Further Reading
  • Deception In The Marketplace: The Psychology of Deceptive Persuasion and Consumer Self-Protection
    Deception In The Marketplace: The Psychology of Deceptive Persuasion and Consumer Self-Protection
    by David M. Boush, Marian Friestad, Peter Wright
  • unSpun: Finding Facts in a World of Disinformation
    unSpun: Finding Facts in a World of Disinformation
    by Brooks Jackson, Kathleen Hall Jamieson
  • Trust Us We're Experts: How Industry Manipulates Science and Gambles with Your Future
    Trust Us We're Experts: How Industry Manipulates Science and Gambles with Your Future
    by Sheldon Rampton, John Stauber
Search
RECENT ARTICLES
NEWS

Deceptive Advertising

Monday
Jan242011

Nestle Agrees to Stop Lying to Parents

Every parent dreads when their kid gets sick and can't go to school or daycare. Because it means that the parent is grounded at home, too -- spending their day serving up chicken noodle soup rather than getting some work done.

So it is no surprise that food makers would have the clever idea of marketing products that promise to boost the immunity of kids. Nestle has tried to cash on fears of sick days with a shake called BOOST Kid Essentials. It rolled out the product with a bunch of claims about its magical effects. The problem is that these claims aren't backed up by research.

Now the Federal Trade Commission has finally moved to stop this deception. In an agreement just finalized this week with the FTC (see the full text below) Nestle says that it will:

  • stop claiming that BOOST Kid Essentials will reduce the risk of colds, flu, and other upper respiratory tract infections unless the claim is approved by the Food and Drug Administration.  
  • stop claiming that BOOST will reduce children’s sick-day absences and the duration of acute diarrhea in children up to age 13, unless the claims are true and backed by at least two well-designed human clinical studies.
  • not make any claims about the health benefits, performance, or efficacy of any probiotic or nutritionally complete drinks that it sells at  retail, unless the claims are true and backed by competent and reliable scientific evidence. It also bars the company from misrepresenting any tests or studies.

FTC Nestle Settlement

Wednesday
Dec222010

Moral of DIRECTV Settlement: Lying Pays

Attorney generals from 50 states piled onto a suit alleging that DIRECTV was deceiving its customers and hitting them with a variety of unethical charges. This month, the suit was settled and many of those attorney generals issued press releases trumpeting the case. But a closer look at the facts suggest that DIRECTV got off easy. Here's what the company was charged with, according to Missouri's state attorney general Chris Koster. DIRECTV:
  • Did not clearly disclose the price the consumer would be charged and the length of time the consumer would be required to keep DIRECTV services;
  • Did not clearly disclose the limitations on getting a certain price for DIRECTV;
  • Enrolled consumers in additional contracts or contract terms without clearly disclosing the terms of the contract;
  • Enrolled consumers in additional contracts when replacing defective equipment;
  • Did not clearly disclose that seasonal sports packages would automatically be renewed; and
  • Offered cash back to consumers but actually provided bill credits.
After years of making millions from its deceptive advertising practices, DIRECTV only had to pay $13.25 million to settle the suit -- an amount so low that it appears not to include a significant punitive element and probably means that the company is still coming out ahead in terms of the profits generated. 
Oh, and one other thing: DIRECTV did not acknowledge any wrongdoing in the episode. "It was important that we resolve these issues because we are a high-integrity company and we value our customer-service reputation," said the company's CEO Mike White. "And frankly, we wanted to get this matter behind us." Excuse, Mr. White, but if your company was "high-integrity" it wouldn't have gotten sued by every state attorney general in the country. This is yet another case in which a company effectively swindled millions of dollars from consumers -- stealing, let's just call it -- and not a single individual executive was held responsible or even had to apologize. Moreover, the cost of the penalty will ultimately be paid by shareholders who did nothing wrong. And the message to other companies will be that even if they get caught for their deceptive practices they may still benefit. This is justice? 
Thursday
Dec092010

How For-Profit Colleges Cheat Veterans

You know an industry has hit rock bottom morally when it targets military personnel for exploitation. These are people who risk their lives for the rest of us and often struggle by on low pay. They can be an easy mark for consumer ripoffs because they are either not well educated or not so savvy about the ways of the civilian world. A few years ago, authorities cracked down on widespread usurious lending to soldiers. And earlier this year there were reports about how life insurance companies were not paying premiums to military widows in a timely fashion.

