Source: https://www.ftc.gov/sites/default/files/documents/cases/1998/09/d09275opi.htm
Timestamp: 2018-01-23 04:23:21
Document Index: 582482167

Matched Legal Cases: ['§ 45', '§ 3', '§ 556', '§ 557', '§ 554', '§ 45', '§ 3', '§ 3', '§ 3', '§ 554', 'art, 542', '§ 5']

Opinion by Anthony, Commissioner
By Anthony, Commissioner:
This case is before the Commission on appeal from an initial decision and order by Administrative Law Judge Lewis F. Parker.(1) Judge Parker found that respondents, Automotive Breakthrough Sciences, Inc. ("ABSI"), ABS Tech Sciences, Inc. ("ABSTSI"), and Richard Schops, engaged in unfair and deceptive acts and practices in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45 ("Section 5"), in connection with the sale and promotion of their "ABS/Trax" after-market braking device.(2)
Like its companion case, Brake Guard Products, Inc., Docket No. 9277,(3) this case is important, not only because of the deceptive practices that form the core of respondents' claims, but also, because respondents' actions have potentially grave implications for motor vehicle safety. After careful examination of the record, the Commission affirms the initial decision of the Administrative Law Judge and adopts his findings and conclusions to the extent they are not inconsistent with this opinion.(4) The order we issue, however, differs slightly from that issued by the Administrative Law Judge and is substantially similar to the order issued in Brake Guard Products, Inc.
Beginning in 1991, the respondents(5) sold various versions of the ABS/Trax device through advertising placed in print media, on television and at trade shows. On September 27, 1995, the Commission issued its complaint(6) challenging a number of respondents' advertising claims as false and/or unsubstantiated and alleging that they violated Section 5.(7) The complaint alleged that respondents made the following false and/or unsubstantiated claims:
1. Antilock Brake System Claims:
a. that ABS/Trax is an antilock brake system (Complaint ¶ 5);
b. that ABS/Trax prevents or reduces lock-up, skidding and loss of steering control (Complaint ¶ 7(a));
c. that ABS/Trax provides antilock braking benefits that are as good as those provided by original equipment manufacturer-installed electronic antilock braking systems (Complaint ¶ 7(f));
2. Stopping-Distance Claims:
a. that in emergency stopping situations, ABS/Trax will stop a vehicle in a shorter distance than a vehicle that is not equipped with the device (Complaint ¶ 9(a));
b. that tests prove that ABS/Trax reduces stopping distances by up to 30% at a speed of 60 mph (Complaint ¶ 7(e));
3. General Comparative Safety Claim:
that ABS/Trax will make operation of a vehicle safer than operation of a vehicle not equipped with ABS/Trax (Complaint ¶ 9(b));
4. Compliance with Standards Claims:
a. that ABS/Trax complies with National Highway Traffic Safety Administration ("NHTSA") standards for antilock brakes (Complaint ¶ 7(d));
b. that ABS/Trax complies with performance standards set forth in the Wheel Slip Brake Control System Road Test Code of the Society of Automotive Engineers ("SAE J46") (Complaint ¶ 7(c)); and
5. Insurance Discount Claim:
that installation of ABS/Trax will qualify a vehicle for an insurance discount in a significant proportion of cases (Complaint ¶ 7(b)).
On October 21, 1995, trial began,(8) and on May 22, 1996, the Administrative Law Judge granted complaint counsel's motion for partial summary decision, holding that respondents had made the alleged claims through their trade names, advertising, and promotional materials.(9) On October 16, 1996, in a second partial summary decision, the Administrative Law Judge found that respondents' claim (Complaint ¶ 7(b)) that installation of their device would qualify a vehicle for an insurance discount was both false and unsubstantiated.(10)
The record closed on December 9, 1996, and on March 3, 1997, the Administrative Law Judge issued his initial decision and order.(11) The Judge concluded that each of the claims challenged in the complaint was false and/or unsubstantiated, in violation of Section 5.(12) He found corporate liability and also held respondent Richard Schops individually liable for the violations.(13)
With the initial decision, Judge Parker issued an order prohibiting respondents from making any of the claims found to be false and from making any of the unsubstantiated claims without proper support. He also barred them from using the term "ABS" in marketing their braking device or substantially similar products. The Judge's order also prohibited respondents from making certain claims in connection with products other than ABS/Trax or similar devices. Order ¶¶ III, IV and V.
Respondents do not appeal Judge Parker's finding that they made the claims challenged in the complaint. The principal contentions in respondents' appeal appear to be(14) that the Administrative Law Judge erred in finding their claims for ABS/Trax false and/or unsubstantiated and also erred in ordering them to cease using the term "ABS." Respondents also contend that the Commission's adjudicative procedures are unfair(15) and that this proceeding was not in the public interest.
The Commission's review of this matter is based on the record of the proceeding, which does not include oral argument by the parties. The Commission's Rules of Practice provide that "[o]ral arguments will be held in all cases on appeal to the Commission, unless the Commission otherwise orders upon its own initiative or at the request of any party made at the time of filing of his brief." 16 C.F.R. § 3.52(I)(1998).
After issuance of the Initial Decision on March 3, 1997, the parties submitted appeal briefs, and neither requested that oral argument not be held. Indeed, respondent Schops made known his desire to present argument on several occasions.(16) On May 14, 1998, the Commission convened to hear oral argument, and although complaint counsel were present, neither respondent Schops, nor anyone else representing the respondents, appeared. Having heard the Secretary of the Commission describe his efforts to satisfy Mr. Schops' expressed desire for an opportunity to present argument as well as to notify Mr. Schops of various argument dates and to accommodate his numerous requests for postponement, the Commission issued an order, consistent with Rule 3.52(I), canceling the oral argument and reiterating its intention, as stated in its notice of April 16, to decide the matter on the papers.(17)
Under Section 5 of the FTC Act, an advertising claim is deceptive if it is "likely to mislead consumers acting reasonably in the circumstances, and . . . is material."(18) A claim that is false and material(19) is misleading to reasonable consumers and, therefore, is deceptive. In addition, the Commission long has held that "a firm's failure to possess and rely upon a reasonable basis for objective claims constitutes an unfair and deceptive act or practice in violation of section 5."(20) When an advertisement promises a level or type of substantiation, such as "75% of doctors agree" or "tests show," the level or type of substantiation promised constitutes a reasonable basis for the claims made. When no level or type of support is specified, the Commission applies the following analysis:
[W]hat constitutes a reasonable basis is essentially a factual issue which will be affected by the interplay of overlapping considerations such as (1) the type and specificity of the claim made -- e.g., safety, efficacy . . . ; (2) the type of product -- e.g., . . . potentially hazardous consumer product . . . ; (3) the possible consequences of a false claim -- e.g., personal injury, property damage; (4) the degree of reliance by consumers on the claims; (5) the type, and accessibility, of evidence adequate to form a reasonable basis for making the particular claims.(21)
Also relevant is "the amount of substantiation experts in the field believe is reasonable."(22)
Advertisers must have appropriate substantiation for claims when they are made,(23) and the Commission has observed that, "in fairness and in the expectations of consumers," the only reasonable basis for some types of claims for some types of products would be competent and reliable scientific evidence.(24)
In this case the Commission concludes that the claims, which potentially involve consumer safety, require substantiation by competent and reliable scientific evidence. As discussed further below, the Commission also concludes that respondents' claims that their device would make a vehicle safer and would shorten stopping distances in emergency stopping situations are unsubstantiated and that the other challenged claims are both unsubstantiated and false. The claims are material. Therefore, as a matter of law, the claims are deceptive and violate Section 5. The Commission further concludes that the violations are serious and readily transferable to other products. The Commission believes that barring use of the term "ABS" is appropriate, but we modify the fencing-in provisions in the Judge's order to tailor them more closely to the circumstances before us and to include certain technical changes consistent with Commission's Rules of Practice. Finally, the Commission concludes that the proceedings in this matter are fair and in the public interest.
