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Castrol v. Mobil 1 case from lubricants world. (archive)

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Posted by Johnny on July 30, 2001 at 15:40:03:

In Reply to: Micah O' is correct it is documented in C&D issue posted by Johnny on July 30, 2001 at 15:33:37:

By Katherine Bui

While the field is not wide open, a new ruling confirms that the definition of "synthetic" is still largely in the hands of marketers.
Part 1 of 2
Synthetic. The word has become almost a proscription in the industry, especially among scientific and technical organizations, such as the Society of Automotive Engineers (SAE) and the American Petroleum Institute (API).
Ask a marketer of motor oil products formulated with hydroprocessed mineral oils, and you might get a definition that involves cost-efficiencies and consumer choices. Ask an engineer involved in manufacturing polyalphaolefins (PAOs) or esters, and composition might be the determining factor. Despite the intense debate over the origins of synthetics, an absolute definition has remained in limbo for many years, with much of the responsibility placed on base oil manufacturers and lubricant marketers.

It was only recently, in a decision by the National Advertising Division (NAD) of the Council of Better Business Bureaus, that the first basic action and ruling in the United States set a strong precedence for a broader description in the marketing of synthetics. In this first installment of a two-part story, Lubricants World takes a look at the NAD's ruling and explores the revived debate surrounding the definition of "synthetic."

The Ruling
In a ruling released April 1999, the NAD addressed complaints filed by Mobil Oil Corp. regarding the truthfulness of Castrol North America Inc.'s claim that its Syntec® provides "superior engine protection" to all other motor oils, both synthetic and conventional, and that Syntec's esters provide "unique molecular bonding." Mobil charged that the advertisements inaccurately represented that the current formulation of Syntec is synthetic. The challenge was filed based on statements Castrol made in a series of television commercials, Web site publications, package labels, and brochures.

The NAD divided its decision to address three issues raised in the complaint. Is the reformulated Syntec synthetic motor oil? Has Castrol substantiated its superiority claims? Has Syntec been degraded?

Synthetic?
The NAD determined that the evidence presented by the advertiser constitutes a reasonable basis for the claim that Castrol Syntec, as currently formulated, is a synthetic motor oil. NAD noted that Mobil markets hydroisomerized basestocks as synthetic in Europe and elsewhere. NAD noted that the action taken by the SAE to delete any reference to "synthetic" in its description of basestocks in section J354 and API's consequent removal of any mention of "synthetic" in API1509 were decisions by the industry not to restrict use of the term "synthetic" to the definition now proffered by Mobil. Further, the SAE Automotive Lubricants Reference Book, an extensively peer-reviewed publication, states base oils made through the processes used to create Shell's hydroisomerized basestock, severe cracking, and reforming processes may be marketed as "synthetic."

Superior?
Despite its prior ruling, the NAD advised that Syntec could not advertise a superior protection claim.

Degraded?
The NAD determined that though Mobil presented clear evidence that Castrol has made a major change to Syntec's formulation, it was not sufficient to demonstrate that Syntec has been "degraded."

Industry Reaction
In a statement to Lubricants World, Castrol's legal counsel said, "The NAD's decision was clearly correct. In accepting Castrol's position on the appropriate definition of synthetic basestock and concluding that Castrol Syntec is a fully synthetic oil, the NAD accepted the overwhelming evidence Castrol presented, which included the opinions of leading scientists . . .and statements from Shell, Exxon, and other industry sources. The NAD also relied on the SAE's rejection of a restrictive definition of the type advanced by Mobil. In fact, although it had the right to do so, Mobil did not attempt to appeal the NADS's decision."

Mark Sztenderowicz, a senior research engineer from Chevron Products Co.'s Base Oil Technology Team, stated his company agreed with the NAD's decision. "We feel strongly," he said, "that 'synthetic' is a fairly broad term and a number of basestocks besides PAOs fit the description. To the extent that the NAD came to a similar conclusion and was unwilling to limit 'synthetic' to a narrow definition, we agree. We further agree with what we consider to be a commonsense interpretation that consumers perceive the word 'synthetic' to mean something man-made, but not made necessarily from a particular compound or component."

