On January 27, 2016, the FTC and the Department of Education both announced enforcement actions against DeVry University for making false and/or unsubstantiated claims regarding the job and earning results of its graduates. The case highlights the increased scrutiny being placed on for profit education institutions and also provides insight into how the FTC examines objective advertising claims.
In a complaint filed in federal court in Los Angeles, the FTC challenged DeVry’s claims that: (i) 90% of its students landed a job in their field of study landed a job in that field within 6 months of graduation; and (ii) DeVry graduates on average earn 15% more than graduates from other colleges and universities. The FTC alleged that DeVry’s representations were false or not substantiated at the time that the representations were made. The FTC alleged that both the 90% and 15% figures were inflated. The Education Department issued a Notice of Intent making allegations regarding the company’s career and placement statistics.
The FTC alleged that the substantiation that DeVry offered for its claims was lacking, and the case is a good reminder that the scrutiny that the FTC places on substantiation for health or scientific claims it also brings to bear on earnings or success claims involving educational or business opportunities.
The criticisms of the FTC serve as a good reminder to scrutinize your earnings or success claims before you make them. Among the criticisms leveled by the FTC, were:
- On the 90% claim, the FTC alleged that DeVry wrongfully characterized people as working in their field of study when they were engaged in jobs such as waitressing.
- On the 90% claim, the FTC alleged that DeVry excluded from its calculation many students who were looking for jobs but unable to find them, alleging that DeVry’s classification of the student as inactive biased the results.
- The FTC alleged that the income report on which DeVry relied to make its 15% earnings claim did not provide a reasonable basis for that claim.
- The report was prepared by a third party, and the FTC alleged that DeVry personnel had good cause to questions and in fact did question the reliability of the conclusions and information contained in the report.
- The FTC alleged that the income report showed results that were materially different from the information that DeVry had collected from students directly; and that the income report showed results that were contrary to publicly available information regarding income levels.
- The FTC alleged that the income report did not account or adjust for salary drivers such as age, experience or degree field.
Other for profit educational institutions have been battling with the FTC, CFPB, and state AGs, and that battle looks to be intensifying.
The FTC complaint at this point is just allegations, and DeVry announced its intention to fight the case. DeVry has created a website that tells its side of the story and defends the substantiation and methodology behind the claims it made. As we have noted before, most recently in the context of the Bayer case, just because the FTC alleges a claim is unsubstantiated does not mean that a court will agree.
We’ll have to await the outcome of this litigation to see who takes who to school.