News broke this week of a Federal Trade Commission (“FTC”) investigation into the University of Phoenix (“UP”). The FTC served a civil investigative demand (“CID”) on UP, in connection with evaluating whether the university has engaged in deceptive marketing tactics. Neither UP nor its parent company, Apollo Education Group, released a statement, but in disclosures made to the Securities and Exchange Commission, both indicated that they are evaluating the demand and intend to cooperate fully with the FTC.
What are the Truth in Advertising laws?
FTC Investigates University of Phoenix for Truth in Advertising Violations
The FTC is the primary agency responsible for enforcing federal advertising laws. Generally, the FTC Act, and its related regulations, prohibit deceptive marketing practices. In addition, advertisers must be able to substantiate all of the claims that they make in their advertisements. The FTC focuses on the material claims contained within advertisements. A statement is material when it is viewed as “key” to a consumer’s decision to purchase a product or service.
Truth in advertising laws also apply to material that is intentionally omitted from advertisements. Specifically, the FTC looks for the failure to include material information in advertisements for purposes of misleading consumers. It is unclear at this time as to what specific provision or provisions of the FTC Act UP is alleged to have violated. However, UP’s response to the CID is critical, as it may result in the filing of a federal lawsuit against UP by the FTC.
The FTC has been closely scrutinizing advertisements that promote for-profit colleges and universities, particularly in instances where students complain about high loan debts with no real prospect for employment. Please note, however, that the FTC’s recent truth in advertising investigations are not limited to colleges and universities. Accordingly, advertisers should consult competent counsel to ensure that their marketing materials are compliant with federal laws and regulations.