The Complaint
Mobil's Position
Mobil contended that Castrol misleads consumers that Syntec is a fully synthetic motor oil despite the fact that Syntec is no longer synthetic. The challenger alleged that after years of manufacturing Syntec with PAO, Castrol replaced the PAO, which had constituted nearly 70% of the volume of the product, with hydroprocessed mineral oil in approximately December 1997. As a result of an independent laboratory test conducted by Savant Inc., Mobil maintained that samples of Syntec purchased in June and December 1997 contained 93% and 80% PAO. Other samples of Syntec, one purchased in December 1997 and four purchased in 1998, contained no PAO, and instead contained 100% mineral oil.

Furthermore, Mobil alleged that Castrol degraded Syntec by substituting hydroprocessed mineral oil for PAO to the detriment of the consumer. Even though Syntec was able to meet the minimum industry standards, Mobil contended that in no way does it prove the current Syntec is as good as it was when it was made with PAO.


Castrol's Syntec motor oils are formulated with Shell's hydroisomerized petroleum basestocks, which the NAD has confirmed may be called synthetic.
Castrol's Position
Castrol defended its claim that Castrol Syntec is synthetic based on the nature of the basestocks used in the formulation (Shell's hydroisomerized basestocks). This is substantiated by the opinions of chemistry experts; authorities from Shell and Exxon; the SAE's Automotive Lubricants Reference Book; a paper by Dr. Martin Voltz, a Mobil scientist; and an independent motor oil expert. Castrol also contends that its data show the current formulation of Syntec provides more protection than the old formulation and is, in fact, superior to Mobil 1®, Mobil's synthetic oil.

In response to Mobil's contention that Castrol deceived its consumers by not informing them of the change in the formulation, the advertiser submitted a statement by Richard Kabel, a motor oil expert. Kabel asserted that motor oil manufacturers, including Mobil, regularly make changes in their formulations without disclosing these changes to consumers. He stated that the industry certification and licensing program is designed to provide motor oil manufacturers with the flexibility to modify their formulations as long as the oil continues to meet industry standards,

The Definition of "Synthetic"
The debate regarding the use of the word "synthetic" created a tumult in the early 1990s when a push by the lubricants industry urged the API and the SAE to set a standard or official definition for the material. The argument centered on the development of very high viscosity index (VHVI) base oils that some argued provided properties similar to PAOs but cost only half as much. VHVIs or hydroisomerized basestocks are created by chemically converting the molecules of a selected feedstock to a different set of molecules, predominantly through chemical rearrangement or decomposition of the structure of the feed molecules. PAOs are derived from a chemical process that combines small molecules to make larger complex molecules of a desired type.

SAE, unable to resolve the debate, stripped references to the word "synthetics" from its terminology books and guides (J357) in 1995 and 1996, respectively. The API eliminated references to "synthetic" from its Engine Oil Licensing and Certification System (API1509).

Mobil's Definition
In the complaint filed by Mobil against Castrol's Syntec, the PAO manufacturer contended true synthetics had to be formulated from small molecules subject to a chemical reaction, not built from natural petroleum.

Mobil submitted testimony from Professor J.M. Perez, a lubrication and technology expert from Pennsylvania State University, who told the NAD that true synthetics require "the formation of chemical products from simple well-defined molecules by synthesis or chemical reaction." Perez cited isomerization, reforming, hydrotreating, and hydrocracking as some of the many chemical and physical processing steps applied to petroleum to produce a variety of useful products, but said that they do not produce synthetic products. He argued that hydroisomerization does not create synthetic material because it does not create or build molecules, but merely rearranges the same molecules that were present in the original petroleum fraction.