IV. RESPONDENTS' CLAIMS VIOLATE SECTION 5
A. ABS/Trax Is Not and Does Not Provide the Benefits of an Antilock Braking System
1. ABS/Trax Is Not an Antilock Braking System
We first consider respondents' advertising claims that ABS/Trax is an antilock braking system. The essential features of an antilock braking system are reflected in well established and widely accepted industry and governmental standards.(25) In brief, an antilock braking system must automatically control the level or degree of rotational wheel slip, which is the proportional amount of wheel or tire skidding relative to vehicle forward motion.(26) IDF 37, 40-41, 44-45.
To control the level of rotational wheel slip automatically, a system must have sensors at the road wheels or drive train and a computational device to evaluate whether lock-up is approaching. IDF 42. The system also must be able to send signals to a control device that will reduce brake force so that the wheels will continue rolling. Id. ABS/Trax lacks the necessary components to detect and control the level or degree of rotational wheel slip automatically. IDF 6, 42-43, 45, 48-49, 72, 87. Rather, the ABS/Trax device is simply a "hydraulic accumulator:" a resilient membrane in a metal housing that may be attached to the hydraulic brake line of an automobile. In a hard stop, the membrane expands to accept some brake fluid, returning it to the line when the brake pedal is released. IDF 6.
Respondents' contention that ABS/Trax qualifies as an antilock system because it is an "accumulator" (RAB 3) is without merit. As explained by complaint counsel's witnesses, experts in the field of automotive brake systems,(27) although some antilock systems contain accumulators, an accumulator, by itself, does not qualify as an antilock braking system because it does not have the capacity to measure wheel speed, make error determinations or issue control signals to control automatically the degree of rotational wheel slip. Respondents' Admissions 70; Tr. 876-80 (Hague); IDF 48-49.
There also is no merit to respondents' contention (RAB 3) that the Administrative Law Judge erred in assuming that a brake system must use an electronic apparatus if it is to be advertised or promoted as an antilock braking system.(28) The record does not show that the case was either tried or decided on such an assumption. Rather, as noted by the Administrative Law Judge, the gist of the complaint is that respondents promoted and advertised ABS/Trax as an antilock braking system even though the device lacks the capability, through whatever means, to control rotational wheel slip automatically. Although the antilock systems being marketed in the United States today rely on electronics to sense wheel rotation and transmit control signals (see CX 102-L), NHTSA has stated that these "functions could be performed using pneumatic, hydraulic, optic, or other mechanical means." Id. Nothing in the initial decision assumes away such a possibility.
2. ABS/Trax Does Not Provide the Benefits of an Antilock Braking System
We next consider respondents' advertising claims that their braking device provides the benefits of a factory-installed antilock braking system, such as preventing or reducing wheel lock-up, skidding and loss of steering control. Respondents did not submit or cite any evidence in support of these claims apart from lay opinion testimony by respondent Schops and patently unreliable tests.
The testimony of respondent Schops is not reliable or probative. Mr. Schops clearly lacks the training necessary to evaluate the performance of an automotive braking system(29) and, indeed, did not offer himself as an expert. IDF 60. Mr. Schops admits that his experiences driving vehicles equipped with aftermarket devices are anecdotal (Tr. 2416), and the record shows that as a layman, he cannot reliably evaluate whether specific wheels experienced lock-up either with or without the ABS/Trax device. Tr. 813, 1132 (Hague); IDF 58, 60-61. Therefore, his observations do not constitute the requisite competent and reliable scientific evidence to support respondents' claims that the ABS/Trax device will prevent or reduce wheel lock-up, skidding and loss of control in emergencies.
Mr. Schops recalls seeing only one written report before developing the advertisements for AccuBrake, the first ABS/Trax device sold by respondents. Tr. 2416. This report is an anonymous, one-page document setting forth purported results of tests apparently aimed at assessing comparative stopping distance performance of a 1980 Triumph TR-8 with and without respondents' device. CX-30-F. This document is devoid of any description of test protocols or other details necessary to permit assessment of the reliability and probative value of the results. Id.; IDF 62; Tr. 2416; compare with CX-34 (documenting NHTSA tests of five after-market add-on brake devices) and CX-35 (documenting NHTSA tests on an AccuBrake device sold by respondents).(30) In any event, the test results described in the report show that when the test vehicle was equipped with the ABS/Trax device, it continued to experience wheel lock-up. Even disregarding the absence of documented protocols and methodology, therefore, the test fails to support respondents' claims that its device will prevent or reduce wheel lock-up. IDF 62-63.
Respondents' reliance on a videotape of tests conducted in Thailand on "a mechanical system that [respondents] had" (Tr. 2371 (Schops)) is likewise without merit.(31) The record shows that competent and reliable testing is necessary to demonstrate that a product controls wheel slip, thereby preventing lock-up, skidding and loss of control, and that it reduces stopping distances. See IDF 50-58. According to complaint counsel's expert, Mr. Kourik, the tests reported on the videotape appear to have been conducted without any instrumentation, and Mr. Kourik also stated that they show "nothing on methodology at all." Tr. 1244-49. Mr. Hinch, another of complaint counsel's expert witnesses, testified that the videotape shows that with or without the ABS/Trax device installed, "the wheels locked-up on the vehicle almost immediately upon brake application." Tr. 2031; IDF 65. He also testified that the videotape does not provide competent and reliable scientific evidence that ABS/Trax controls the degree of wheel slip. Id. Therefore, the videotape does not support respondents' claim that the device reduces or prevents wheel lock-ups or otherwise provides the benefits of an antilock braking system.
Respondents cite an Australian test conducted in December 1993 (Tr. 2435 (Schops)) on deceleration levels of an ABS/Trax-fitted vehicle. This test is not on the record. Nonetheless, it is deficient because it does not show that split mu(32) or lane-change testing was conducted or that instrumentation was used to compare wheel slip with and without the device. Regardless of its methodological deficiencies, the Australian test demonstrates that the test vehicle continued to experience lock-up with respondents' device installed. IDF 67. In any event, respondents did not use or rely on the Australian test results at the time they made their claims for ABS/Trax. IDF 67; Tr. 2438 (Schops). Therefore, the results do not show that respondents had or relied on competent and reliable scientific evidence in support of their performance claims at the time the claims were made.(33)
In contrast to respondents' proffered substantiation, tests conducted by NHTSA in accordance with SAE J46 (CX-39, CX-40), a widely-accepted industry protocol (Tr. 829-30; IDF 76), demonstrate that ABS/Trax will not prevent wheel lock-up. See CX-34; CX-35; IDF 68-87.(34) The expert testimony offered by complaint counsel's witnesses corroborates the testing results and confirms that ABS/Trax does not provide the benefits of an antilock braking system. See, e.g., Tr. 873-83 (Hague); Tr. 1140-52 (Kourik).
Respondents argue that the NHTSA "testings" relied on by the Administrative Law Judge are "highly arguable and inarguably limited/biased," stating that they have been "shown to be dysfunctional in protocol and conclusion, actually producing (mis)information that unabashedly confers 15% shortened stopping on electronic (OE) ABS." They assert further that this "determination is now scandalously admitted by the car makers and ABS brake manufacturers themselves to be mostly inaccurate and inarticulate. . . ." RAB 7.
