Standard Oil Co. of California v. F. T. C.
| Decision Date | 03 July 1978 |
| Docket Number | No. 75-1341,75-1342,75-1341 |
| Citation | 577 F.2d 653 |
| Parties | , 1978-2 Trade Cases 62,145, 4 Media L. Rep. 1459 STANDARD OIL COMPANY OF CALIFORNIA, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. BATTEN, BARTON, DURSTINE & OSBORN, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Francis R. Kirkham (argued), San Francisco, Cal., Lawrence G. Meyer (argued), Washington, D. C., for petitioners.
David M. Fitzgerald (argued), Washington, D. C., for respondent.
Petitions to Review an Order of the Federal Trade Commission.
Before CUMMINGS, * HUFSTEDLER, and KENNEDY, Circuit Judges.
In this consolidated appeal, petitioners Standard Oil Company of California (Standard), and Batten, Barton, Durstine & Osborn, Inc. (BBD&O), challenge a decision and a cease and desist order issued by the Federal Trade Commission (FTC or Commission). The Commission found that Standard and BBD&O had broadcast advertising that was false, misleading, and deceptive, in violation of section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. Standard and BBD&O contend that the advertising was accurate and in all respects lawful. They further state that even if the advertising were improper, the cease and desist order issued by the FTC is overly broad. We affirm the Commission's finding that the advertising violated section 5 of the Act, but we agree that the cease and desist order is unwarranted and therefore direct that the scope of the order be modified.
The case concerns three television commercials that promoted a gasoline additive known as F-310. The commercials were broadcast on television from January 9 to June 9, 1970. Two commercials were based on demonstrations which were designed to afford viewers a visual comparison of automobile exhaust before and after using F-310. See Appendix I. In one, a large clear balloon was attached to the exhaust pipe of an idling automobile. The balloon was shown inflating with black, opaque vapor, while the announcer described it as "filling with dirty exhaust emissions that go into the air and waste mileage." The announcer then stated that "Standard Oil of California has accomplished the development of a remarkable gasoline additive, Formula F-310 that reduces exhaust emissions from dirty engines." He informed the viewer that the same car was run on six tankfuls of Chevron F-310 and the result was "no dirty smoke, cleaner air." To prove the point, a clear balloon was again shown being attached to the car. This time the balloon inflated with transparent vapor. In conclusion the television viewer was told:
The second commercial, known as the bag demonstration, was similar to the commercial just described except that the automobile was completely enclosed in a transparent bag. In the before segment of the demonstration, the automobile was hidden from view by black exhaust smoke. In the after segment the automobile was plainly visible, thus illustrating the effects of using the F-310 additive.
The third commercial considered by the Commission focused on a meter dial labeled "exhaust emissions." The dial showed a scale from 0 to 100. The word "clean" labeled the 0 extremity, and the word "dirty" was printed under 100. Once again a before-and-after format was used, with the meter pointing to 100 before use of F-310 and to 20 afterwards. The announcer's accompanying message was: "(A)fter just six tankfuls of Chevron F-310 exhaust emissions reduced." The commercial again closed with the message that: "There isn't a car on the road that shouldn't be using it."
On May 19, 1970 the FTC advised Standard that it objected to the advertisements because it was not clear that the car depicted in the before segment of each commercial had been driven previously with a gasoline that was deliberately formulated to accelerate carbon deposits, resulting in an especially dirty engine. The FTC expressed concern that the commercials did not indicate either that the degree of improvement in gasoline mileage and pollution reduction would vary according to the condition of the engine, or that the gasoline used to prepare the test cars for the before part of the sequence caused much dirtier engines than would have been caused by normal gasoline.
Standard submitted an assurance of voluntary compliance to the Commission on May 25, 1970. Beginning June 10 the commercials were altered by superimposing on the film phrases such as, "Very Dirty Engine Purposely Used to Provide Severe Test," and "Degree of Improvement in Your Car Depends on Condition of Engine."
