zMax Marketers Settle for $1 Million

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The marketers of zMax automotive aftermarket lubricant additives have agreed to reimburse customers $1 million to settle a false advertising suit brought by the U.S. Federal Trade Commission.

The settlement, approved March 21 by a federal judge in Greensboro, N.C., prohibits Speedway Motorsports Inc. and subsidiary Oil-Chem Research Corp. from continuing to make general claims that zMax Power System improves fuel economy, reduces engine wear and corrosion, lowers emissions and extends engine life.

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Concord, N.C.-based Speedway, which owns race tracks throughout the South and California, trumpeted the fact that the settlement allows it to continue making narrower claims, for example that zMax may restore fuel economy in older cars and reduce wear on some parts by reducing engine deposits.

Were very pleased with the resolution and the fact that the staff at the commission has confirmed that we can make the claims contained in the order, Vice President and General Counsel Marylaurel E. Wilks said. Were just going to have to be more specific in the benefits we describe.

zMax Power System is sold as a package of three fluids to be added to engines, fuel lines and transmissions. When the FTC filed its suit in February 2001, Oil-Chem was running infomercials claiming that the product, which sold for $39 per package, was guaranteed to improve fuel efficiency by at least 10 percent. Advertisements also claimed that zMax reduced engine wear and corrosion, extended engine life and reduced emissions.

According to the commissions 2001 complaint, Oil-Chem based those claims on results of results of L-38 engine tests (also known as the Sequence VIII) performed by an independent laboratory in 1997. The L-38 is a standard industry test used to measure the bearing corrosion protection properties of motor oils. The commission maintained that the results did not support Oil-Chems claims, that they in fact showed zMax causing more than twice as much bearing corrosion as motor oil alone. The suit also claimed that zMax was nothing more than tinted motor oil and that the defendants deleted detrimental information from the lab results before using them in infomercials.

In entering the settlement, Speedway officials emphasized that they were not admitting wrongdoing.

We believed the commissions claims were unsubstantiated, Wilks said. But it was a reasonable and prudent business decision to settle when you looked at the expense of litigating and the damage that the products reputation would suffer had the case dragged on.

The settlement requires Speedway and Oil-Chem to mail letters offering refunds to individuals who purchased zMax through their website or during telemarketing campaigns. It also prohibits the defendants from claiming that zMax increases gas mileage in general or by specific amounts; reduces engine wear; eliminates start-up engine wear; reduces corrosion; extends engine life; or lowers emissions.

The settlement also states that the commission will not challenge the companys right to make certain other statements which Oil-Chem provided documentation to support. The company is allowed to say that zMax soaks into metal, reduces friction, increases horsepower and dissipates engine heat. It may also say that, insofar as zMax reduces engine deposits, it maintains fuel economy and emissions in new cars; improves or restores fuel economy and reduces emissions in older cars; reduces wear on valve stems and guides, piston rings and skirts; and extends engine life.

A commission spokesman said the agency was not able to pursue its claim that zMax is tinted motor oil because the judge in the case ruled the products content proprietary. He also maintained that the commissions staff never contended that zMax causes increased corrosion.

We said that that was what the test results indicated, spokesman Jonathan Cowen said. There is no basis for belief that the product causes harm. If there were, that would have been stated in the settlement.

The zMax settlement is the latest in a series of penalties that the FTC has obtained since the mid-1990s from engine oil aftermarket additive marketers such as STP, Dura Lube and Slick 50. The penalties, all the result of false advertising suits, ranged from less than $1 million to $10 million. Others, including Prolong, Motor Up and Valvoline, settled without fines after agreeing not to make unsupported performance claims.

Theres two ways to look at all of those suits, Wilks said. You could say it gives this class of products a bad reputation. On the other hand, you could conclude that its been targeted by the FTC, for whatever reason.