Respondents do not identify the testing to which they refer. If respondents' intention is to challenge the validity of the NHTSA tests on the record, such as CX-34 and CX-35, which were relied on by the Administrative Law Judge, and which we consider both reliable and probative, they cite no supporting record evidence. The Commission finds these arguments without factual basis in the record.(35) We find, therefore, that the NHTSA test results, the expert testimony presented by complaint counsel and respondents' failure to submit competent and reliable evidence to substantiate their claims provide strong support for concluding that respondents made false and unsubstantiated claims that ABS/Trax would perform like and as well as an antilock braking system with respect to wheel lock-up, skidding and control in panic stops.
B. ABS/Trax Does Not Reduce Stopping distances in Emergencies; Nor Do Tests Show Using ABS/Trax Reduces Stopping Distances by Up To 30%
Respondents' advertising made two claims concerning stopping distances: a general claim that vehicles equipped with ABS/Trax would experience shorter stopping distances in emergency circumstances than would vehicles without the device; and a more specific claim that "simulation testing has shown that use of the device would reduce a vehicle's stopping distances by up to 30% at a speed of 60 mph." We find both of these claims unsubstantiated and the second false, as well.
Respondents appear to argue that because no performance standards for vehicle stopping distances exist, testing or other competent reliable scientific evidence is not required to support the claims. RAB 1. This argument is in error. Two of respondents' advertisements expressly state that "simulation testing has shown" the claimed reduction in distances needed for emergency stops. Respondents, therefore, were obligated to have and rely on tests demonstrating the validity of those claims.(36) The remaining advertisements that include claims about reduced stopping distances do not reference testing results and are properly assessed under the analysis in Pfizer. See supra pp. 10-12. Under a Pfizer analysis, respondents' claims require substantiation by competent and reliable scientific evidence. See IDF 50-58; ID 40-41.
Respondents do not specify a basis in the record for their apparent disagreement with the Administrative Law Judge's decision that their general stopping-distance claim was unsubstantiated and their specific claim that tests showed up to 30% reduction in stopping distance was false. Respondents appear to argue that because they claimed that tests showed that vehicles using their device would experience "up to" 30% shorter stopping distances than those without it, any reduction in stopping distance in any test, regardless of that test's validity or its showing with respect to the consistency of the device's performance, would substantiate the claim. Respondents' position seems to be that the "up to" qualification is "necessary because every car and especially as it ages/wears its various braking component parts . . . will produce unspecific predictably unpredictable results without add-on ABS, thereby the same consistent inconsistencies are anticipated with add-on ABS." RAB 10.
Even had respondents' device been shown on the record to produce consistent small reductions in stopping distances, which it was not, the claim challenged in the complaint was not so limited. The claim, "tests show up to 30% reduction," in our view, conveyed a message that respondents had and relied on tests that showed consistently significant reductions in stopping distances. In fact, the record is devoid of test results that demonstrate that ABS/Trax consistently reduced stopping distances by any substantial percentage, let alone 30%. To the contrary, the record contains both reliable and probative evidence that respondents' product did not and could not perform as claimed. See, e.g., CX-34, CX-35; discussion supra pp. 13-23.
We already have addressed and rejected as unreliable and not probative the extra-record testing material cited by respondents to support their wheel lock-up and related claims. See supra pp.16-21. In the context of respondents' stopping-distance claims, we note additional deficiencies in this evidence.
Although the one-page AccuBrake test report states that use of respondents' device shortened stopping distances by an average of 11.6%, it does not state how those distances were measured. CX-30-F. Mr. Schops testified that a tape measure could have been used. Tr. 2419. The manner in which stopping distances are measured is critical to permit control of all relevant factors and ensure accuracy. IDF 50-58. Casual consumer observations and use of tape measures are not reliable means of assessing comparative stopping distances. Tr. 824, 1242, 1287, 1912-19, 2031-32; IDF 53 & 58.(37) This unscientific test does not support either of respondents' claims of reduced stopping distances.
Similarly, the Thailand test videotape does not provide reliable evidence regarding stopping distances that would support either claim. Brake engineering experts testified without contradiction that the videotape shows the test vehicle was not properly instrumented to record the speed at which braking was commenced, that reliable means were not used to measure the stopping distances, that insufficient test runs were made to provide reliable data and that stopping distances were not corrected to accommodate differences between the actual speed and the target speed. IDF 64; Tr. 1242 (Kourik), 2024-31 (Hinch), 2438-39 (Schops).(38)
The Australian test also is deficient with respect to respondents' two stopping-distance claims. Stopping distances cannot be computed reliably from deceleration levels because deceleration is not constant. IDF 66; Tr. 2019-20 (Hinch). In addition, respondent Schops admits that the reported stopping distances were measured with a tape measure, a measurement technique that uncontroverted expert testimony persuades us is unreliable. IDF 58; Tr. 824 (Hague), 1242 (Kourik), 2031-32 (Hinch).
Tests conducted by NHTSA demonstrate clearly that ABS/Trax does not reduce stopping distances in emergencies. CX-35; IDF 69-71. Indeed, in some instances, this competent and reliable testing shows that respondents' device actually extended stopping distances by as much as 20%. CX-35-T, -W; IDF 71. Based on all of these tests, the Commission finds that both of respondents' stopping distance claims were unsubstantiated. It further finds that the claim that respondents had tests showing up to a 30% reduction in stopping distances at a speed of 60 m.p.h. was false.
C. Respondents Lacked Reasonable Basis for Claim that ABS/Trax Provides Comparative Safety
We next address respondents' advertising claim that installation of ABS/Trax will make operation of a vehicle safer than operation of a vehicle not equipped with the device. This claim is unsubstantiated.
Respondents offered no evidence in support of their comparative safety claim, and their appeal brief points to no record evidence to substantiate the representation. The only evidence in the record that might be relevant to this claim is the material relating to the ability of ABS/Trax to prevent or reduce wheel lock-up, skidding and loss of steering control and to reduce stopping distances in emergencies. We already have found that this material is neither probative nor reliable, and that it does not support a claim that ABS/Trax prevents or reduces wheel lock-up, skidding or loss of steering control (see supra pp. 16-23) or a claim that the product will shorten stopping distances in emergency circumstances. See supra pp. 23-28. It follows, therefore, that this material does not support respondents' comparative safety claim. See Tr. 1254-55 (Kourik); ID at 43.
D. ABS/Trax Does Not Comply with NHTSA Antilock Brake Standards or with Performance Standards in SAE J46
As already discussed (supra pp. 13-16), respondents' claim that their device complies with NHTSA standards for antilock braking systems is unsubstantiated and false. Respondents also claim falsely and without substantiation that ABS/Trax complies with performance standards set forth in SAE J46 ("Wheel Slip Brake Control System Road Test"). SAE J46, on its face, however, does not contain performance standards. See CX-39, CX-40. As stated in the publication itself, "This document establishes a uniform procedure for the road test of wheel-slip brake-control systems. . . ."(39) See also IDF 54, 88.(40) Because SAE J46 does not contain performance standards, "the claim that the ABS/Trax device complies with a performance standard set forth in . . . SAE J46 . . . is false and unsubstantiated." ID at 42-43.
