January 21, 2018

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FTC Settles Section 5 Claims Against Company Promoting Schools to Military Servicemembers

The FTC has entered a proposed consent order with Victory Media, Inc. (VMI) to settle the FTC’s charges that VMI violated Section 5 of the FTC Act by engaging in deceptive acts or practices in connection with its promotion of post-secondary schools to military veterans and servicemembers.

According to the FTC’s complaint, VMI creates advertising, marketing, and promotional content for schools that VMI disseminates through various media, such as magazines, and that targets veterans and servicemembers seeking new education and employment opportunities.  VMI also operates several websites directed at military consumers on which it posts articles and other information on educational topics and schools and describes itself as an advisor to such consumers on social media sites.  In addition, on one of its websites, VMI operates a search tool for military consumers seeking to identify schools in their fields of interest.

The FTC claimed that the following conduct by VMI constituted false, misleading or deceptive acts or practices in violation of Section 5:

  • Representing that its search tool only searched schools that met VMI’s “military friendly” criteria.  According to the FTC, the tool actually searched any schools that paid to be included, whether or not VMI had designated them as “military friendly.”  As a result, the tool’s search results included schools that VMI had not designated as “military friendly.”

  • Endorsing specific schools in articles, emails and social media.  According to the FTC, although they were paid advertising, VMI represented in such communications, expressly or by implication, that such endorsements were independent sources of information and not paid advertising.

  • Representing, expressly or by implication, in articles, emails and social media that it recommended specific schools.  According to the FTC, VMI failed to disclose or disclose adequately that many of such schools had paid VMI to be recommended.

In addition to reporting and recordkeeping and requirements, the terms of the proposed consent order include the following:

  • In connection with paid promotional content, VMI is prohibited from making any misrepresentations, expressly or by implication, (1) regarding the scope of any search tool, including whether the tool only searches “military friendly” schools, (2) about material connections between VMI and any schools, or (3) that paid commercial advertising is independent content.

  • In connection with any endorsement of a school (or third-party endorsement VMI prepares), VMI must clearly and conspicuously disclose, in close proximity to the endorsement, any payments or other material connections between VMI or the other endorser and the school.  For purposes of this requirement, an endorsement is any advertising message that consumers are likely to believe reflects the beliefs of a party other than the school.

Copyright © by Ballard Spahr LLP

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Culhane, Ballard, Partner
Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing,...

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