Cynex Manufacturing Corporation

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

Complaint 104 F.T.C.

IN THE MATTER OF

CYNEX MANUFACTURING CORPORATION

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT

Docket C-3139. Complaint, Aug. 6, 1984—Decision, Aug. 6, 1984

This Consent Order requires a Hillside, N.J. manufacturer and seller of a power factor controller (a device claimed to reduce the amount of electricity used by any motorized electrical home appliance or tool), among other things, to cease making any energy-related claim for its product unless the claim is based on competent and reliable substantiation. The order also bars respondent from making energy-related claims using the term "up to" or words of similar import, unless a significant number of consumers can achieve the maximum levels of savings or performance claimed; and where consumers cannot reasonably foresee the major factors or conditions affecting the maximum levels of savings or performance, respondent is required to clearly and prominently disclose the class of consumers who can achieve those levels. The firm is further prohibited from misrepresenting the purpose, content or conclusions of any test or study; and required to retain records substantiating claims for a period of three years.

Appearances

For the Commission: Brinley H. Williams and Mitchell Paul. For the respondent: Maurice H. Bitner, Parsippany, N.J.

COMPLAINT

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

PARAGRAPH 1. Respondent is a corporation organized, existing and doing business under and by virtue of the laws of the State of New Jersey, with its office and principal place of business located at 28 [illegible]ger Place, Hillside, New Jersey.

PAR. 2. Respondent is now, and at all times relevant to this complaint has been, engaged in the manufacture and sale to the public of

CYNEX MANUFACTURING CORP. 465

464 Complaint

a device known as a power factor controller which is sold by respondent under the name “Watt Wizard Model PFC 1000”. PAR. 3. In the course and conduct of its business, respondent has caused its power factor controller, when sold, to be shipped from its place of business in New Jersey to its distributors, retailers and individual customers in various States of the United States. Respondent’s manufacture, sale and distribution of its power factor controller constitutes maintenance of a substantial course of trade in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act.

PAR. 4. Respondent at all times mentioned herein has been and now is in competition with individuals, firms and corporations engaged in the sale of power factor controllers and other products. PAR. 5. In the course and conduct of its business, and for the purpose of promoting the sale and distribution of its power factor controller, respondent has disseminated and caused the dissemination of advertising for its power factor controller in magazines, newspapers and catalogs distributed by mail and across state lines and in radio and television broadcasts transmitted by stations located in various States of the United States and the District of Columbia having sufficient power to carry such broadcasts across state lines. In addition, respondent has distributed by mail or other means, product brochures and other sales literature directly to consumers or to dealers for display or distribution to consumers prior to or at the time of sale. PAR. 6. Typical of said advertisements and promotional materials, disseminated as previously described, but not necessarily inclusive thereof, are the advertisements and promotional materials attached hereto as Exhibits A, B, C, D, E, F, and G. An example of the statements contained in said advertisements is “Save up to 60% of the cost of running your motorized home & shop appliances” (Exhibit B). PAR. 7. Through the use of the advertisements and promotional materials referred to in Paragraph Six and others not specifically set forth herein respondent has represented, and now represents, directly or by implication, that:

Use of the Watt Wizard Model PFC 1000 power factor controller will save an appreciable number of consumers 60 percent or close to 60 percent of the electricity used by and cost of operating any motorized electrical home appliance or tool under circumstances reasonably foreseen by consumers.

PAR. 8. In truth and in fact, contrary to respondent’s representation set forth in Paragraph Seven:

(a) Few, if any, consumers, using Watt Wizard Model PFC 1000, will save 60 percent or close to 60 percent of the electricity used by and

Complaint 104 F.T.C.

the cost of operating any motorized electrical home appliance or tool under reasonably foreseen circumstances.

(b) The Watt Wizard Model PFC 1000 power factor controller can only be used with appliances having electric alternating current motors, and therefore it cannot save electricity or reduce the cost of operating motorized electrical home appliances or tools powered by universal or brush motors.

Therefore, said representation is false, misleading and deceptive.

PAR. 9. In Exhibits A, B, C, D, E, F, G, and other advertisements and promotional materials substantially similar thereto, respondent has represented, directly or by implication, that at the time of the initial and each subsequent dissemination of the representation set forth in Paragraph Seven, it possessed and relied upon a reasonable basis for that representation.

PAR. 10. In truth and in fact, respondent did not possess and rely upon a reasonable basis for the representation set forth in Paragraph Seven, because, inter alia, respondent's test protocols and calculations were not designed or conducted to assess product performance under circumstances reasonably foreseen by consumers in operating motorized electrical home appliances or tools. Therefore, the advertisements and promotional materials containing the representation set forth in Paragraph Seven were and are false, misleading and deceptive.

