In the Matter of International Harvester Company 104 F.T.C. 949 (1984)

Since at least the early 1950s, the International Harvester Company's gasoline-powered tractors had been subject to "fuel geysering." This was a phenomenon in which hot liquid gasoline would shoot from the tractor's gas tank when the filler cap was opened. The hot gasoline could cause severe burns and could ignite and cause a fire. Over the years, at least 90 fuel geysering incidents involving International Harvester tractors occurred. At least 12 of these involved significant burn injuries, and at least one caused a death.

International Harvester first discovered the full dimensions of the fuel geysering problem in 1963. In that year, it revised its owner's manuals to warn buyers of new gas-powered tractors not to remove the gas cap from a hot or running tractor. In 1976, it produced a new fuel tank decal with a similar warning. Because of an industrywide shift to diesel-powered tractors, however, this warning had a very limited distribution to buyers of new tractors, and it rarely reached former buyers. International Harvester never specifically warned either new or old buyers about the geysering problem until 1980, when it voluntarily made a mass mailing to 630,000 customers.

In 1980, the FTC issued a complaint against International Harvester, alleging that its failure to warn buyers of the fuel geysering problem for 17 years was both deceptive and unfair under FTC Act section 5. The administrative law judge agreed with the Commission on each charge. In view of International Harvester's notification program, however, he concluded that a cease-and-desist order was unnecessary. Both International Harvester and the FTC's complaint counsel appealed to the full Commission. The Commission concluded that International Harvester's failure to disclose the fuel geysering problem was not deceptive, primarily because only 12 of the approximately 1.3 million tractors sold by International Harvester during the relevant time period had been involved in geysering incidents that resulted in injury. In the following portion of its opinion, the Commission addressed the unfairness claim.

Douglas, Commissioner   Unfairness analysis focuses on three criteria: (1) whether the practice creates a serious consumer injury; (2) whether this injury exceeds any offsetting consumer benefits; and (3) whether the injury was one that consumers could not reasonably have avoided. We find that all three criteria are satisfied in the present case.

There clearly has been serious consumer injury. At least one person has been killed and eleven others burned. Many of the burn injuries have been major ones. It is true that [these injuries] involve only limited numbers of people, but conduct causing a very severe harm to a small number will be covered.

The second criterion states that the consumer injury must not be outweighed by any countervailing benefits to consumers or to competition that the practice also brings about. The principal trade-off to be considered in this analysis is that involving compliance costs. More information may be helpful to consumers, but such information can be produced only by incurring costs that are ultimately borne as higher prices by those same consumers. Harvester's program which finally led to an effective warning cost the company approximately $2.8 million. Here, however, Harvester's expenses were not large in relation to the injuries that could have been avoided. We therefore conclude that the costs and benefits in this case satisfy the second unfairness criterion.

Finally, the injury must be one that consumers could not reasonably have avoided. Here, tractor operators could have avoided their injuries if they had refrained from removing the cap from a hot or running tractor—something that both the owner's manuals and common knowledge suggested was a dangerous practice. However, whether some consequence is reasonably avoidable depends, not just on whether people know the steps to take to prevent it, but also on whether they understand the necessity of taking those steps. Farmers may have known that loosening the fuel cap was generally a poor practice, but they did not know the full consequences that might follow. Since fuel geysering was a risk that they were not aware of, they could not reasonably have avoided it. This is so even though they had been informed of measures to prevent it. Such information was not the same thing as an effective warning.

Having found that Harvester was engaged in unfair practices, we must now determine what corrective measures the public interest will require. Under the particular circumstances of this case, we will issue no order at all. First, Harvester's voluntary notification program has already provided all the relief that could be expected from a Commission order. Second, Harvester has not made a gasoline tractor since 1978 and does not appear likely to do so again in the future.

Decision of administrative law judge affirmed in part and reversed in part.