On December 10, 2019, the Federal Trade Commission ("FTC") announced a settlement with the University of Phoenix and its parent company, Apollo Education Group ("AEG"), for $191 million dollars. This $191 million dollar settlement is the "largest settlement the FTC has ever obtained against a for-profit school." This settlement is the culmination of a multi-year investigation undertaken by the FTC Bureau of Consumer Protection beginning in "> 2015.
How did The University of Phoenix Allegedly Violate Advertising Law?
University of Phoenix Committed Advertising Law Violations Through Use of Deceptive Ads
The University of Phoenix and AEG have attempted to attract prospective students by publishing advertisements featuring eye-catching, impressive employers, such as Twitter, Microsoft, the American Red Cross, Adobe and Yahoo!. As described in the complaint filed by the FTC, the University of Phoenix strategically focused on "large, stable, technology-based, forward-focused companies with great reputations." Through University of Phoenix's "Let's Get to Work" advertising campaign, these advertisements were used to mislead prospective students into believing that the University of Phoenix had established relationships with these notable employers and that the curriculum offered by the University of Phoenix was tailored to prepare students for jobs at those companies. One study examining this advertising campaign showed that the purported relationship with leading employers increased the percentage of consumers interested in attending University of Phoenix from 12% to 29%. However, in reality, the University of Phoenix had not been working with any of these marquis employers to develop curriculum or otherwise usher their graduates into jobs.
To hold the University of Phoenix and AEG accountable for their deceptive marketing practices, the FTC charged them with two counts of violating Section 5(a) of the FTC Act which prohibits "unfair or deceptive acts or practices in or affecting commerce." Count I charged that University of Phoenix violated the FTC Act by misrepresenting relationships with corporate partners; Count II charged the school with misrepresentations regarding curriculum development.
Of the $191 million settlement figure, $50 million is earmarked for the FTC, while the remaining $141 million will be dedicated to canceling the debts owed to the school by those students who were misled by the advertisements.
Advertising Law and Your Business
This significant settlement illustrates the FTC's continued interest in both holding for-profit colleges accountable for deceptive practices and protecting consumers against misleading advertising. In addition, the historic scale of this settlement will likely send shock waves through the for-profit college industry and serve as a cautionary tale for those exploring new ways to attract prospective students. While the marketing partner itself was not a party to the FTC's complaint in this case, marketers should also exercise caution and consult competent counsel to ensure that their advertisements are compliant with applicable state and federal advertising laws.
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