E. Installation of ABS/Trax Will Not Qualify Vehicles for Insurance Discounts in a Substantial Proportion of Cases
We next address the allegation that respondents have made unsubstantiated and false representations that installation of ABS/Trax will qualify a vehicle for an insurance discount.
The record shows that respondents, in making their claim, relied on promotional literature from Allstate and another unspecified insurer stating that consumers could get a discount on their auto insurance if they had antilock brakes. In fact, Allstate expressly limits its discount to factory-installed ABS systems. See PSD2, F. 12. In addition, although respondents contacted insurance brokers at about the time they prepared their advertisements, they could not get an answer to whether their device would qualify for a discount. Id., F. 14. By their own admission, respondents simply "took a look at some of the advertising literature of some of the insurance carriers," and "where their advertising [said] 'ABS discount,' and did not invoke any electronics . . . factory or any other qualification for it . . . [they] put two and two together and said, 'If this is ABS and ABS discounts apply, this certainly would qualify for it.'" Id.
Respondents' leap of faith was unwarranted. The record shows that ABS/Trax is not an antilock braking system. Even if respondents' device somehow were classified as such a system, vehicles equipped with the device would not necessarily qualify for an insurance discount because insurers that offer brake-related discounts typically limit the availability of such a discount to factory-installed antilock braking systems. See PSD2, F. 2a-f; Affidavits from GEICO, State Farm, Allstate and others, appended to Complaint Counsel's Motion for Summary Decision on Insurance Discount Issue.(41)
Respondents argue that the Administrative Law Judge incorrectly found false and unsubstantiated their claim that vehicles using their device would receive an insurance discount in a significant proportion of cases. They assert error in the Judge's finding "that insurance carriers only recognize factory (OE) ABS for safety discount." RAB 12. Arguing, in effect, that the insurance carriers fail to take account of what respondents believe are "serious concerns about the safety delivered by factory (OE) ABS," and that these firms are "self-admittedly, not that knowledgeable about the technology" (id.), respondents contend that the Administrative Law Judge "deems to disqualify ABS claims of possible 'insurance acceptance based upon individual carrier policy' as untruthful, when there is every reason to believe add-on ABS should, could and would qualify were it not for the NHTSA, GM and FTC misteachings and 'tortous' [sic] conduct." Id. at 12-13. We have found the challenged advertising claim that users of respondents' device would receive a discount in their insurance in a significant proportion of cases is false and without substantiation, and the record is devoid of evidence of the collusion between the FTC and NHTSA on the one hand and the automobile manufacturers on the other. The fact that respondents believe their product should or could qualify for insurance discounts is irrelevant. What is relevant is that respondents failed to present evidence that their device qualified for such a discount.
V. FAIRNESS AND PUBLIC INTEREST
Respondents have challenged on appeal the fairness of this adjudication, particularly the delegation of the trial to an administrative law judge who, respondents assert, is in an "inseparable relationship" with the Commission, the final adjudicator of the merits. RAB 1. Section 556 of the Administrative Procedure Act, 5 U.S.C. § 556, however, expressly authorizes agencies to delegate the duties of conducting an adjudication to an administrative law judge. Nonetheless, the Commission itself must conduct a de novo review of the decision of an administrative law judge on appeal by a party to the proceeding, or it may do so on its own motion. See 5 U.S.C. § 557.
Respondents also appear to argue that the Commission's roles of prosecutor and adjudicator conflict to deprive respondents of a fair and objective proceeding. Section 554(d) of the Administrative Procedure Act, 5 U.S.C. § 554(d), explicitly provides for separation of investigatory or prosecutory functions and adjudicative functions within an administrative agency such as the Commission.(42) In addition, this argument has been rejected repeatedly by the courts.(43) Respondents' position, therefore, is without merit. Fairness and failure to prevail on the merits should not be confused.
Finally, respondents argue that this proceeding is not in the public interest. Respondents' assertion appears to be based largely on their conviction that the absence of consumer complaints or enforcement actions by other agencies renders this proceeding an "overreaction." RAB 7. The FTC Act permits the Commission to issue an administrative complaint only on finding "reason to believe," based on available information, but not necessarily on complaints or enforcement actions by other agencies, that Section 5 has been violated and that an administrative proceeding "in respect thereof would be to the interest of the public." 15 U.S.C. § 45(b). These requirements were met when the Commission issued its complaint in this matter.
The Commission looks with disfavor on challenges to its initial public interest determination in adjudications.(44) Nothing in respondents' brief or in the record suggests or supports the notion that this proceeding is not in the public interest. To the contrary, even had we not found the allegations supported by a preponderance of the evidence in the record,(45) if consumers purchased respondents' product based on respondents' unsubstantiated or false claims of product safety and performance, we may reasonably assume that these consumers are at some physical risk and have suffered economic loss as well. This more than adequately justifies the conduct of the current proceeding. We therefore reject respondents' argument on appeal as groundless.
Having concluded that respondents have violated Section 5 in advertising for their after-market braking devices, the Commission will impose an order to prevent recurrence of the unlawful acts and practices found. The Commission has wide discretion in its choice of a remedy, and it is authorized to enter an order that is sufficiently broad to ensure that respondents will refrain from engaging in similar conduct or conduct that likely would have the same or similar effects.(46)
The discretion of the Commission is limited by two constraints. First, the order must be sufficiently clear and precise that its requirements can be understood.(47) Second, the order must bear a "reasonable relation" to the unlawful practices found.(48) The Commission's fencing-in relief is not limited to enjoining unlawful actions. "[I]t is within the Commission's discretion to determine that the only effective way to terminate the effects of the unlawful conduct is by barring an otherwise lawful course of conduct which could have the practical effect of continuing the unlawful conduct unmitigated."(49)
In determining whether to impose fencing-in relief, the Commission considers the seriousness and deliberateness of the violations; the ease with which the unlawful conduct can be transferred to other products; and whether the respondents have a history of violations.(50) The more egregious the facts with respect to any one of these elements, the less important it is that other negative factors be present.(51)
B. Commission Order
The order the Commission issues in this matter, like that accompanying the initial decision, enjoins respondents from using the term "ABS" in conjunction with or as part of the name or logo for ABS/Trax or any substantially similar product. Order ¶ I. The order also enjoins respondents from making any of the claims found both false and unsubstantiated for ABS/Trax or any substantially similar product (id. ¶ II); and from making the two claims found simply unsubstantiated for ABS/Trax and certain other products, unless respondents can support them with "competent and reliable scientific evidence." Id. ¶ III. In addition, the order prohibits respondents from making misrepresentations concerning tests or studies, the compliance of ABS/Trax and certain other products with any standard, definition or regulation and the availability of insurance benefits and discounts based on use of certain products. Id. ¶ IV. The order also enjoins representations concerning the attributes, efficacy, performance, safety or benefits of ABS/Trax and certain other products unless the representations are true and supported by competent and reliable scientific evidence. Id. ¶ V. Paragraph VI of the order requires, among other things, that respondents mail to each purchaser of their ABS/Trax products a prescribed letter notifying the recipients of the order.(52)
1. Prohibition of Use of Term "ABS"
Respondents' appeal the prohibition in the order issued by the Administrative Law Judge on use of the term "ABS." Respondents call this provision "unconscionable and unconstitutional" and argue that their "entitlement to the ABS acronym ought not be a subjective arbitrary whim or an unwitting aberration." RAB 3. The Commission agrees that brand-name excision should not be ordered arbitrarily. We have considered, therefore, whether the deception inherent in respondents' use of the term "ABS" is properly remedied by prohibiting them from using the term in conjunction with, or as part of, their trade name.