PAR. 11. The use by respondent of the aforesaid false, misleading and deceptive representations and the placement in the hands of its distributors and retailers of the means and instrumentalities by and through which others may have used the aforesaid false, misleading and deceptive representations have had the capacity and tendency to mislead consumers into the erroneous and mistaken belief that said representations were and are true and complete, and into the purchase of respondent's power factor controller by reason of said erroneous and mistaken belief.

PAR. 12. The acts and practices of respondent as herein alleged are all to the prejudice and injury of the public and of respondent's competitors, and constitute unfair methods of competition and unfair and deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the Federal Trade Commission Act.

Commissioners Pertschuk and Bailey voted in the negative.

Complaint EXHIBIT A

WATT WIZARD You are wasting money each time you run your electrically-powered motors!

WATT WIZARD SAVES MONEY . . .

MACHINES . . .

MAINTENANCE! ALLOWS YOU TO SAVE UP TO 60% OF THE COST OF RUNNING YOUR MOTORIZED HOME & SHOP APPLIANCES! $39.95

HOW IT WORKS:

To put it simply, the WATT WIZARD enables your refrigerator for example to run efficiently on just 60 to 80 volts, instead of the full 120 volts direct from the power line! In addition to the wasted electricity cost, the wasted power produces an excess amount of heat within the motor thus reducing its life and efficiency and increasing the probability of repairs and maintenance. The WATT WIZARD softens the Power Factor of the motor and applies the correct voltage required to keep the motor running at a constant energy saving speed.

RESULTS:

You save up to 80% on each WATT WIZARD application. Your motor runs more efficiently, quieter, cooler . . . knowing it a more trouble-free longer life! Since motor life is typically doubled for each 10°C reduction in insulation temperature the WATT WIZARD could reduce the temperature of a motor up to 30 degrees. Motors like refrigerators and freezers that run 24 hours a day, are excellent candidates for the WATT WIZARD.

10 Year Motor Warranty If your motor burns out within 10 years from date of purchase, we will replace it free.

CALL Professional Marketing Services 997-6468 VISA or Mastercard accepted.

8930 Suite J Oakland Center Columbia, Md. 21045

Complaint 104 F.T.C.

EXHIBIT B

SERVICE ACE HARDWARE SALE ENDS 12-14-81

WATT WIZARD Demonstration Sunday, December 13 10 a.m. - 4 p.m.

Naperville Store Only

SAVE UP TO 60%

OF THE COST OF RUNNING YOUR MOTORIZED HOME & SHOP APPLIANCES

IT REALLY WORKS! makes motors run cooler, longer, more trouble-free...and COST LESS TO OPERATE!

REG. $39.95

WATT WIZARD ONLY 34.95 LESS $2.00 FACTORY REBATE

NAPERVILLE ACE 1020 E. Ogden Naperville, IL 355-0077

WHEATON ACE HARDWARE 106 E. Front Wheaton, IL 668-0826

WEST CHICAGO ACE 127 W. Washington West Chicago, IL 231-0336

WESTMONT ACE HARDWARE 34 W. Burlington Westmont, IL 969-0060

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Complaint

EXHIBIT C

CYNEX Manufacturing Corporation

26 SAGER PLACE • MUNSING NEW JERSEY 07001 (201) 349-3000 • TWX 710-995-4530 CABLE CYNEX

Ref: Watt Wizard for Farm February 10, 1971

AMEN:

LISTEN CAREFULLY. I'm gonna tell you about the Watt Wizard which can save you up to 60% of the electric power required in the motor-operated appliances in your home or business. Since the Watt Wizard was conceived, it has been our aim to save you money and your machines life. We want to save you money. Use it to save money and save your machines life. We have a lot of money. Just plug your appliance into Watt Wizard and plug the Watt Wizard into wall outlet. Watt Wizard is yours for only $19.95. If you need more than one, you need more than one. Look at your electric bills. You need Watt Wizard. Today. To order call 800-453-4000. That's 800-453-4000 or send $19.95 + 2.00 postage & handling to M.E.C. Corp., Box 653, Fayetteville, N.C. 07207. That's M.E.C. Corp., Box 653, Fayetteville, N.C. 07207.

Bills piling up? The Watt Wizard can save you, and it comes with a money back guarantee.

N.J. residents please add sales tax

Complaint

EXHIBIT D

Watt Wizard Saves Energy! Saves Money! Saves Machines! Only $39.99

Watt Wizard Saves Energy! How? The A.C. induction motors in a home, farm or business use the same amount of power to run at any given speed.

The power factor controller is a relatively new device that saves energy by sensing the load on the motor and reducing the voltage when the motor is not working as hard. This reduces the current drawn by the motor and the power consumed. The Watt Wizard will reduce the voltage and current to the motor when it is not needed, thus saving energy and money.

