Late last month, the Federal Trade Commission (FTC) entered into consent decrees with two Florida-based online sellers of high school diplomas. The two companies, doing business as Jefferson High School Online and Enterprise High School Online, claimed to offer official and accredited high school diplomas that consumers can include on their resumes when applying to college and seeking a job. Consumers can obtain these diplomas by simply taking an online exam and paying between $200 and $300. According to an FTC court filing, these companies took in over $11 million in gross revenue since 2009.
The FTC alleged that Jefferson and Enterprise High Schools operated fraudulent “diploma mills” in violation of Section 5 of the FTC Act, falsely representing that the diplomas they offered could be successfully used to apply for jobs or college. The FTC also claimed that the companies’ claims of official online school accreditation were false. Citing several consumer complaints and its own investigation, the FTC alleged that the diplomas offered by Jefferson and Enterprise were not equivalent to traditional high school diplomas (or even a General Educational Development test credential) because many consumers who attempted to enroll in college, join the military, or apply for jobs were told that their diplomas were invalid credentials. Further, according to the FTC, defendants’ claim of accreditation was based on accreditation by an entity, IABOS (International Accrediting Body of Online Schools), that they themselves created. The FTC found that, essentially, the diplomas were hardly worth the paper they were printed on.
Based on these allegations, the FTC won a temporary restraining order against the schools in September 2014, requiring them to immediately cease operations. Rather than proceeding to litigation, the parties chose to enter into consent decrees in January 2015. In order to resolve the alleged violations, Defendants agreed permanently to cease selling any academic degree, and jointly to pay an $11 million penalty, equivalent to the total revenue of their operations. In addition, each defendant agreed to be bound to a broad clause restricting it from any misrepresentation of any material fact in any future business. This demonstrates that the FTC continues to take misrepresentations in advertising very seriously.
This settlement may be seen as a victory by the FTC, which has long provided guidance to consumers on how to distinguish legitimate online educational programs from those making fraudulent promises. Just as the FTC encourages consumers to do some homework before selecting an online education portal, online educators should also do their homework to determine what exactly they are allowed to say about their programs.