Brand name excision may be appropriate when a less restrictive remedy, such as an affirmative disclosure, is insufficient to eliminate the deception conveyed by the name or will lead to a "confusing contradiction in terms."(53) The relevant question is whether any less restrictive means exists for eliminating the deception inherent in the respondents' use of "ABS" in conjunction with, or as part of, their trade name or trademark.(54)
Trade names and trademarks are valuable business assets. Here, however, the record shows the association of the term "ABS" with antilock braking systems and their performance attributes to be sufficiently established that consumers are likely to be misled into believing that the ABS/Trax device is equivalent to and provides the benefits advertised for factory-installed antilock braking systems. PSD1, F. 3. The terms "ABS" and "antilock brakes" are used interchangeably in advertising for new cars. Id. Indeed, the record demonstrates that new car manufacturers are willing to use promotional materials in which the shorthand expression "ABS" appears without an accompanying explanation, which reflects a high degree of confidence among industry marketing personnel that the consuming public has a clear understanding of the meaning of the term. PSD1, F. 1; Respondents' Answers to Complaint Counsel's First Request for Admissions 54-55. Consumers commonly use the term "ABS" to refer to antilock braking systems in their contacts with NHTSA officials, another reliable indicator that consumers would assume that a product described as "ABS" is an antilock braking system. PSD1, F. 2; Respondents' Answers to Complaint Counsel's First Request for Admissions 67-69.
In light of the strong association of the term "ABS" with antilock braking systems and their performance attributes, adding a qualifying phrase to respondents' trade names or advertising claims using the term would result in an apparent contradiction in terms and would likely confuse consumers.(55) The potential for confusion is of particular concern to us here, where the product and claims relate to the safety and performance of a motor vehicle. Permitting respondents to continue using the term "ABS" in conjunction with or as part of their trade name or trademark would enable them to continue selling a product to consumers that not only would deceive them by failing to perform as advertised, but also, could lull them into believing that the product will make their vehicles safer when the opposite would be true. Therefore, the Commission enjoins respondents from using the term "ABS" in conjunction with or as part of their trade name or trademark.(56)
2. Scope of Fencing-in Provisions
The Commission believes that respondents' practices are serious and deliberate and are readily transferable to other products and claims. See ID 48 and findings and cases cited therein. They clearly justify fencing-in relief.(57) Respondents' broad based campaign to market their braking device as an antilock braking system over an extended period (IDF 4-11), without regard to whether there was reliable information to support their claims(58) and in the face of substantial information that the claims were false, demonstrates the serious and deliberate nature of the violations before us. First, respondent Schops admitted that many of the challenged claims were intentional. Tr. 2403-04 (Schops); IDF 19. In addition, although required by Section 5 to have a reasonable basis for their claims in the form of competent and reliable scientific evidence (supra pp. 10-12), and despite being informed by NHTSA that their claims were not supported,(59) respondents failed to obtain an independent and scientific assessment of their product before continuing to disseminate their advertising claims. This conduct supports the conclusion that respondents did not want to discover or accept the truth and that their false and unsubstantiated claims were deliberate.
We also find that the ease with which the unlawful conduct here might be transferred to other products justifies limiting future claims regarding products in addition to ABS/Trax and similar devices. Respondents have demonstrated a lack of interest in using proper scientific methodology to test equipment purportedly designed to enhance the safety and performance of motor vehicles, and they have ignored the results of competent and reliable tests repudiating their claims for such equipment. Such irresponsible conduct easily could be transferred to the testing of other products.(60)
Taking into account that respondents' advertising representations are "credence" claims that consumers cannot evaluate accurately on their own, considering that the claims and product involve the performance and comparative safety of a motor vehicle, and noting the respondents' repeated and apparently deliberate disregard for testing results inconsistent with their claims, we readily conclude that strong fencing-in relief is required to prevent recurrence of the respondents' unlawful conduct.(61)
"All-product" coverage, however, in our view, is overly broad. The record does not show that respondents' business has extended beyond manufacturing and promoting one or more versions of the ABS/Trax device; nor does the record suggest that respondents are likely to extend their endeavors beyond automobile and other motor vehicle accessories and devices in the future.(62) On the other hand, coverage limited to "any braking system, accessory or device" appears less than adequate to protect against future related violations with respect to other automotive and motor vehicular products. The Commission, therefore, has decided to make all three fencing-in provisions of the order applicable to "any braking system, accessory, or device, or any other system, accessory, or device designed to be used in, on, or in conjunction with any motor vehicle."(63)
This approach will make the fencing-in coverage in Paragraphs III, IV and V consistent and, we believe, appropriately tailored.(64) This language also parallels that in the comparable provisions of the final order in Docket No. 9277.
3. Notification Requirements
The Commission adopts without change the notification provisions in the order issued by the Administrative Law Judge.(65) Generally, these provisions require respondents to compile a mailing list of all purchasers of their braking devices since 1990 and to send to each purchaser a prescribed letter notifying the purchaser that the Commission has found most of the advertising claims at issue in this proceeding "false and misleading" and that the FTC has issued an order barring respondents from making such claims in the future. The notice letter explains further that the order prohibits respondents from making safety claims and claims that their product reduces stopping distances in emergencies without having competent and reliable scientific evidence substantiating the representation. Respondents also are required to notify their distributors and seek their cooperation in locating purchasers.
It is well established that the Commission may order respondents to notify product distributors and retail purchasers that advertising claims for products they have purchased have been found to violate Section 5.(66) Such notification is intended to apprise consumers of the truth about their purchase and to reduce the likelihood of further deception from any recurrence of the false or deceptive claims.(67)
Notification provisions are especially appropriate to warn consumers about potential safety concerns.(68) Here, it is reasonable to conclude that consumers decided not to purchase factory-installed antilock braking systems in reliance on respondents' deceptive claims that their product was an equally effective alternative. It also is reasonable to conclude that these consumers will not find out until too late that unlike factory-installed systems, the device will not reduce stopping distances (CX-35; IDF 69-87) and will leave them susceptible to wheel lock-up, loss of control and possible injury. Id.(69)
The Commission concludes that the respondents have engaged in unfair and deceptive acts or practices in violation of Section 5 of the Federal Trade Commission Act. Accordingly, the Commission issues the attached final order.
1. References to the record are abbreviated as follows:
ID Initial Decision
IDF Initial Decision Finding
RAB Respondents' Appeal Brief (styled "Motion To Appeal")
Tr. Transcript of Testimony
CX Complaint Counsel's Exhibit
PSD1 Partial Summary Decision of May 22, 1996
PSD2 Partial Summary Decision of October 16, 1996
F. Finding in Partial Summary Decision
2. "ABS/Trax" is used herein to refer collectively to all the after-market devices sold or marketed by respondents for installation on a vehicle to improve its braking performance. The original 1991 product was sold under the name "AccuBrake." See CX-30-A through -C. Subsequent versions were sold as ABS/Trax and ABS/Trax2. The same claims were made with respect to all versions of the device. See IDF 7.
3. See infra note 6.
4. There appears to be a typographic error on page 41 of the Initial Decision. On line 11 of that page, the ID refers to braking "distance" instead of braking "control." This seems to be incorrect in the context. Changing the word "distance" to the word "control" makes the sentence consistent with the record, the discussion immediately preceding the sentence in question (id. at 40) and with the cited findings of fact. The Commission adopts the discussion with this modification.
