The Federal Trade Commission (FTC) dropped the $30 million hammer on Career Education Corporation (CEC) for using leads obtained from dubious and illegal website operators to engage with prospects with the hope of having the prospect enroll in CEC’s post-secondary schools. This is one of the first cases in which a company was being held responsible for its vendors’ conduct.
CEC and its many subsidiaries used lead generators that claimed to be affiliated with the U.S. military or be recommended by the military. These sites’ false claims were designed to entice individuals to share their personal identifying information (PII) “under the guise of providing job or benefit assistance.”
“You can’t skirt the law by outsourcing illegal conduct to your service providers,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “This case demonstrates that the FTC will seek to hold advertisers liable for the deceptive or illegal practices of their affiliates, publishers or other lead generators. We expect companies purchasing leads to implement strong vendor management programs and stay on the right side of the law.”
CEC: The Back Story
According to the FTC complaint, CEC’s “lead generators posed online as official U.S. military recruiters or as job-finding services, then called consumers whose contact information was solicited under those false pretenses. CEC’s lead generators then continued to misrepresent that the military, or an independent education adviser, recommended CEC. Three of the lead generators—Sun Key, Edutrek and Expand—have themselves been the subject of FTC law enforcement actions.
Sun Key implied an association with the U.S. military through its imagery. The FTC charged Sun Key with having its personnel contact interested individuals posing as representatives of the military and pitch the post-secondary schools—schools that were supposedly endorsed by the military. Sun Key would sell each lead to entities such as CEC for between $15 and $40 each. The FTC socked Sun Key with an $11.1 million penalty for its deceptive practices.
EduTrek also would use images to project its affiliation with the U.S. military. If a visitor to the site read the small print, howeer, they would learn such was not the case. The company had no leads to jobs; it was simply collecting the consumer information and then selling the information to third parties. While the example reflects an implied U.S. government affiliation, EduTrek reached into the worlds of unemployment benefits, health insurance, Medicaid coverage and more.
In 2016, Expand settled with the FTC for its deceptive pre-screening interviews for “employers, like banks, government agencies and multinational corporations,” according to the FTC complaint. The reality was that the interviews were designed to generate leads for its clients, to which the firm would sell each lead for $22 to $125. The FTC fined the firm $90 million, of which all but $360,000 was suspended with several caveats including truthfulness of Expand and its representatives.
Bottom line: Know your vendor and the provenance of the information being used by your firm, especially in the marketing and sales arena.