Professor O.L. Chapman, an expert in synthetic chemistry from the University of California, also testified that synthetic materials are constructed from pure compounds that are themselves not natural and that the resulting synthetic material has well-defined properties. PAO and ester, he said, are built from pure small molecules that have already been subject to a chemical reaction, and are not built from natural petroleum.

Mobil also asserted that the definition of synthetic propounded by Castrol is contrary to the definition used by other motor oil manufacturers and the Environmental Protection Agency (EPA). Under the EPA's 40CFR435.11(x), "the term 'synthetic' material. . . means material produced by the reaction of a specific purified chemical feedstock, as opposed to the traditional base fluids such as diesel and mineral oil, which are derived from crude oil solely through physical separation processes."

The challenger also noted that Exxon, on its Web site, stated that a synthetic lubricant is a "lubricating fluid made by chemically reacting materials of a specific chemical composition to produce a compound with planned and predictable properties. . . ." Similarly, Mobil contended Chevron, Lubrizol, Mobil, Valvoline, and Quaker State all disseminated definitions of synthetic that did not include hydroisomerized oil.

The challenger argued that Castrol does not even meet the definition of synthetic oil that it disseminates on its own Web site. Castrol's definition reads, "synthetic lubricants are manufactured chemicals . . . created in the laboratory by combining molecules" and "a lubricant produced by synthesis rather than by extraction and refinement." Mobil asserted that, in fact, Syntec meets Castrol's own Web-posted definition of mineral oil: "oil that is manufactured from crude oil by a series of refinery processes."

Despite the fact that the label does not contain the claim that Syntec is a fully synthetic motor oil, Mobil contended that Castrol's television commercials, brochures, labels, Web sites have created an automatic association for consumers that any Syntec product is a synthetic oil. In response to Castrol's assertions that SAE changed its definition of synthetics to include mineral oils, Mobil asserted that SAE's legal administrator, Steven P. Daum, has stated, "SAE has neither issued an official definition of, nor adopted a Society position on, what does or does not constitute such materials. SAE does not render opinions on what products may be marketed or advertised as synthetic motor oil."

Furthermore, Mobil contested Castrol's claim that Section J357 of SAE's "Physical and Chemical Properties of Engine Oils," described the basestocks used in manufacturing motor oils, recognizes Shell's hydroisomerized basestocks as synthetic. The challenger claimed the section is a general guide to engine oil properties and that the current version does not define or even use the word "synthetic." Mobil also argued that Castrol's assertion that SAE's Automotive Lubricants Reference Book supports hydroisomerized oil as synthetic is misleading. Mobil contended the book expresses the views of the authors and not that of SAE.

Catrol's Definition
Castrol distinguished "synthetic" from "conventional" oil in its definition. Conventional oils, according to Castrol, are taken from the ground, purified, and refined without reforming through chemical reactions. Castrol described synthetic oils as made with stocks in which the molecular structure of a substance, such as wax, has been broken apart and transformed through a chemical reaction to create a new molecule that is different from naturally occurring substances.

Castrol called Nobel Laureate Roald Hoffman and Frank H.T. Rhodes, professor of chemistry at Cornell University, who defined synthetic material as "the product of an intended chemical reaction." Hoffman also defined at least one major chemical transformation (reaction) in its manufacture of processing, but a simple "physical separation, purification, or transformation (e.g., freezing or boiling) does not constitute a synthesis."

Sir John Meurig Thomas of the Royal Institute of Great Britain reached a similar conclusion, stating that although there is no net increase in the size of the molecule in hydroisomerization, this does not prevent the process from creating a synthetic substance. Furthermore, he noted the act of isomerizing a linear paraffin into a branched-chain paraffin makes the process of producing Shell's hydroisomerized basestock as much of a synthesis as the buildup of larger hydrocarbons from smaller ones.