5. ABSI and ABSTSI are New York corporations with their principal place of business in Wheatley Heights, New York. IDF 1. ABSI was formed in 1991 for purposes of marketing a brake product known as "ABS/Trax." The designer of the device, respondent Richard Schops, was ABSI's Chief Executive Officer and, with another individual, managed the firm on a day-to-day basis. In addition to selecting the product name and logo, Mr. Schops drafted and placed the advertising and promotional materials. Since 1992, ABS/Trax has been sold through ABSTSI. In his capacity as officer and director of ABSTSI, Mr. Schops attends trade shows, signs agreements with product distributors, and prepares promotional materials. IDF 2, 4.
6. On the same date, the Commission issued substantially similar complaints in BST Enterprises, Inc., Docket No. 9276, and Brake Guard Products, Inc., Docket No. 9277. On October 16, 1996, the Administrative Law Judge entered a judgment by default in Docket No. 9276, and on May 30, 1997, the Commission issued its final order. On May 2, 1997, the Administrative Law Judge issued an initial decision in Docket No. 9277, which was appealed to the Commission. On January 15, 1998, the Commission issued a final order and opinion in that proceeding.
7. The Complaint alleged that the general stopping-distance and comparative safety claims (Complaint ¶ 9) were unsubstantiated (Complaint ¶ 10), and that the remaining claims were both unsubstantiated and false (Complaint ¶¶ 5 and 7).
8. This case was consolidated with Docket Nos. 9276 and 9277.
9. PSD1; see also IDF 13.
10. PSD2; see also ID 43.
11. The initial decision includes some findings and conclusions on issues first addressed in the earlier partial summary decisions.
12. ID 41-43; PSD2.
13. ID 45.
14. The document filed by respondents as their appeal brief is styled "Respondent(s)' Motion To Appeal from the Decision." It fails to comply with § 3.52(b) of the Commission's Rules of Practice, 16 C.F.R. § 3.52(c) (1998), which specifies that an appeal brief "shall contain [among other things]. . . [a] concise statement of the case; . . . [a] specification of the questions intended to be urged; . . . [t]he argument presenting clearly the points of fact and law relied upon in support of the position taken on each question, with specific page references to the record and the legal or other material relied upon. . . and [a] proposed form of order. . . ." The document filed is conclusory and difficult to follow. Nonetheless, recognizing that respondents are appearing pro se, the Commission accepted the appeal and endeavored to understand, consider and address respondents' contentions.
15. In connection with their fairness argument, respondents also seem to suggest that the Commission brought this action on behalf of manufacturers of new automobiles and their brake equipment suppliers, who, respondents argue, stand to benefit from the proceeding. See RAB 7-8, 13. Respondents also suggest that because "the Giant Manufacturers" have not brought suit against respondents, their claims for ABS/Trax must be true. See RAB 14-15. Respondents cited no record evidence in support of these bald assertions, and the Commission rejects them as without factual basis.
16. Oral argument was originally scheduled for August 14, 1997. On three occasions between that date and May 14, 1998, respondent Schops requested that the Commission postpone the argument, and each time, the Commission granted his request. On the last such occasion, on April 1, 1998, in response to the latest letter from Mr. Schops seeking yet another postponement of the date of argument, the Commission issued an order postponing oral argument scheduled for April 6 and further stating that if respondents failed to appear at the next scheduled argument date, the Commission would decide the case on the papers. On April 16 the Commission issued a notice rescheduling the oral argument for May 14 at 2:00 p.m. Copies of both the April 1 order and the April 16 notice were dispatched to Mr. Schops on numerous occasions by multiple methods including express mail, commercial delivery service and facsimile transmission. In addition, the Office of the Secretary of the Commission left several recorded messages on Mr. Schops' telephone answering device describing the documents to Mr. Schops and requesting that he advise the Commission whether he intended to participate in the argument on May 14. No answer was received as of that date. See Transcript of Hearing Before the Commission, 3-5, May 14, 1998.
17. On May 18, 1998, Mr. Schops sent a letter to the Secretary explaining his failure to appear at the oral argument and stating that he had been out of town and had not received the notices of the May 14 date until four days after it had passed. The letter concludes, "As a pro se Respondent unfamiliar with protocols and pursuancies, I respectfully request instruction as to re-opening the oral argument on appeal opportunity." On May 19, complaint counsel filed in opposition, noting that the Commission's April 16 notice setting the argument for May 14 was consistent with the respondents' earlier request by letter of March 30, 1998, that the argument be set for "mid-May." Although the Commission's Rules do not permit a reply from a moving party (16 C.F.R. § 3.22(c)), Mr. Schops submitted such a reply on May 20. By order of May 27, the Commission denied respondents' motion, noting once more its previous efforts to accommodate respondents' pro se status and citing Commission Rule 3.52(i). On May 29, respondents requested that the Commission reconsider its order of May 27, and the Commission denied this motion by order of June 25, 1998.
18. Cliffdale Associates, Inc., 103 F.T.C. 110, 164-65 (1984); see id. at 174-84 (Appendix) (Federal Trade Commission Policy Statement on Deception ("Deception Statement")); accord, Kraft, Inc., 114 F.T.C. 40 (1991), aff'd, 970 F.2d 311 (7th Cir. 1992), cert. denied, 507 U.S. 909 (1993); Removatron Int'l Corp., 111 F.T.C. 206 (1988), aff'd, 884 F.2d 1489 (1st Cir. 1989).
19. To be material, a claim must be "important to consumers and, hence, likely to affect their choice of, or conduct regarding, a product. . . ." Cliffdale Associates, Inc., 103 F.T.C. at 165; see Deception Statement, 103 F.T.C. at 182.
20. Thompson Medical Co., 104 F.T.C. 648, 839 & 839-42 (Appendix) (FTC Policy Statement Regarding Advertising Substantiation ("Advertising Substantiation Statement")) (1984), aff'd, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987); see National Dynamics Corp., 82 F.T.C. 488, 552-53 (1973), aff'd and remanded on other grounds, 492 F.2d 1333 (2d Cir.), cert. denied, 419 U.S. 993 (1974), reissued 85 F.T.C. 391 (1976).
21. Pfizer, Inc., 81 F.T.C. 23, 64 (1972); see also Advertising Substantiation Statement, 104 F.T.C. at 839-40 (1984).
22. Removatron Int'l Corp., 111 F.T.C. 206, 297 (1988), aff'd, 884 F.2d 1489 (1st Cir. 1989); see Advertising Substantiation Statement, 104 F.T.C. at 840.
23. See, e.g., Porter & Dietsch, Inc. v. FTC, 605 F.2d 294, 302 n.6 (7th Cir. 1979); Pfizer, 81 F.T.C. at 67 (1972) ("[T]o have had a reasonable basis, the tests must have been conducted prior to, and actually relied upon in connection with, the marketing of the product in question."); see also Advertising Substantiation Statement, 104 F.T.C. at 839.
24. Pfizer Inc., 81 F.T.C. at 64; see, e.g., Removatron Int'l Corp., 111 F.T.C. 206 (1988), aff'd, 884 F.2d 1489 (1st Cir. 1989); Firestone Tire & Rubber Co., 81 F.T.C. 398, 463 (1972), aff'd, 481 F.2d 246 (6th Cir.), cert. denied, 414 U.S. 1112 (1973).
25. NHTSA regulations set forth the components of an antilock braking system. See CX-102; CX 37-A. The fundamentals of an antilock system are also set forth in a publication of the Society of Automotive Engineers, "Antilock Brake System Review -- SAE J2246." CX-103. SAE publications are regarded as authoritative by experts in the field. IDF 41. The views of experts in the field as to the essential features of an antilock system are consistent with definitions reflected in NHTSA and SAE standards. IDF 43; ID 41.
