American Consumer, Inc

Text (OCR of the scan at left; may contain errors)

Complaint 94 F.T.C.

IN THE MATTER OF

AMERICAN CONSUMER, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT

Docket C-2991. Complaint, Sept. 24, 1979 — Decision, Sept. 24, 1979

This consent order, among other things, requires two Philadelphia, Pa. firms engaged in the advertising, sale and distribution of a product known, among other names, as the G.R. Valve, to cease representing, without reliable substantiation, that installing the G.R. Valve or any other air-bleed automobile retrofit device in a motor vehicle will result in fuel economy improvement. Respondents are also barred from using any endorsement or testimonial which has not been properly authorized; and prohibited from misrepresenting a product endorser's expertise in a field of knowledge and the conclusions of tests or surveys pertaining to energy consumption or energy saving characteristics of automobile retrofit devices. Additionally, the order requires that product advertising disclose any material connection that may exist between respondents and a product endorser.

Appearances

For the Commission: Laurence M. Kahn.

For the respondents: Bruce Lev, Westport, Conn.

COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission having reason to believe that Panacolor, Inc., a corporation, and American Consumer, Inc., a corporation, hereinafter referred to as "respondents," having violated the provisions of the said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Panacolor, Inc. is a corporation organized and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at Caroline and Charter Roads, Philadelphia, Pennsylvania. Respondent American Consumer, Inc. is a corporation organized and doing business under the laws of the Commonwealth of Pennsylvania, with its office and principal place of business located at Caroline and Charter Roads, Philadelphia, Pennsylvania. American Consumer, Inc. is a wholly-owned subsidiary of Panacolor, Inc. and respondent Panacolor, Inc. dominates and controls, furnishes the means, instru-

Complaint

mentalities, services, and facilities for, condones and approves, and accepts all the pecuniary and other benefits flowing from the acts, practices and policies of respondent American Consumer, Inc. and its employees. Both of said respondents have cooperated and acted together in the performance of the acts and practices hereinafter alleged. PAR. 2. Respondents have been and are now engaged in the marketing and advertising of a product variously known as the G.R. Valve, the Turbo-Dyne Energy Chamber, and by other names (hereinafter "product"), which product is advertised to be a means of improving fuel economy in automobiles. Said product is an automobile retrofit device as "automobile retrofit device" is defined in § 301 of the Energy Policy and Conservation Act of 1975, 15 U.S.C. 2011. Respondents, in connection with the marketing of said product, have disseminated, published and distributed and now disseminate, publish and distribute advertisements and promotional material for the purpose of promoting the sale of said product. PAR. 3. One of the means respondents have used to market and advertise said product has been to use a celebrity endorsement. Gordon Cooper has aided the promotion of said product by providing such endorsement. This endorsement appeared in disseminated advertisements and other sales promotional materials for said product. In return for his role in the marketing of said product, Gordon Cooper has received remuneration from the manufacturer and distributor of the product. The amount of such remuneration was and is dependent upon the number of products sold. PAR. 4. In the course and conduct of their said businesses, the respondents have disseminated and caused the dissemination of certain advertisements for said product through the United States mail and by various means in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, including but not limited to, the insertion of advertisements in magazines and newspapers with national circulations; and have disseminated and caused the dissemination of advertisements for said product by various means, including but not limited to the aforesaid media, for the purpose of inducing and which are likely to induce, directly or indirectly, the purchase of said product in commerce. PAR. 5. Among the advertisements and other sales promotional materials are the materials identified as Exhibits A-G which are attached hereto. PAR. 6. Through the use of advertisements referred to in Paragraph Five and other advertisements and sales promotional materi-

Complaint 94 F.T.C.

als, respondents represented and now represent, directly or by implication, that

a. the G.R. Valve when installed in a typical automobile will significantly improve fuel economy; b. a typical driver can ordinarily obtain, under normal driving conditions, a fuel economy improvement which will approximate or equal seven miles per gallon when the G.R. Valve is installed in his/her automobile; c. competent scientific tests for fuel economy of automobiles in which the G.R. Valve has been installed prove the fuel economy claims made for the G.R. Valve; d. Gordon Cooper bears only the relationship of endorser to the marketing of said product; e. Gordon Cooper has the education, training, and knowledge necessary to qualify him as an expert in the field of automotive engineering; f. results of consumer usage, as evidenced by consumer testimonials, prove that the G.R. Valve significantly improves fuel economy.

