FTC v. Dura Lube Agreement

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.

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.

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.

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