Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Provider of educational products for school children settles FTC charges, (Oct 9, 2014)

By Jeffrey May, J.D.

The marketers of WordSmart—a program that purportedly improves children’s performance in school or on college entrance exams—have agreed to refrain from misrepresenting the benefits of educational goods or services and from violating the Telemarketing Sales Rule (TSR) to settle an FTC action filed on October 3. The agency alleged that the defendants’ deceptive sales pitches violated the FTC Act and that their aggressive telemarketing campaigns violated the TSR. A consent decree, which prohibits the challenged conduct and orders the defendants to pay $147,400, was approved by the federal district court in San Diego on October 6 (FTC v. WordSmart Corp., FTC File No. 132 3161, Case No.14cv2348 AJB (RBB)).

According to the FTC's complaint, WordSmart Corporation and its president used deceptive practices to take millions of dollars from families as far back as January 2010. The defendants allegedly called consumers with school-age children—some of whom were on the “National Do Not Call Registry”—and misrepresented that the child in question had expressed interest in a WordSmart good or service. In some instances, the defendants claimed to be affiliated with the child’s school or standardized test providers.

The FTC challenged many of the defendants' claims and guarantees about their goods and services. Among these claims were representations that “Students who use WordSmart will score higher in every class and on every test” and that “WordSmart will improve: letter grades by at least 1 GPA point; SAT scores by at least 200 points; ACT scores by at least 4 points; GRE and GMAT scores by at least 100 points; and IQ scores.” Also at issue was the defendant's willingness to honor its 100% money-back 30-day guarantee.

Under the terms of the consent decree, the defendants are prohibited from misrepresenting the benefits, performance, or efficacy of their educational goods or services, including claims that the products will help students learn faster, improve reading speed, or increase grades, IQ scores, or test scores. It also bars them from misrepresenting the terms of their refund policy and violating the TSR’s Do Not Call rules. The order imposes an $18.7 million judgment; however, the monetary judgment will be suspended when the defendants pay $147,400 in light of their financial condition.

Companies: WordSmart Corp.

News: ConsumerProtection FederalTradeCommissionNews