Now comes evidence that for-profit colleges have used deceptive advertising and sales tactics to lure veterans into educational programs that don't deliver the skills and opportunities that are pomised. A damning expose in today's New York Times by Eric Lipton reveals the sordid details. The story says that 36 percent of tuition payments made under the so-called "Post 9/11 GI Bill," a government effort to help veterans get a college education, went to for-profit colleges like the University of Phoenix. These schools promise great things to veterans who enroll. Lipton tells a different tale:

But high dropout rates at some of these colleges, difficulty in transferring credits, higher tuition bills than at public colleges and skepticism from some employers about the value of the degrees are all creating unease among some in Congress.

“For-profit schools see our active-duty military and veterans as a cash cow, an untapped profit resource,” said Senator Tom Harkin, Democrat of Iowa, the chairman of the Senate committee that oversees federal education policy. “It is both a rip off of the taxpayer and a slap in the face to the people who have risked their lives for our country.”

In many ways, the story is a familiar tale of how profit hungry companies push to raise sales even when they are clearly not serving the best interests of their customers. The most damning indictment in the article comes from recruiters "from some of the nation’s largest for-profit chains, who in interviews said the intense drive to enroll veterans had led them, at times, to sign up military personnel for classes when they were all but certain they would drop out or fail."

“There is such pressure to simply enroll more vets — we knew that most of them would drop out after the first session,” said Jason Deatherage, who worked as military admissions adviser at Colorado Technical University until this spring, when he was fired, he said, for not meeting his quota. “Instead of helping people, too often I felt like we were almost tricking them.”

Tales of cheating and deception in sales can nearly always be linked to the practice of tying pay to quotas. Salespeople who want to actually make a living in a bottom-line driven setting may feel they have no choice by to engage in practices that the know are unethical. As the Times explains, recruiters:

"said in interviews that the extremely high enrollment targets set by their bosses all but forced them at times to sign up veterans for programs or classes they knew they were not qualified for.

“They weren’t going to make it, and we knew it,” said NaQuan Hudson, who worked as an admissions adviser in the military recruitment office there until August 2009, after the university had started to sign up students under the Post-9/11 G.I. Bill. “I knew I had no business enrolling some of these students. But everything here is about numbers. You make your numbers, or you are out of a job.”

Congress is now investigating and members like Tom Harkin have vowed to take action as part of the broader crackdown on for-profit colleges. But don't expect quick solutions. Military veterans are a cash cow for these schools, which have a powerful lobby in Washington.

Wednesday
Dec012010

For-Profit College Lies: The Video Evidence 

Monday
Nov012010

For-Profit Schools Hit With New Rules

One of the bigger scandals in higher education throughout the past few months has been the accusations by, amongst others, Steven Eisman (famous for his portraiture in Michael Lewis' The Big Short), who claimed that many of the nation's for-profit institutions (such as the Apollo Group's University of Phoenix) were rife with corruption and fraud.

If the notion of fraud existing at a university is bewildering, one must remember that these institutions are not in the same playing field as community or private colleges. Most of those centers for learning have non-profit status. However, the University of Phoenix, the biggest for-profit with approximately 400,000 students, is run by a publically traded company that must make its stockholders happy. The tension between focusing on students versus the company has apparently led the organization into undertaking some ethically unsound practices, such as lying about its programs' accredidations or the average salaries of its students post-degree.

A recent report from ABC news followed the tragic story of Melissa Dalmier, 30, from Illinois, who enrolled in the University of Phoenix in the hopes of becoming an elementary school teacher. Shortly after beginning her studies, she learned that the degree would not qualify her to become a public school teacher. She claimed the whole case was a lie, so ABC news investigated the issue further:

Much of the rise in government loans for for-profit students has come as a result of the recent recession, which has driven millions out of jobs and into searching for new career opportunities. For-profit companies have seized this opportunity through massive online marketing campaigns, which have lead to increasing requests for student loans.

Because of its substantial stake (over $26 billion) in this growing sector of the higher education market, the U.S. government immediately jumped at claims of widespread fraud in the industry. During the summer, numerous hearings were held on Capitol Hill in which victims were given the opportunity to tell their revealing tales. One such tragedy was that of Yasmine Issa, who spent $15,000 only to realize that her program was not accredited. In response to calls from students, lawmakers and the media to, the Education Department has recently announced 14 new regulations that it hopes can curb the worst of the abuses.