26. As brake application is increased, wheel slip increases. After 20% slippage, the ability to make turns falls precipitously. At 100% wheel slip, the wheels are locked and no longer rotating. IDF 37-38. If the front wheels lock up first, the driver is unable to steer. If the rear wheels lock first, the vehicle spins out of control. IDF 39.
27. Respondents presented no expert testimony.
28. Respondent argues further that by predicating use of the term "ABS" or "antilock braking system" on the presence of an electronic apparatus, the Commission essentially limits use of the term to new car manufacturers and their suppliers.
29. Mr. Schops has neither formal scientific training nor background in engineering. Before his involvement with ABSI and ABSTSI, he worked for various advertising agencies selling advertising and advertising time. He has started and operated several businesses and also worked as a marketing consultant. See IDF 60. He also admits he is not an expert. Tr. 198. In contrast, complaint counsel offered and the Judge found persuasive the testimony of three expert witnesses. IDF 20-35. We agree with Judge Parker's assessment of this testimony.
30. Although CX-35 on its face reports testing on a "Brake-Guard" device, testimony shows that although identical to the Brake-Guard product, the tested device, in fact, was a product called "AccuBrake," which was the first version of ABS/Trax to be marketed by respondent Schops and his companies. Tr. 46, 2415-16; CX-30-A through C.
31. The audio of the tape, its graphics and the accompanying written report, none of which is on the record, are in a foreign language, apparently Thai, and are unaccompanied by English subtitles or other translation. IDF 64-65.
32. The Greek letter "mu" in the context of brake testing stands for the frictional coefficient of the surface on which the test is being conducted. See Tr. 792 (Hague). Uncontroverted expert testimony in the record establishes that appropriate methodology for testing whether a product controls the level or degree of rotational wheel slip as called for in the NHTSA regulations and SAE J2246 specifications (see supra note 25) includes test runs on a variety of surfaces with different frictional or mu levels. A "split mu" test is conducted on a surface with different frictional levels on the right and left sides of the test vehicle. Tr. 1127 (Kourik).
33. See supra note 23.
34. Respondents also argue that "[t]here are . . . no D.O.T. standards . . . effectively no discreet pass/fail delineation." RAB 5. Assuming that by this, respondents mean to argue that no objective means exist to evaluate wheel-slip control, the record is to the contrary. Well established protocols exist for evaluating the ability of a device to control wheel slip and were used in the NHTSA testing. See IDF 50-54.
35. Respondents seem to argue that the NHTSA test results relied on by the Administrative Law Judge are flawed as indicators of the performance of their products, because they constitute "simple, selective, and single minded testing of mostly new cars." They argue that "RESPONDENT company agenda is primarily the retrofit of mostly older or somewhat aged, non ABS equipped cars," but also "admit[] application of its claims to all non ABS cars, including newly manufactured hydraulics braking facilitate vehicles." RAB 9. This argument is somewhat opaque. In any event, however, none of the advertising claims challenged in this proceeding distinguishes between old and new vehicles.
36. Removatron Int'l Corp., 111 F.T.C. at 297-98 & n.11.
37. CX-30-F also is inaccurate on its face. The calculation of average stopping distances reflected in the report does not appear to have included the figure for the shortest stop by the control vehicle, which was not equipped with respondents' device. The report does not show that the figures used were adjusted to compensate for the unequal number of test runs for the control and test vehicles. If the omitted stopping distance is included in the calculation, the resulting figure shows a reduction of four feet in the average stopping distance needed by the control vehicle and decreases to 7.3% the percentage of purported improvement for the vehicle using respondents' device. Id.; IDF 63. These results of an unreliable and inaccurately reported test, although minimally favorable to respondents' general position, do not constitute competent and reliable scientific evidence sufficient to support respondents' stopping-distance claims.
38. The expert testimony concerning the Thailand test and that of respondent Schops was based on the pictures appearing on the videotape because the audio, graphics and accompanying written material were in Thai. See Tr. 2024 (Hinch); see also supra note 31.
39. CX-40 at ¶ 1.4.
40. None of the tests relied on by respondents at the time they made their claims was conducted according to the protocol prescribed by SAE J46. IDF 62-67.
41. As noted in the insurance company affidavits and PSD2, the only exception to the general policy of providing discounts for only factory-installed automatic braking systems was in the State of Florida, which until 1993, prohibited insurers from conditioning discounts on factory-installation of the device. PSD2, F. 7d.
42. But see 5 U.S.C. § 554(d)(2)(C) (exempting head of agency from separation of functions requirements of the Administrative Procedure Act).
43. See, e.g., Withrow v. Larkin, 421 U.S. 35, 47 (1975) (assertion of unfairness based on combination of investigative and adjudicative functions "must overcome a presumption of honesty and integrity in those serving as adjudicators"); Sheldon v. SEC, 45 F.3d 1515 (11th Cir. 1995) ("'It is uniformly accepted that many agencies properly combine the functions of prosecutor, judge and jury.'") (quoting Touche Ross & Co. v. SEC, 609 F.2d 570, 581 (2d Cir. 1979)); FTC v. Cinderella Career and Finishing Schools, 404 F.2d 1308, 1315 (D.C. Cir. 1968) ("It is well settled that a combination of investigative and judicial functions within an agency does not violate due process.").
44. See, e.g., Pepsico, Inc., 83 F.T.C. 1716 (1974) (interlocutory order) ("Only in the most extraordinary circumstances" will the Commission review its public interest determination); Exxon Corp., 83 F.T.C. 1759 (1974) (interlocutory order).
45. To justify issuance of a complaint, the Commission must simply find reason to believe the law has been violated. This may be based, for example, on evidence suggesting that liability is more likely to be found than not. To find liability, however, the Commission must be persuaded that each of its findings is supported by a preponderance of the evidence on the record. See Adventist Health System/West, 117 F.T.C. 224, 297 (1994); Charlton v. FTC, 543 F.2d 903, 907 (D.C. Cir. 1976).
46. See, e.g., FTC v. Ruberoid Co., 343 U.S. 470, 473 (1952); Jacob Siegel Co. v. FTC, 327 U.S. 608, 611-13 (1946).
47. See FTC v. Colgate-Palmolive Co., 380 U.S. 374, 392 (1965).
48. Jacob Siegel Co., 327 U.S. at 612.
49. Sandura Co. v. FTC, 339 F.2d 847, 860-61 (6th Cir. 1964). See FTC v. National Lead Co., 352 U.S. 419, 430 (1957); FTC v. Ruberoid Co., 343 U.S. 470, 473 (1952).
50. See Thompson Medical Co., 104 F.T.C. at 833.
51. See Sears Roebuck & Co. v. FTC, 676 F.2d 385, 392 (9th Cir. 1982); Thompson Medical Co., 104 F.T.C. at 833.
52. Paragraph VII of the order requires respondents to maintain the list required by Paragraph VI for five years along with copies of the letters sent to purchasers. Paragraphs VIII-XI and XIII are standard compliance provisions typically found in Commission orders, and Paragraph XII provides for sunsetting of the order consistent with current Commission policy.
53. Continental Wax Corp. v. FTC, 330 F.2d 475, 479-80 (2d Cir. 1964), aff'g 62 F.T.C. 1064 (1963); see Thompson Medical Co., 104 F.T.C. at 837-39.
