Antitrust Law Daily Wrap Up, ADVERTISING NEWS: Online ‘high schools’ are diploma mills, FTC alleges, (Feb 10, 2016)

By Greg Hammond, J.D.

The FTC has filed suit against two operators of online “high schools,” claiming that the operators have violated the FTC Act by misrepresenting that their “fraudulent diploma mills” are legitimate, accredited online “schools,” and that consumers can use the defendants’ diplomas as valid high school equivalency credentials, when they cannot actually do so. The complaints were filed in the federal district court in Phoenix (FTC v. Stepping Stonez Development, LLC, File No. 152 3263, Dkt. 2:16-cv-00351-SPL) and (FTC v. Capitol Network Distance Learning Programs, LLC, File No. 152 2089, Dkt. 2:16-cv-00350-DJH).

The Commission alleges that the operators—Stepping Stonez Development, LLC and Capitol Network Distance Learning Programs, LLC—operated several fraudulent online “high schools” that sell fake high school diplomas to consumers nationwide. In addition, the complaints claim that the operators can use their diploma when applying for a job or to seek acceptance in the military, and that the operators’ programs are accredited. Consumers have paid between $249 and $349 for the supposed diplomas.

However, in reality, the Commission asserts that the operators do not operate accredited online high schools and do not issue valid high school credentials. Rather, consumers are only allegedly required to pay a fee and pass a nominal test in order to obtain a “diploma.” In particular, the FTC claims that the programs do not require any coursework or preparation before taking the test and the test offers hints to help consumers select the correct answers. Consequently, the Commission alleges that the supposed “diplomas” are virtually worthless and consumers have learned that the programs are unaccredited and that the diplomas are invalid when they apply for jobs or join the military.

The FTC consequently claims that the operators misrepresented that their diplomas constitute valid high school equivalency credentials accepted by employers and colleges and misrepresented that they operate legitimate, accredited secondary education programs. Furthermore, the complaints assert that the inconspicuous disclaimers on the operator’s websites are buried on a terms and conditions page and are therefore inadequate.

The complaints seek preliminary injunctive and ancillary relief; a permanent injunction; relief to address the injury caused to consumers, including rescission or reformation of contracts, restitution, refund of monies paid, and disgorgement of ill-gotten monies; and costs of bringing suit.

Companies: Stepping Stonez Development, LLC; Intentional Growth, LLC; Capitol Network Distance Learning Programs, LLC; Capital Network Digital Licensing Programs, LLC; Veritas Sales, Inc.

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