STANDARD OIL COMPANY OF CALIFORNIA v. FEDERAL TRADE COMMISSION
BATTEN, BARTON, DURSTINE & OSBORN, INC. v. FEDERAL TRADE COMMISSION
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
577 F.2d 653; 1978 U.S. App. LEXIS 10376; 1978-2 Trade Cas. (CCH) P62,145; 47 A.L.R. Fed. 375; 4 Media L. Rep. 1459
July 3, 1978


OPINION:  KENNEDY, Circuit Judge:

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. 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: "Chevron with F-310 turns dirty smoke into good, clean mileage. There isn't a car on the road that shouldn't be using it."

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: "After 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.  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.

The Commission's Findings

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. n2

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n2 BBD&O reached this conclusion on the basis of answers received from motorists who were asked the following question: Sometimes a car, idling at a stoplight, gives off black smoke that you can see. Do you believe this is contributing more to air pollution than other cars? Eighty-three percent of the motorists interviewed answered yes, and fourteen percent said no.
 

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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 misleading impression as to F - 310's impact on the problem of air pollution. But there were other misrepresentations, and these lend support to the Commission's conclusion that the advertising had a capacity and tendency to mislead.

The Commission found that a substantial portion of the viewing audience would believe that the automobiles in all three advertisements were representative of most automobiles, and petitioners do not cite evidence in the record to contradict that conclusion. That representation, clear and implicit in the ads, simply was not true. Heavy engine deposits were built up in the test vehicles by use of a special, extra-dirty fuel to show a more dramatic difference between the before-and-after sequences. It is conceded that only a small percentage of cars on the road would have similar engine conditions before using F - 310. Thus most cars, although they would be cleaned by the detergent effects of F - 310, would not show as large an improvement as was demonstrated by the ad. The statement made in each advertisement that "there isn't a car on the road that shouldn't be using it" seemed to promise similar results for all cars, thus reinforcing the misleading impression that the condition of the demonstration vehicle was representative of the condition of most automobiles. There is adequate evidence, therefore, to support the Commission's finding that the balloon and bag ads misrepresented the effect of F - 310 on most automobiles. That misrepresentation provides an independent basis for the Commission's order, and it further suggests the capacity of the ads to misrepresent the efficacy of F - 310 in reducing pollution generally.

Finally, the Commission concluded that the meter advertisement was misleading. The ad showed a change of 80 units on a dial of 100 units after use of F - 310. It is undisputed that the meter was a Beekman Infra-red Analyzer used by federal and state authorities to measure exhaust emissions. That instrument measures the level of hydrocarbon emissions. By reference to this measurement, one also can draw an inference as to the degree of reduction of carbon monoxide emissions, since the two pollutants generally come from the same source. It is undisputed that the meter was not rigged. The Commission's finding that it conveyed a misleading impression as used in the ad was based on the total absence of any explanation of the calibration shown on the meter dial. The drop from 100 units ("dirty") to 20 units ("clean") did not correspond to a percentage reduction or, indeed, to any other scale of measurement with which the public is familiar. As we have previously stated, the hydrocarbon reduction was fifty percent, not eighty percent. Equally important, the ad gave no indication at all that some emission pollutants not measured by the meter where wholly unaffected by F - 310. These considerations support the Commission's determination that the meter ad violated section 5.

The issue before us as to each of the ads is whether the record supports the Commission's interpretation of the meaning the commercial would have to the average viewer, and the Commission's determination of the accuracy of that message.

The Commission found that the public is acutely aware of the air pollution problem and that it is a matter of public importance for advertisements which play upon this concern to be accurate and precise. Implicit in the Commission's opinion is a finding that commercial messages might lead the average viewer, in his anxiety to help solve the pollution problem, to overreact even though upon careful reflection he might see for himself the limitations inherent in the advertiser's claim.

Here the Commission found that the predominant visual message was misleading, and that it was not corrected or contradicted by the accompanying verbal message in the advertisements. "The Commission may determine for itself [the deceptive nature of the representations] through visual inspection and analysis." United States Retail Credit Ass'n v. FTC, 300 F.2d 212, 217 (4th Cir. 1962); Carter Products, Inc. v. FTC, 268 F.2d 461, 495 (9th Cir.), cert. denied, 361 U.S. 884, 80 S. Ct. 155, 4 L. Ed. 2d 120 (1959). In making this determination the Commission is entitled to "draw upon its own experience in order to determine (even) in the absence of consumer testimony, the natural and probable result of the use of advertising expressions." Carter Products, Inc., 268 F.2d at 495 (parenthetical in original). Based on those principles and our review of the record, we find substantial evidence to support the Commission's finding that the three advertisements were misleading.

BBD&O contends the Commission acted improperly in holding it liable under section 5. The standard of care to be exercised by an advertising agency in determining what express and implied representations are contained in an ad and in assessing the truth or falsity of those representations increases in direct relation to the advertising agency's participation in the commercial project. See Doherty, Clifford, Steers & Shenfield, Inc. v. FTC, 392 F.2d 921, 928 (6th Cir. 1968). The degree of its participation is measured by a number of factors including the agency's role in writing and editing the text of the ad, its work in creating and designing the graphic or audio-visual material, its research and analysis of public opinions and attitudes, and its selection of the appropriate audience for the advertising message. Precisely these factors were weighed in reaching the conclusion that BBD&O knew or should have known of the deceptive nature of the F - 310 advertising. The Commission determined that:
Representatives of BBD&O were involved in the development of the F - 310 advertising from the very earliest stages. They carefully reviewed all the test results and were active participants in numerous meetings in which alternative advertising approaches were evaluated and ultimately accepted or rejected. The final determination to use the demonstration format of the January 1970 advertisements was a joint decision of representatives of BBD&O and Standard, and after the final joint decision was made, BBD&O actively participated in the filming of the pictorial portions of the advertisements, the drafting of the verbal texts, the preparation of layouts and the promotion and distribution of the advertisements.

The advertising agency argues vigorously that it was entitled to rely on the elaborate safeguards, including independent laboratory tests and procedures for high level review, that preceded this advertising campaign. The network advertising here in question was approved by the following persons and departments: Chevron Research; Standard's Product Engineering, Advertising, and Law Departments; the highest level of Standard's corporate management; executives of BBD&O who handle Standard's account; BBD&O's corporate management and legal counsel; Scott Research Laboratories, a highly reputable independent laboratory which reviewed each of the auto emissions tests; and Scott Carpenter, a former NASA astronaut and qualified engineer, who made an independent review of the technical reports on F - 310 before agreeing to act as the announcer for the advertisements.

These safeguards and procedures are highly relevant to the petitioners' common defenses, including the truth of the message which the ads conveyed, and to BBD&O's claim that it exercised diligence in investigating the accuracy of the advertising. Nevertheless, review of the record indicates that while the technical accuracy of the tests was fully investigated, the review procedures did not have a specific focus on the accuracy of the implicit representations the ads conveyed to the viewing public. No specialized engineer was needed to put BBD&O on notice that a gauge which drops from a reading of 100 ("dirty") to 20 ("clean") implies a sweeping representation with reference to the change in level of pollution discharge. In light of the advertising agency's active participation in developing this advertising, it was BBD&O's responsibility to assure itself not only that the gauge was not rigged, but also that use of the gauge did not convey a distorted impression. The evidence is fully adequate to support the Commission's findings that, given the degree of participation by this advertising agency, it knew or should have known that the F - 310 ads were misleading in the respects previously indicated.