PAR. 7. At the time respondents made the representations alleged in Paragraph Six of the complaint, they did not possess and rely upon a reasonable basis for such representations. Therefore, said advertisements are deceptive, misleading, or unfair. PAR. 8. In truth and in fact, contrary to respondents' representations in Paragraph Six:

a. the G.R. Valve when installed in a typical automobile will not significantly improve fuel economy; b. a typical driver cannot ordinarily obtain under normal driving conditions a fuel economy improvement which will approximate or equal seven miles per gallon when the G.R. Valve is installed in his/her automobile; c. no competent scientific tests for fuel economy of automobiles in which the G.R. Valve has been installed prove the fuel economy claims made for the G.R. Valve; d. Gordon Cooper bears not only the relationship of endorser to the marketing of said product, but also bears the relationship of principal to the marketing of said product which fact is not disclosed and is material; e. Gordon Cooper does not have the education, training, and knowledge to qualify him as an expert in the field of automotive engineering; f. results of consumer usage, as evidenced by consumer testimo-

AMERICAN CONSUMER, INC., ET AL. 651

648 Complaint

nials, do not prove that the G.R. Valve significantly improves fuel economy.

Therefore, said advertisement is deceptive, misleading, or unfair. PAR. 9. Exhibits A-G and other advertisements represent, directly and by implication, that respondents had a reasonable basis for making, at the time they were made, the representations alleged in Paragraph Six. In truth and in fact, respondents had no reasonable basis for such representations. Therefore, said advertisements are deceptive, misleading, or unfair. PAR. 10. In the course and conduct of their businesses, and at all times mentioned herein, respondents have been, and now are, in substantial competition in or affecting commerce with corporations, firms and individuals engaged in the sale of automobile retrofit devices. PAR. 11. The use by respondents of the aforesaid unfair or deceptive representations and the dissemination of the aforesaid false advertisements has had, and now has, the capacity and tendency to mislead members of the consuming public into the erroneous and mistaken belief that said representations were and are true and into the purchase of substantial quantities of products sold by respondents by reason of said erroneous and mistaken belief. PAR. 12. The aforesaid acts and practices of respondent, as herein alleged, including the dissemination of the aforesaid false advertisement, were and are all to the prejudice and injury of the public and of respondents' competitors, and constituted and now constitute, unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5 of the Federal Trade Commission Act.

Complaint 94 F.T.C.

Ex. A

ASTRONAUT GORDON COOPER ANNOUNCES:

NOW! CONVERT AIR INTO ENERGY— EXPLODE IT LIKE FUEL—and GET UP TO 7 MORE MILES PER GALLON!

Yes, save up to $18 a month, save up to 350 gallons of gas each year, save up to 2 full gallons every 60 minutes you drive — ALL FREE — because air costs you not one single penny!

[illegible]

National Enquirer. JTD-58

AMERICAN CONSUMER, [illegible]

Complaint

ASTRONAUT GORDON COOPER ANNOUNCES:

NOW! CONVERT AIR INTO ENERGY— EXPLODE IT LIKE FUEL—and GET UP to 7 MORE MILES PER GALLON!

[illegible]

NOVEMBER 1, 1977 Cappers Weekly JTDA-3

Complaint 94 F.T.C.

Ex. C

NOW! SAVE UP TO 25¢ ON EVERY GALLON OF GAS YOU EVER BUY FOR THE REST OF YOUR LIFE!

Yes, save up to $18 a month, save up to 30 gallons of gas each month, save up to 350 gallons of gas each year...

without changing a single part on your car!

Automotive Scientists at California university prove: You can actually transform the oxygen in ordinary air into piston-driving power for your car! The result:

Now, instead of filling your gas tank each and every week, your car's engine converts air into energy 2,000 times a minute... and saves you up to 350 gallons of gas (over $200 worth), each and every year!

[illegible]

THIS 1968 CADILLAC GETS BETTER GAS MILEAGE THAN THIS TINY FOREIGN "ECONOMY" CAR ... SO CAN YOUR CAR! What's the secret? Ah! That's right ... how thanks to an amazing automotive discovery you can actually convert a [illegible]

WHAT DO YOU EXPECT FROM A MACHINE THAT'S GOT THE POWER OF A GIANT BUT THE MIND OF AN INFANT?

[illegible]

NOW: FINALLY POSSIBLE:

UP TO ALMOST TWICE THE MILEAGE ON NOT A SINGLE EXTRA DROP OF GAS.

[illegible]

NOW: CONVERT AIR INTO ENERGY — BEST FOREIGN CAR ECONOMY — EVEN FROM BIG LUXURY SEDANS!

[illegible]

BUT WHAT A DIFFERENT STORY IF BUYING YOUR ENGINE COULD THINK

[illegible]

BUT NOW — YOU GET SO MANY FREE, EXTRA MILES YOU ACTUALLY SAVE UP TO 25¢ ON EVERY GALLON OF GAS EVERY HOUR YOU DRIVE!