J.G Helpinstill, who works for Exxon in basestock and finished-product research and development, stated that it is appropriate to classify as synthetic materials that are not found in the earth's naturally occurring resources in commercial quantities, but instead are made by substantive chemical modifications of other naturally occurring or physically recoverable substances.

In 1993, Castrol asserted SAE was asked to exclude hydroisomerized products from the definition of synthetic basestocks by defining synthesis as involving the buildup of larger molecules from smaller components. The SAE, according to Castrol, decided in 1995, as did the API, to revise its guidelines to eliminate any definition of synthetic. The advertiser contended Mobil's challenge before the NAD is really an effort to reopen a debate previously lost in these industry organizations. Furthermore, Castrol contended the SAE's Automotive Lubricants Reference Book states that base oils made through severe cracking and reforming processes may be marketed as synthetic.

Castrol also maintained that basestocks like shell's hydroisomerized basestock are marketed as synthetic in 37 countries, including the United States, and that Mobil's real interest is in protecting its market dominance. The advertiser argued that Mobil, through its alliance with British Petroleum, has also marketed hydroisomerized basestocks as synthetic in Europe and elsewhere.

In a private interview with Lubricants World, Castrol's legal counsel from Paul Weiss said, "As the NAD recognized, the scientific and industry consensus view is that synthetic basestocks are manufactured through an intended chemical reaction in which the molecular structure of a substance has been transformed. Synthetic basestocks are used to produce engine oils that meet high performance specifications." Furthermore, he contended the NAD's decision confirmed that the use of judiciously chosen synthetic basestocks is essential to the formulation of a fully synthetic engine oil that meets the exacting performance standards consumers have come to expect from synthetic engine oils.


Mobil 1's Tri-SyntheticTM Formula is formulated with all man-made basestock, meeting Mobil's definition of a synthetic.
He said, "The NAD recognized, therefore, that both composition and performance are important characteristics of synthetic lubricants. Castrol requires that its Syntec full-synthetic engine oils meet those exacting performance specifications and surpass the performance of conventional products."

Industry Reaction
In Lubricant World's discussions with several lubricant companies, the case raised a diversity of opinions.

An industry expert from a major oil company prefers a description of synthetic used by the Society of Tribologists and Lubrication Engineers (STLE), which defines synthetics as man-made compounds, not naturally occurring, and that combining low-molecular-weight materials via chemical reaction into higher-molecular-weight structures makes these products. The spokesperson said, "In our opinion, that responsibility [of placing the accountability of defining synthetics in the hands of manufacturers or lubricant marketers] will yield an inconsistent application of the basestock, and inconsistencies in finished-product quality will result."

He also argued that based on PAO synthetic products, the emphasis should be based on performance rather than composition. "This is not to imply," he suggested, "that the only way to achieve enhanced performance is through the use of PAO. In Europe, for example, oil is formulated on various quality tiers, where the consumer is informed about what each tier will accomplish in his automobile (extended drains, high-RPM engines, etc.). The North American lubricant market has a long way to go to develop this type of market."

Sztenderowicz, however, applies the definition in Webster's Dictionary in the chemical context. The dictionary defines synthetic to mean, "of, relating to, or produced by chemical or biochemical synthesis, especially produced artificially," with synthesis defined as "the production of substance by the union on chemical elements, groups, or simpler compounds or by the degradation of a complex compound."

Chevron Products Co. manufactures a VHVI line of unconventional base oils (UCBOs) at its Richmond base oil plant. Based on these definitions, Sztenderowicz said, "Both Chevron PAOs and UCBOs fit this description." He noted the definition clearly links synthetics to composition or origin, but not to a specific composition, origin, or manufacturing route. "We think that a basestock in which the molecules largely are altered in some way from those appearing in the raw materials might be classified as synthetic," Sztenderowicz explained. "Performance is an issue separate from whether or not the base fluid is considered synthetic. The association is based entirely upon marketing claims. In the real world, the performance of a lubricant is a function of both the base fluid and the additives which make up the product. Although most synthetic basestocks offer certain advantages relative to conventional stocks, superior performance is not guaranteed by their use."