On December 29, 1970 the Commission filed a complaint against Standard and BBD&O based on the commercials as they were presented prior to June 10, 1970, specifying eleven charges of false advertising. The charges were sweeping. The FTC alleged not only that the ads were misleading in the respects indicated above, but also that F-310 did not reduce pollution to any significant degree. 1 After extended hearings the administrative law judge found that F-310 was effective as claimed, and that it did result in a significant reduction in exhaust emissions. He further found that the commercials accurately depicted the product's performance. Accordingly he recommended that the administrative complaint be dismissed in its entirety.
The Commission adopted substantially all of the findings of the administrative law judge pertaining to the efficacy of the product. The FTC's charges that the product did not reduce pollution were found to be wholly without merit. The Commission agreed they should be dismissed and stated that the development of F-310 was "laudable."
The Commission did not, however, adopt the findings of the administrative law judge as to certain of the alleged disparities between the claims which the commercials were interpreted to make and the data offered to substantiate those claims. Specifically, the Commission found that the commercials falsely represented (1) that use of F-310 would result in a complete reduction of air pollutants; (2) that all cars would show the same degree of improvement as was illustrated by the reduction of pollution in the exceptionally dirty engine; (3) that the use of F-310 would affect all types of exhaust emissions; and (4) that the meter used in the third commercial portrayed an eighty percent reduction of pollution with F-310. Based on these findings the Commission held that Standard and BBD&O had violated section 5 and issued broad cease and desist orders against them.
Before turning to an analysis of the cease and desist orders and a determination of their propriety, we examine the petitioners' contention that there is no substantial evidence in the administrative record to support the Commission's finding that the commercials were misleading and deceptive, and BBD&O's additional contention that there is no support for the finding that it knew or should have known that the three advertisements were deceptive. The court has jurisdiction over this appeal under section 5(c) of the FTC Act, 15 U.S.C. § 45(c).
Although the law is intended to protect "that vast multitude which includes the ignorant, the unthinking and the credulous," Aronberg v. FTC,132 F.2d 165, 167 (7th Cir. 1942), neither the courts nor the Commission should freely speculate that the viewing public will place a patently absurd interpretation on an advertisement. On the facts before it, the Commission could not properly have found that these ads claimed that F-310 removed all harmful chemical emissions from automobile exhaust. We do not think that any television viewer would have a level of credulity so primitive that he could expect to breathe fresh air if he stuck his head into a bag inflated by exhaust, no matter how clean it looked. If that were the whole case, we would agree with the petitioners and overturn the Commission's order in its entirety. But the Commission's opinion made a different point. The Commission was concerned with the ads' implicit statements about the degree of reduction in auto emissions and the effect of that reduction on the pollution problem.
Exhaust emissions are of two types: visible and transparent. The visible elements (black smoke and particulate matter) contribute less to pollution than the transparent elements. The Commission determined that the public is not aware of this fact. In support of this finding, it cited a study made by BBD&O with respect to the very commercials in question here. BBD&O, in reporting on this study to Standard, concluded from a survey it had made that only fourteen percent of motorists are aware that most polluting elements in automobile exhaust are invisible. 2
Hydrocarbons and carbon monoxide, two common exhaust pollutants which generally are transparent, were reduced by fifty percent and thirty-three percent, respectively, after use of F-310 in tests run on cars with very dirty engines. The additive had no effect at all on lead compound auto emissions which are also prime contributors to air pollution. The ads gave the public no indication whatsoever of the degree of reduction of invisible pollutants with use of F-310. Moreover, since the public, at least before it analyzes the question fully, is unaware that the visible pollutants eliminated by F-310 are not the most troublesome part of exhaust pollution, the complete disappearance of black smoke may indicate a greater pollution reduction than is actually achieved by the product. References in the ads to "no dirty smoke, cleaner air" and "turns dirty smoke into good, clean mileage" reinforced that erroneous impression.
We would be less confident in upholding the Commission's finding of a section 5 violation were there not other, more palpable, misrepresentations besides the overall...
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