[illegible]

LOOK HOW EASY IT IS

[illegible]

COSTS LESS THAN A TANKFUL OF GAS PAYS FOR ITSELF IN LESS THAN 30 DAYS:

[illegible]

REMEMBER — YOU PROVE IT YOURSELF ENTIRELY AT OUR RISK!

[illegible]

New York Post

AMERICAN CONSUMER, [illegible]

Complaint

Ex. D

ASTRONAUT GORDON COOPER ANNOUNCES:

NOW! CONVERT AIR INTO ENERGY— EXPLODE IT LIKE FUEL—and GET UP TO 7 MORE MILES PER GALLON!

Yes, save up to $18 a month, save up to 350 gallons of gas each year, save up to 2 full gallons every 60 minutes you drive — ALL FREE — because air costs you not one single penny!

[illegible]

Cappers. JTDE-3

Complaint 94 F.T.C.

ASTRONAUT GORDON COOPER ANNOUNCES: Ex. E NOW! CONVERT AIR INTO ENERGY— EXPLODE IT LIKE FUEL—and GET UP TO 7 MORE MILES PER GALLON! Yes, save up to $18 a month, save up to 350 gallons of gas each year, save up to 2 full gallons every 60 minutes you drive —ALL FREE—because air costs you not one single penny! [illegible] THE ELKS MAGAZINE FEBRUARY 1972 55 Elks Magazine JTDF-19

AMERICAN CONSUMER, INC., ET AL.

Complaint Ex. F ASTRONAUT GORDON COOPER ANNOUNCES:

[illegible] [illegible] [illegible] [illegible] MORE MILES PER GALLON! [illegible] [illegible] [illegible] [illegible]

Complaint 94 F.T.C.

Ex G

"IT'S A FACT!—INCREASES MILEAGE UP TO 8 MILES PER GALLON."

Says GORDON COOPER GEMINI ASTRONAUT

"IMPROVES ENGINE PERFORMANCE, REDUCES SMOG EMISSION AND CLEANS YOUR ENGINE."

[illegible]

AMERICAN CONSUMER, INC., ET AL. 659 648 Decision and Order

DECISION AND ORDER

The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Bureau proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violations of the Federal Trade Commission Act; and

The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of such agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order: 1. Respondent American Consumer, Inc. is a corporation organized, existing, and doing business under and by virtue of the laws of the Commonwealth of Pennsylvania, with its principal office and place of business at Caroline and Charter Roads, Philadelphia, Pennsylvania. Respondent Panacolor, Inc. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal office and place of business at Caroline and Charter Roads, Philadelphia, Pennsylvania. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER

PART I

It is ordered, That respondents Panacolor, Inc., a corporation, and American Consumer, Inc., a corporation, their successors and

Decision and Order 94 F.T.C.

assigns, either jointly or individually, and their officers, agents, representatives and employees directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, offering for sale, sale and distribution of the automobile retrofit device, variously known as the G.R. Valve, the Turbo-Dyne Energy Chamber, and by other names, or of any other air-bleed automobile retrofit device, as "automobile retrofit device" is defined in §301 of the Energy Policy and Conservation Act of 1975, 15 U.S.C. 2011, in or affecting commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing, directly or by implication, that the automobile retrofit device variously known as the G.R. Valve, the Turbo-Dyne Energy Chamber, and by other names, or any other air-bleed automobile retrofit device will or may result in fuel economy improvement when installed in an automobile, truck, recreational vehicle, or other motor vehicle. For purposes of Part I of this order, an "air-bleed automobile retrofit device" shall be defined as an automobile retrofit device which, in its operation, admits additional air into the engine intake system either at or downstream of the fuel metering system of the vehicle's engine. PART II It is further ordered, That respondents, their successors and assigns, either jointly or individually, and the respondents' officers, agents, representatives and employees, directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, offering for sale, sale or distribution of any automobile retrofit device as "automobile retrofit device" is defined in §301 of the Energy Policy and Conservation Act of 1975, U.S.C. 2011, in or affecting commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing, directly or by implication, that such device will or may result in fuel economy improvement when installed in an automobile, truck, recreational vehicle, or other motor vehicle unless (1) such representation is true, and (2) at the time of making such representation, respondents possess and rely upon written results of dynamometer testing of such device according to the then current urban and highway driving test cycles established by the Environmental Protection Agency and these results substantiate such representation, and (3) where the representation of the fuel economy improvement is expressed in miles per gallon or percentage, all advertising and other sales promotional materials which contain the representation expressed in such a way must also contain, in a way

AMERICAN CONSUMER, INC., ET AL.

