[Federal Register Volume 76, Number 54 (Monday, March 21, 2011)]
[Notices]
[Pages 15311-15313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-6491]
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FEDERAL TRADE COMMISSION
[File No. 102 3055]
Legacy Learning Systems, Inc.; Analysis of Proposed Consent Order
To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before April 15, 2011.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to ``Legacy
Learning Systems, File No. 102 3055'' to facilitate the organization of
comments. Please note that your comment--including your name and your
state--will be placed on the public record of this proceeding,
including on the publicly accessible FTC Web site, at http://www.ftc.gov/os/publiccomments.shtm.
Because comments will be made public, they should not include any
sensitive personal information, such as an individual's Social Security
Number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential. * * *,'' as provided in
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled ``Confidential,'' and must comply with FTC Rule
4.9(c), 16 CFR 4.9(c).\1\
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: https://ftcpublic.commentworks.com/ftc/legacylearningsystems and following the
instructions on the web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the web-based form
at https://ftcpublic.commentworks.com/ftc/legacylearningsystems. If
this Notice appears at http://www.regulations.gov/search/index.jsp, you
may also file an electronic comment through that Web site. The
Commission will consider all comments that regulations.gov forwards to
it. You may also visit the FTC Web site at http://www.ftc.gov/ to read
the Notice and the news release describing it.
A comment filed in paper form should include the ``Legacy Learning
Systems, File No. 102 3055'' reference both in the text and on the
envelope, and should be mailed or delivered to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue, NW., Washington, DC 20580. The FTC is
requesting that any comment filed in paper form be sent by courier or
overnight service, if possible, because U.S. postal mail in the
Washington area and at the Commission is subject to delay due to
heightened security precautions.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments to
consider and use in this proceeding as appropriate. The Commission will
consider all timely and responsive public comments that it receives,
whether filed in paper or electronic form. Comments received will be
available to the public on the FTC Web site, to the extent practicable,
at http://www.ftc.gov/os/publiccomments.shtm. As a matter of
discretion, the Commission makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC Web site. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at http://www.ftc.gov/ftc/privacy.shtm.
FOR FURTHER INFORMATION CONTACT: Stacey Ferguson (202-326-2361) or
Victor DeFrancis (202-326-3495), FTC Bureau of Consumer Protection, 600
Pennsylvania Avenue, NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 the
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that
the above-captioned consent agreement containing a consent order to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, has been placed on the public record for a
period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for March 15, 2010), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington,
DC 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
Analysis of Agreement Containing Consent Order To Aid Public Comment
The Federal Trade Commission (``FTC'' or ``Commission'') has
accepted, subject to final approval, an agreement containing a consent
order from Legacy Learning Systems, Inc. and Lester Gabriel Smith, an
officer and director of the corporation (``respondents'').
The proposed consent order (``proposed order'') has been placed on
the public record for thirty (30) days for receipt of comments by
interested persons. Comments received during this period will become
part of the public record. After thirty (30) days, the Commission will
again review the agreement and the comments received, and will decide
whether it should withdraw from the agreement and take appropriate
action or make final the agreement's proposed order.
The practices challenged in this case relate to the advertising of
respondents' instructional courses via an online affiliate marketing
program. According to the Commission's complaint, many of respondents'
affiliates promoted respondents' instructional courses through positive
endorsements in articles, blog posts, or other online editorial copy
that contained hyperlinks to respondents' Web site in close proximity
to the endorsements. For each sale of an instructional course to a
consumer directed to respondents' Web site by an affiliate, respondents
paid the affiliate a commission of 20 to 45 percent of the purchase
price. The affiliates often posted endorsements
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about respondents' instructional courses using statements that gave
readers the impression the endorsements had been submitted by ordinary
consumers or independent reviewers. Respondents failed to implement a
reasonable monitoring program to ensure that these postings clearly and
prominently disclosed the compensated nature of the affiliates'
relationship to respondents.
The Commission's complaint alleges that respondents violated
Section 5 of the FTC Act by disseminating or causing to be disseminated
reviews of their instructional courses that misrepresented that they
were those of independent, ordinary consumers. The complaint further
alleges that respondents violated Section 5 by failing to disclose, or
disclose adequately, that the affiliates receive financial compensation
from the sale of respondents' products.
Part I of the proposed order prohibits respondents, in connection
with the advertising of any product or service, from misrepresenting
the status of any user or endorser of a product or service, including,
but not limited to, misrepresenting that the user or endorser is an
independent user or ordinary consumer of the product or service.
Part II prohibits respondents from making any representation about
any user or endorser of a product or service unless they disclose,
clearly and prominently, a material connection, when one exists,
between the user or endorser of the product or service and any other
party involved in promoting that product or service. The proposed order
defines ``material connection'' as any relationship that materially
affects the weight or credibility of any endorsement and would not be
reasonably expected by consumers.
Part III requires respondents to take immediate steps to ensure
compliance with Parts I and II of the order, including maintaining a
system to review and monitor their affiliate representations and
disclosures. The proposed order requires respondents to determine, on a
semi-annual basis, their top fifty (50) revenue-generating affiliates,
and then monitor, on a monthly basis, the Web sites of those affiliates
and the Web sites of a random sample of fifty (50) of their remaining
affiliates. Part III also requires respondents to terminate any
affiliate who engages in conduct inconsistent with Parts I and II of
the order and to maintain reports regarding compliance with Part III of
the order.
Part IV requires respondents to serve copies of the order to
prospective affiliates prior to their entry into respondents' affiliate
program, and to current affiliates within ten days of the date of
service of the order.
Part V requires respondents to pay to the Commission a sum of
$250,000. This payment may be used in the Commission's sole discretion
to provide appropriate relief, which may include, but is not limited
to, the recision of contracts, payment of damages, and/or public
notification respecting the unfair or deceptive acts or practices
alleged in the complaint. If the Commission determines that such relief
is wholly or partially impracticable, any or all such funds shall be
paid to the United States Treasury.
Parts VI through X of the proposed order require respondents to:
Keep copies of relevant consumer complaints and inquiries, documents
demonstrating order compliance, and any documents relating to any
representation covered by this order; provide copies of the order to
certain of their personnel; notify the Commission of changes in
corporate structure that might affect compliance obligations under the
order; notify the Commission of changes in corporate business or
employment as to respondent Lester Gabriel Smith individually; and file
compliance reports with the Commission. Part XI provides that the order
will terminate after twenty (20) years, with certain exceptions.
The purpose of this analysis is to facilitate public comment on the
proposed order, and it is not intended to constitute an official
interpretation of the agreement and proposed order or to modify in any
way their terms.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011-6491 Filed 3-18-11; 8:45 am]
BILLING CODE 6750-01-P