settlement purposes only and without admitting any of the
FTC's allegations that we violated the law. The order requires us to request that our
distributors and wholesalers stop using or distributing advertisements or promotional
materials containing claims challenged by the FTC. As one of our distributors or
wholesalers, we are required to send [purchaser for resale] this letter.
Specifically, the FTC order prohibits us in the
future from making false claims that Dura Lube Engine Treatment (1) contains no
chlorinated compound; and (2) has been tested by the U.S. Environmental Protection Agency.
The order also requires that we have a reasonable basis for any performance claims we make
for Dura Lube Engine Treatment or any other product for use in a motor vehicle. Finally,
the order prohibits us from disseminating (1) any deceptive demonstrations regarding Dura
Lube Engine Treatment or any other product, or (2) any expert endorsements regarding Dura
Lube Engine Treatment or any other product for use in a motor vehicle.
We request your assistance by asking you to
discontinue using, distributing, or relying on any of your advertising or promotional
material for Dura Lube Engine Treatment received from us prior to January 1, 2000. Please
also notify any of your customers who resell these products and who may have such
materials to discontinue using those promotional materials. Under separate cover, we will
be sending you replacement promotional material that you will be able to use. You do not
need to dispose of your existing inventory of Dura Lube Engine Treatment because we will
send someone to your facility to replace the Dura Lube Engine Treatment labels and
packaging with labels and packaging that comply with the FTC order shortly. If we receive
information that you are continuing to use materials that do not comply with the FTC
order, we are required to notify the FTC of your failure to comply with this request.
Thank you very much for your assistance.
Sincerely,
[name]
President
[respondents]
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