Henkel Lubricant Technologies refers to the traditional definition described by ASTM D 4175 from the American Society for Testing and Materials. In this case, synthetic is defined as originating from the chemical synthesis of relatively pure organic compounds from one or more of a wide variety of raw materials. Henkel produces ester basestocks used in the manufacture of synthetic or synthesized lubricants, including polyolesters, diesters, and dimer acid esters. A spokesperson for the company said, "we feel the definition of synthetics should include a combination of performance and composition."

Motiva Enterprises LLC defines synthetics as "man-made, not naturally occurring." Motiva manufactures Group III base oils known as TEXHVI 3 and 4. A representative of the company said "The definition of synthetics should be based on how it is derived."

None of the independent manufacturers contacted by Lubricants World said they had heard of the case or judgment. Denny Madden of Amalie Oil Co., which buys and manufacturers finished goods using both PAOs and VHVI basestocks, said "Personally, I have always ad a strange feeling about calling one slice of crude oil synthetic when the very nature of refining is a synthesizing process. I understand that there needs to be a way of differentiating between basestock types and that more mechanical, physical, and chemical activity takes place when one makes PAOs and other so-called synthetic stocks, but all crude is synthesized to make any number of very different products, lubricating or otherwise. So, how do I feel about the subject? Confused!"

Outcome
Castrol North America Inc. has agreed to modify its superior engine protect and "unique molecular bonding" claims in advertising for its Syntec motor oils, but continues to advertise the product as a synthetic. Castrol says it is in the process of further upgrading and reformulating Syntec. Castrol's legal counsel added separately to Lubricants World, "The NAD's decision does not make any changes. Instead, it confirms a preexisting consensus reached by industry groups, experts, and scientists."

A Mobil spokesperson told Lubricants World that "Mobil is disappointed with the NAD's decision that, in its judgment, Castrol Syntec can be advertised and marketed as synthetic motor oil. Mobil filed the challenge in order to protect consumers and the integrity of fully synthetic motor oils. Mobil 1, the top-selling fully synthetic motor oil in the world, provides several important benefits not offered by conventional blended or hydroprocessed motor oils -- benefits that can significantly improve engine performance, even under extreme conditions." Mobil currently does not have any plans to appeal the ruling.

Industry experts had mixed reactions to the impact of the decision on developing an industry-accepted definition for synthetics. A Henkel spokesperson said, "If the technical societies adopt the broader definition of synthetics, it will force more performance-driven specifications in the market and the term 'synthetic' will become meaningless." One industry expert described, "The market will move in a direction that it has historically and support synthetics as they presently are defined. PAOs will continue to thrive and support the demands of niche markets that require the highest quality basestock available.

Joe Geagea, Chevron base oils products team manager, suggested, "Currently, there is no strict definition in North America of what constitutes synthetic, and we don't expect this to change. What we really think will come out of this decision is an awareness that several types of stocks, particularly some newer UCNOs, justifiably can be considered synthetic and are viable basestocks for the formulation of top-quality synthetic lubricants. In other words, the decision sends a message that 'synthetic' is not synonymous with 'PAO'".

Note: In the second part of this series, Lubricants World explored the market of PAOs and VHVIs and considered how the NAD ruling affects it. As this Part 2 consisted mostly of re-hashing the facts set forth above and interviews with numerous industry people with varying positions, and did not substantially add to that set out above, the second part will not be reproduced here.

Lubricants World -- Serving the Global Marketplace
is a publication of:
Hart Publications, Inc.
4545 Post Oak Place, Suite 210
Houston, TX 77027 U.S.A.
(800) 874-2544
(713) 993-9320
Fax: (713) 840-8585
www.lubricantsworld.com




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