The Power-Factor Controller Was Developed and Tested by NASA.

The amazing energy-saving device was developed by NASA. The Power Factor Controller is a spin-off of the space program to reduce power consumption in space. The Power Factor Controller was developed by NASA to reduce the power consumption of A.C. induction motors. Frank Nola invented the device at the NASA George C. Marshall Space Flight Center in Huntsville, Alabama. The controller was patented in 1977. In 1981, NASA released the invention to the public.

The Watt Wizard is a commercial version of the NASA Power Factor Controller. The Watt Wizard is manufactured by M.E.C. Corp. under license from NASA. The Watt Wizard is the only power factor controller authorized by NASA. M.E.C. Corp.

is a prime contractor for the U.S.

Army. M.E.C. Corp. manufactures the Watt Wizard in the U.S.A.

Watt Wizard Saves Money! (Your Money.) No one knows better than you the cost of electric power. The cost of electric power has been rising dramatically over the years. The Watt Wizard will save you money on your electric bill. The Watt Wizard will pay for itself in a short time and continue to save you money year after year. The Watt Wizard will save you money on your electric bill. The Watt Wizard will save you money on your electric bill.

It's So Easy to Use.

Just plug the Watt Wizard into any 110 volt A.C. outlet and then plug your appliance into the Watt Wizard. It's that simple.

The Watt Wizard is a small device that is easy to install and use. The Watt Wizard will save you money on your electric bill. The Watt Wizard will save you money on your electric bill.

Watt Wizard Saves Machines! The Watt Wizard will save your machines from the damaging effects of low voltage. The Watt Wizard will protect your machines from voltage spikes and surges. The Watt Wizard will save you money on your electric bill. The Watt Wizard will save you money on your electric bill.

Independent Studies Prove Power Savings of Up To 61% On Watt Wizard's Efficiency | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 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Complaint EXHIBIT E

Gone NAME BRANDS DEPARTMENT STORES

GAME THE WIZARD 39.77

The WIZARD comes in 2 models, the 4 player model and the 2 player model. Both models are identical except for the number of players and the score display. The 4 player model has a larger display and player 3 and 4 use the same buttons as players 1 and 2.

CONSUMER USES:

* Background * Strategy * Skill * Education * Just Plain Fun * Challenge * Competition

HISTORY In 1977 Bally Mfg. Co.

introduced a microprocessor based video game called "The Wizard"

which was an instant success. The success of this game led to the development of a home version. Bally introduced the home version in 1978. This home version is the subject of this report.

Complaint 104 F.T.C.

EXHIBIT F SAVE MONEY! USE LESS ELECTRICITY WITH The Watt Wizard PAYS FOR ITSELF

SAVE UP TO 50% on the power used for AC motors motor driven electrical devices

ONLY $49.99 FOR MODEL A

Consumer Uses:

• Refrigerators • Freezers • Attic Fans • Swimming Pools • Furnaces • Washers* • Dryers* • Air Conditioners*

Industrial Uses:

• Oil Presses • Lathes • Food Processing Machines • Printing Machines • Textile Machines • Pumps • Conveyors

Features:

• Power on Light • LED Readout to Show Savings • Fuse Protected • Factory Preset • Solid State Design • Compact Size • UL, CSA Approved • 1 Year Limited Warranty • Model PLB-1A • Measures Watts and Saves from 10%

Complaint EXHIBIT G

COLD WEATHER BARGAINS Glass Enclosures By Fireguard 79.95 Reddy Space Heater 159.95 269.95 Titan Portable Utility Heater 28.88 ALBERT BROS.

2207 BELLMORE AVE. BELLMORE, L.I.

516 785-2262 9.95 SAVE! UP TO 60% ON HEATING COSTS POWER FACTOR CONTROLLER 39.95 2.00 37.95 Boekamp Quartz Heater Sale 29.88 VISA Master Charge

Decision and Order 104 F.T.C.

DECISION AND ORDER

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

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

The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Cynex Manufacturing Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of New Jersey, with its office and principal place of business located at 28 Sager Place, in the City of Hillside, State of New Jersey.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER

Definitions

For purposes of this order, the following definitions shall apply:

Energy-related claim means any general or specific, oral or written representation that, directly or by implication, describes or refers to

464 Decision and Order

energy savings, efficiency or conservation; electricity savings, or electricity cost savings.

A competent and reliable test means any scientific, engineering, or other analytical report or study prepared by one or more persons with skill and expert knowledge in the field to which the material pertains and based on testing, evaluation, and analytical procedures that ensure accurate and reliable results.