Decision and Order

that clearly and conspicuously discloses it, the following disclaimer: "REMINDER: Your actual fuel saving may be less. It depends on the kind of driving you do, how you drive and the condition of your car."

PART III

It is further ordered, That respondents, their successors and assigns, either jointly or individually, and their employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale or distribution of any product in or affecting commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

a. representing, directly or by implication, that an endorser of such product has expertise in a field of knowledge unless the endorser has the education, training, and knowledge necessary to be qualified as an expert in that field;

b. using, publishing, or referring to any testimonial or endorsement from any person or organization for such product unless, within the twelve (12) months immediately preceding any such use, publication, or reference, respondents have obtained from that person or organization an express written and dated authorization for such use, publication, or reference;

c. failing to disclose a material connection, where one exists, between an endorser of such product and any of the respondents. A "material" connection shall mean, for purposes of this order, any direct or indirect economic interest in the sale of the product which is the subject of this endorsement other than (1) a fixed sum payment for the endorsement, all of which is paid before any advertisement containing the endorsement is disseminated, or (2) payment for the endorsement which is directly related to the extent of the dissemination of advertising containing it;

d. misrepresenting, in any manner the purpose, content, or conclusion of any test or survey pertaining to such product;

e. misrepresenting, in any manner and for any product, either consumer preference for such product or the results obtained by consumer usage of such product;

f. misrepresenting in any manner the performance, efficacy, capacity, or usefulness of such product;

g. representing, directly or by implication, any performance characteristic of such product unless at the time of making the representation respondents possessed and reasonably relied upon

Decision and Order 94 F.T.C.

competent and reliable scientific evidence which substantiates such representation.

PART IV

It is further ordered, That respondents, their successors and assigns, either jointly or individually, and their officers, agents, representatives and employees, directly or through any corporation, subsidiary, division, or other device, in connection with the advertis-ing, offering for sale, sale or distribution of any product in or affecting commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from failing to maintain the following accurate records which may be inspected by Commission staff members upon reasonable notice: copies of and dissemination schedules for all advertisements, sales promotional materials, and post-purchase materials; documents authorizing use, publication or reference to testimonials or endorsements; records of the number of pieces of direct mail advertising sent in each direct mail advertisement dissemination; documents which substantiate or which contradict any claim which is a part of the advertising, sales promotional material, or post-purchase materials disseminated by respondents directly or through any business entity. Such documen-tation shall be retained by respondents for a period of three (3) years from the last date any such advertising, sales promotional, or post-purchase materials were disseminated.

PART V

It is further ordered, That respondents shall forthwith distribute a copy of this order to each of their operating divisions and to each of their officers, agents, representatives, or employees who are engaged in the preparation and placement of advertisements.

PART VI

It is further ordered, That respondents notify the Commission at least thirty (30) days prior to the effective date of any proposed change in the corporate respondents such as dissolution, assignment, or sale, resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of the order.

PART VII

It is further ordered, That the respondents shall, within sixty (60)

AMERICAN [illegible]

648 Decision and Order

days after service upon them of this order, and also annually thereafter for three (3) years, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

Complaint 94 F.T.C.

IN THE MATTER OF

ADMARKETING, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT

Docket C-2992. Complaint, Sept. 25, 1979 — Decision, Sept. 25, 1979

This consent order, among other things, requires a Beverly Hills, Calif. advertising agency engaged in the advertising and sale of a product known, among other names, as the G.R. Valve to cease from representing, without reliable substantiation, that installing the G.R. Valve or any substantially similar automobile retrofit device in a motor vehicle will result in fuel economy improvement. The firm is further prohibited from misrepresenting the performance, efficacy or usefulness of any energy consumption or energy saving characteristic of an automobile retrofit device; or the purpose, contents or conclusions of tests or surveys relating to such characteristic. The order additionally requires respondent to identify and present to its client, in writing, every representation contained in each advertisement which pertains to an energy consumption or energy saving characteristic of the advertised product.

Appearances

For the Commission: Laurence M. Kahn.

For the respondent: Ronald J. Mandell, Los Angeles, Calif.

COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission having reason to believe that Admarketing, Inc., a corporation, hereinafter referred to as "respondent," having violated the provisions of the said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Admarketing, Inc. is a corporation organized and doing business under and by virtue of the laws of the State of California, with its office and principal place of business located at 8383 Wilshire Boulevard, Beverly Hills, California. PAR. 2. Respondent, as advertising agency for C.I. Energy Development, Inc., has been engaged in the advertising of a product variously known as the G.R. Valve, the Turbo-Dyne Energy Chamber, and by other names, (hereinafter "product") which product is advertised to be a means of improving fuel economy in automobiles.