54. See Jacob Siegel Co. v. FTC, 327 U.S. at 612; Continental Wax Corp., supra.
55. See Continental Wax Corp., 330 F.2d at 479-80 (where "the offending deception is caused by a clear and unambiguous false representation implicit in the product's name, [so that] addition of a qualifying phrase would lead to a confusing contradiction in terms, no remedy short of complete excision of the trade name will suffice").
56. Compare Continental Wax with Beneficial Corp., 86 F.T.C. 119, 167-68 (1975), vacated and remanded in part, 542 F.2d 611 (3d Cir. 1976), cert. denied, 430 U.S. 983 (1977). In Beneficial, the Third Circuit vacated and remanded a provision in the Commission's order barring use of the term "Instant Tax Refund." The court held that the term could be explained without creating ambiguity or confusion and that "[i]n failing to consider fully the feasibility of requiring merely that advertising copy be rewritten in lieu of total excision of the offending language, the Commission would appear to have exceeded its remedial authority under § 5. . . ."
The record in this proceeding shows that unlike the term the Commission attempted to bar in Beneficial, the term "ABS," which, among other things, is part of respondents' product name, is widely used by industry as a synonym for factory-installed antilock braking systems and is not susceptible to unambiguous clarification. As we said in Continental Wax, the term "is more than a trade name; it is an allegation concerning the performance of a product." 62 F.T.C. at 1084. We have found that performance allegation false and unsubstantiated. Therefore, we believe that any genuine effort to explain that respondents' product name should not be taken as a claim that the product is, or will perform as if it is, a factory-installed antilock braking system would be contradictory and confusing.
57. See, e.g., Stouffer Foods Corp., 118 F.T.C. 746, 813-15; see also id. at 815-18 (Commissioner Azcuenaga concurring in part) (1994); Kraft, Inc., 114 F.T.C. 40, 139-42 (1991), aff'd, 970 F.2d 311 (7th Cir. 1992), cert. denied, 507 U.S. 909 (1993).
58. Respondents even professed reliance on a test, the results of which appear to have been manipulated to support their claims. IDF 63; CX-30-F; Tr. 2418; supra note 37.
59. NHTSA sent Mr. Schops a letter in early January 1992, informing him that NHTSA was "investigating the performance of bolt-on 'antilock' devices to determine if their performance was consistent with the marketing claims being made by their manufacturers and distributors." CX-29-A. The letter also informed Mr. Schops that "[b]ased on preliminary testing," NHTSA had "contacted the Federal Trade Commission when it appeared the devices did not perform as claimed." Id. The claims described in the NHTSA letter included several of the claims at issue in this proceeding. Respondents submitted information and product in response to the NHTSA letter and offered to assist in the investigation. CX-30 and CX-31. Mr. Schops also testified that he received a report from NHTSA at some time before August 16, 1994, concluding that ABS/Trax did not function as an antilock braking system. Tr. 2431-32. Despite their contacts with NHTSA, respondents continued to disseminate their claims throughout this period and beyond, offering as substantiation only the unsupported conclusions of respondent Schops and a few demonstrably unreliable reports, one of which is in a foreign language offered without translation.
60. See Kraft, Inc., 114 F.T.C. 40, 141- 42 (1991), aff'd, 970 F.2d 311 (7th Cir. 1992), cert. denied, 507 U.S. 909 (1993); Cf. American Home Products, 98 F.T.C. 136, 405 (1981) ("effort to misrepresent the nature of a quite ordinary ingredient is a technique that could easily be applied to advertising of . . . products other than [this one]").
61. See Kraft, Inc., 114 F.T.C. at 140-42; Thompson Medical Co., 104 F.T.C. at 832-33; Sears, Roebuck, 676 F.2d at 392; Litton Indus., Inc. v. FTC, 676 F.2d 364, 370-72 (9th Cir. 1982).
62. The record shows that respondent Schops was the founder, CEO and virtual alter ego of the corporate defendants, controlling nearly every aspect of their business. IDF 1-4. Respondent Schops, however, made clear on several occasions in this proceeding that his financial resources are modest. For example, he explained to the Administrative Law Judge that he "was financially unable to attend" the entire trial (Tr. 8); and he requested that the Commission pay his travel expenses to enable him to present oral argument on appeal to the Commission. Respondent's Response to Notice of Schedule of Oral Argument and Request for Adjournment and Request for Continuance at 1 (May 30, 1998). In addition, he stated on two occasions since the close of the administrative trial that he "has voluntarily ceased operation (Respondent's Motion for Continuance of the September 3, 1997 appeal Hearing Based upon Exigent Medical Circumstance at 1 (August 26, 1997)) and that "there is no product being manufactured, no inventory and no product being sold." Response to Notice of Schedule of Oral Argument and Request for Adjournment and Request for Continuance, supra. We are persuaded that neither respondent Schops nor the corporate respondents he controls are likely to expand business beyond the manufacture and sale of products for automobiles and other motor vehicles. Cf. Kraft, Inc., 970 F.2d at 327 (approving Commission finding that violations with respect to Kraft Singles were transferable only to other Kraft cheese products).
63. Compare Administrative Law Judge Order ¶ III ("any braking system, accessory, or device"); with Administrative Law Judge Order ¶ IV ("any product"); and Administrative Law Judge Order ¶ V ("any braking system, accessory, or device, or any other system, accessory, or device designed to be used in, on, or in conjunction with any motor vehicle").
64. We also make several technical modifications to the order issued by the Administrative Law Judge. These changes in paragraphs VI-A and B, IX-A and B and XIII are consistent with the Commission's Rules of Practice and are intended simply to conform the order more closely to the Rules. See also Brake Guard Products, Inc., Docket No. 9277 (Order Denying Respondents' Motion for Reconsideration and Modifying Final Order) (March 27, 1998).
65. Respondents do not appear to challenge the notification provisions in the Administrative Law Judge's order. Nonetheless, in view of respondents' pro se status, we will address these provisions briefly.
66. See, e.g., Removatron Int'l Corp., 111 F.T.C. 206, 311 (1988), aff'd, 884 F.2d 1489 (1st Cir. 1989); Southwest Sunsites, Inc., 105 F.T.C. 7, 176-78 (1985), aff'd, 785 F.2d 1431 (9th Cir.), cert. denied, 479 U.S. 828 (1986).
67. FTC v. Virginia Homes Mfg. Corp., 509 F.Supp. 51, 56-59 (D.Md. 1981); Removatron, 111 F.T.C. at 311 (notification of Removatron operators to prevent future dissemination of deceptive sales materials to consumers); Figgie, Int'l, Inc., 107 F.T.C. 313, 368-70, 395 (1986), aff'd, 817 F.2d 102 (4th Cir. 1987); Southwest Sunsites, 105 F.T.C. at 176-78; AMREP Corp., 102 F.T.C. 1362, 1678-80 (1983), aff'd, 768 F.2d 1171 (10th Cir. 1985), cert. denied, 475 U.S. 1034 (1986).
68. See Figgie, 107 F.T.C. at 368-70, 395; see also, e.g., MACE Security Int'l, Inc., C-3487 (Mar. 25, 1994) (consent order); Aquanautics Corp., 109 F.T.C. 34 (1987) (consent order); Bayleysuit, Inc., 102 F.T.C. 1285 (1983) (consent order).
69. See Figgie, 107 F.T.C. at 363 (reasonable to conclude that consumers purchased heat detectors in reliance upon respondents' safety claims and will be unable to determine for themselves until it is too late that their heat detectors will not provide the promised protection).