A power factor controller means any device for use with motorized home appliances or tools that reduces the voltage applied to electric alternating current motors by sensing the phase angle between motor voltage and current.

PART I

It is ordered, That respondent Cynex Manufacturing Corporation, a corporation, its successors and assigns, and its officers, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale or distribution of any power factor controller or any other product or service, in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

(1) Making any energy-related claim for any power factor controller unless, at the time that the claim is made, respondent possesses and relies upon a reasonable basis consisting of a competent and reliable test or other objective material which substantiates the claim.

(2) Making any energy-related claim which uses the phrase "up to" or words of similar import unless the maximum level of savings or performance can be achieved by an appreciable number of consumers; and, further, in any instances where consumers could not reasonably foresee the major factors or conditions affecting the maximum level of savings or performance, cease and desist from failing to disclose clearly and prominently the class of consumers who can achieve the maximum level of savings or performance.

(3) Making any claim concerning the performance capabilities of any power factor controller unless, at the time that the claim is made, respondent possesses and relies upon a reasonable basis consisting of a competent and reliable test or other objective material which substantiates the claim.

(4) Misrepresenting in any manner, directly or by implication, the purpose, content, or conclusion of any test or study upon which respondent relies as substantiation for any energy-related claim or performance claim, or making any statement or representation which is inconsistent with the results or conclusions of any such test or study.

Decision and Order 104 F.T.C.

PART II

It is further ordered, That respondent, its successors and assigns, and its officers, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale or distribution of any power factor controller, in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, shall maintain written records:

1. Of all materials relied upon in making any claim or representation covered by this order;

2. Of all test reports, studies, surveys or demonstrations in its possession that contradict, qualify, or call into question the basis upon which respondent relied at the time of the initial dissemination and each continuing or successive dissemination of any claim or representation covered by this order.

Such records shall be retained by respondent for a period of three years from the date respondent's advertisements, sales materials, promotional materials or post purchase materials making such claim or representation were last disseminated. Such records shall be made available to the Commission staff for inspection upon reasonable notice.

PART III

It is further ordered, That respondent shall forthwith distribute a copy of this order to each of its operating divisions and to each of its officers, agents, representatives or employees engaged in the preparation and placement of advertisements or other sales materials, and to each of its distributors, dealers and any other person engaged in the wholesale or retail sale of any power factor controller manufactured by or for respondent.

PART IV

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

PART V

It is further ordered, That respondent shall, within sixty (60) days after this order becomes final, file with the Commission a report in

464 Decision and Order 477

writing, setting forth in detail the manner and form in which it has complied with the order.

Commissioners Pertschuk and Bailey voted in the negative.

Complaint 104 F.T.C.

IN THE MATTER OF

SOVEREIGN CHEMICAL & PETROLEUM PRODUCTS, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT

Docket C-3140. Complaint, Aug. 8, 1984—Decision, Aug. 8, 1984

This consent order requires a Chicago, Ill. manufacturer and seller of automotive products, among other things, to cease representing that any automatic transmission fluid or motor oil possesses certain performance or quality characteristics, including any claim that a motor oil has an American Petroleum Institute (API) service classification or a Society of Automotive Engineers (SAE) viscosity, unless such claims can be substantiated by competent and reliable evidence. Respondent must retain representative samples of motor oil and automatic transmission fluid from its production batches and filling runs, documents its sampling method, and pay for an independent laboratory to test these and other samples obtained in the marketplace. Respondent must also maintain records to substantiate claims covered by the order and distribute a copy of the order to all personnel with responsibility for advertising, quality control or corporate policy.

Appearances

For the Commission: James K. Leonard.

For the respondent: Ira Berman, Zissu, Berman, Halper, Barron & Gumbinger, Chicago, Ill. and Gary B. Homsey, Oklahoma City, Okl.

COMPLAINT

The Federal Trade Commission, having reason to believe that Sovereign Chemical & Petroleum Products, Inc., hereinafter referred to as respondent, has violated Section 5 of the Federal Trade Commission Act and that an action is in the public interest, issues this complaint and alleges:

PARAGRAPH 1. Respondent Sovereign Chemical & Petroleum Products, Inc., is a Delaware corporation with its office and principal place of business located at 6801 West 66th Place, Chicago, Il. Until August 18, 1982, respondent was known as Sovereign Oil Company, Inc. All of the respondent's business is done through its four wholly-owned subsidiaries: Future Chemical & Oil Corporation (New York), Sovereign Oil Company (Illinois), Sovereign Oil Company of Pennsylvania, Inc., and Sovereign Oil of Florida, Inc.

PAR. 2. Respondent is, and has been, engaged in the manufacture and sale of substantial quantities of motor oils, automatic transmis-