FTC and DeVry University Settle False Advertising Claims for $100M
In December 2016, DeVry University agreed to pay $100 million to settle a lawsuit with the Federal Trade Commission (FTC) over allegations stemming from DeVry’s advertising about the employment rates and salaries of its graduates. According to the FTC press release announcing the settlement in FTC v. DeVry Educ. Group in the district court for the Central District of California, DeVry will pay $49.4 million in cash to be distributed to students and $50.6 million towards debt relief programs to cover unpaid student loans and debts.
This dispute began in January 2015 when the FTC filed a lawsuit in California federal court in Los Angeles against DeVry, alleging two areas of allegedly deceptive advertising. First, the FTC took issue with DeVry’s claim that 90% of all DeVry graduates who were actively seeking employment obtained jobs in their field of study within six months of graduation. The FTC alleged that DeVry did not have a reasonable basis to support this claim since, in calculating this figure, DeVry included a substantial percentage of graduates who continued with the same job that they had at the start of their DeVry enrollment, and because DeVry unreasonably construed certain unrelated jobs as within a graduate’s “field of study.” For example, according to the FTC, graduates with a “technical management” degree were all considered “in field” by DeVry when these graduates obtained jobs as a rural mail carrier, a driver who delivered rain gutters for a construction services company, and a sales associate at Macy’s. Similarly, according to the FTC, a graduate with a degree in business administration who obtained a job as a server at the Cheesecake Factory was considered “in field” by DeVry.
Second, the FTC took issue with DeVry’s claim that its graduates earned fifteen percent more than graduates with bachelor’s degrees from all other colleges and universities. Again, the FTC alleged that DeVry did not have a reasonable basis to support this higher income claim because DeVry substantiated this claim through an income report received from a third party company in 2012 that did not account or adjust for significant salary drivers (like age, experience, and field of degree) and which included findings that differed significantly from DeVry’s own collected information. Further, the FTC claimed that publicly available information did not corroborate this claim.
Under the terms of the settlement, DeVry agreed to refrain from future mischaracterizations of its educational products or services. DeVry agreed to stop including jobs that students obtained before purchasing any DeVry educational service or that students acquired more than six months prior to graduation in their advertising claims about the ability of its graduates to find jobs following graduation. Further, the settlement prevents DeVry from misrepresenting a student’s ability to obtain a job in his or her “field of study.” In addition, the settlement prevents DeVry from making any express or implied representation about the benefit or success of its services unless that data is non-misleading and relies upon competent and reliable evidence. Such evidence requires “tests, analyses, research, studies, or other evidence” relying on expertise of professionals and conducted in an objective manner through generally accepted procedures. To help ensure compliance, the settlement also requires DeVry to implement a training program designed to ensure that employees do not make a future representation that is prohibited by the settlement.
The size of the monetary relief—$100 million—is eye-catching and represents one of the largest FTC settlements in a false advertising case that we have covered on this blog. With such a loud victory for the FTC, we may see the Commission’s interest towards for-profit higher education institutions grow in the near future.