FTC settles deceptive advertising charges against University of Phoenix

The Federal Trade Commission announced today that it has settled with the University of Phoenix and its parent company, Apollo Education Group, for a record $191 million to resolve FTC charges that the school used deceptive advertisements that falsely touted their relationships and job opportunities with companies such as AT&T, Yahoo!, Microsoft, Twitter, and The American Red Cross. Under the settlement, University of Phoenix will pay $50 million and cancel $141 million in debts owed to the school by students who were harmed by the deceptive ads.

The FTC's press release, with links to the FTC's complaint and the settlement, is here. University of Phoenix's press release and other statements about the case are here.

Arbel & Shapira article on nudniks and consumer activism

Yonathan A. Arbel of Alabama and Roy Shapira of the Stigler Center, University of Chicago Booth School of Business, have written Theory of the Nudnik: The Future of Consumer Activism and What We Can Do to Stop it, forthcoming in the Vanderbilt Law Review.  Here's the abstract:

How do consumers hold sellers accountable and enforce market norms? This Article contributes to our understanding of consumer markets in three ways. First, The Article identifies the role of a small subset of consumers—the titular ‘nudniks’—as engines of market discipline. Nudniks are those who call to complain, speak with managers, post online reviews, and file lawsuits. Typified by an idiosyncratic utility function and personality traits, nudniks pursue action where most consumers remain passive. Although derided in courtrooms and the court of public opinion, we show that nudniks can solve consumer collective action problems, thereby leading to broad market improvements.

Second, the Article spotlights a disconcerting development: Sellers’ growing usage of Big Data and predictive analytics allows them to identify specific consumers as potential nudniks and avoid selling to or disarm them before they can draw attention to sellers’ misconduct. The Article therefore captures an understudied problem with Big Data tools: sellers can use these tools to shield themselves from market accountability.

Finally, the Article evaluates a menu of legal strategies that would preserve the benefits of nudnik-based activism in light of these technological developments. In the process, we revisit the conventional wisdom on the desirability of form contracts, mandatory arbitration clauses, defamation law, and standing doctrines.

Can Devin Dodge Dendrite to Doxx and Damage Devin’s Cow?

by Paul Alan Levy

In pursuit of his frivolous libel suit against Devin Nunes’ Cow and other defendants in Henrico County, Virginia, Congressman Devin Nunes has served subpoenas on Twitter, on a local political consultant, and on a Richmond law firm, demanding information that would provide the identity of the owner of the Devin Nunes’ Cow account. Nunes is not, so far as we can tell, pursuing his subpoena to Twitter, because the Virginia Supreme Court held in the Hadeed case a few years ago that Virginia plaintiffs cannot assert subpoena jurisdiction over out of state companies to obtain identifying information; and the consultant, so far as we know, does not have any identifying information (although his motion to quash the subpoena is highly entertaining).  But the Richmond law firm may well have that information, so this morning Public Citizen, along with the ACLU and the ACLU of Virginia, is filing a brief as amicus curiae  in support of the law firm's own motion to quash, arguing that enforcement of the subpoena to identify Devin Nunes’ Cow would violate the First Amendment.

In that regard, we are taking up the unfinished business from Yelp, Inc. v. Hadeed Carpet Cleaning. Yelp had two arguments in the Virginia Supreme Court – lack of subpoena jurisdiction, and the First Amendment right to speak anonymously. In ruling for Yelp on the first question, the Virginia Supreme Court was able to postpone for another day the decision on the second question (the Virginia Court of Appeals had ruled against Yelp on the First Amendment issue; that ruling was vacated by the state supreme court). Our amicus brief argues that because Nunes has sued over rhetorical hyperbole and because he has presented no evidence that any factual statements his Twitter detractors may have made against him are false, his effort to use judicial power to compel the disclosure of Devin Cow’s real name runs headlong into the First Amendment.  It was a Public Citizen amicus brief, joined by the ACLU that first proposed the Dendrite standards in Dendrite International v. Doe.  We have been pursuing that issue from state to state ever since.

Virginia has never decided whether it will follow the roughly dozen states whose courts demand valid legal claims and evidence of wrongdoing before they will compel identification of anonymous critics, but our brief also addresses this anomaly: California, where Nunes lives, follows the Dendrite standard (or, more precisely, the Doe v. Cahill variation on Dendrite, adopted in another case where we had teamed up with the ACLU to file an amicus brief on this issue). Why should Nunes be allowed to take his libel claims to Virginia, to pursue an anonymous critic who may well herself be in California (her parody name has her living on the Nunes family farm), and yet fail to follow California law?

This aspect of our brief points to the disturbing pattern of libel tourism by Nunes, who has plainly decided that Virginia provides a more hospitable forum in which he can harass his critics through frivolous libel litigation. Another major difference between the two states is that California has a vigorous anti-SLAPP law, while Virginia’s is very weak. It is my view that the California SLAPP law should follow Nunes to Virginia under proper choice of law principles, but that problem may well be alleviated in the Virginia legislature this coming year – a new, strong anti-SLAPP bill is being offered,  and we can hope that Virginia’s elected officials will save the Commonwealth from having its reputation sullied as the preferred venue for libel tourism, a status that London had suffered until recent changes in the law there.

Chanrasekhar & Horton paper examines the source of the repeat player effect in consumer arbitration

Andrea Chandrasekher and David Horton, both of California--Davis, have written Empirically Investigating the Source of the Repeat Player Effect in Consumer Arbitration. Here's the abstract:

Policymakers, courts, and scholars have long been interested in whether repeat players enjoy an advantage in forced arbitration. Sophisticated empirical studies of consumer and employment awards reveal that there is indeed a repeat player effect: even controlling for other factors, companies that arbitrate more than once boast higher win rates than one-shot firms. However, researchers have not yet tried to determine whether this repeat player effect is a product of experience within the arbitral forum (the “experience” hypothesis) or characteristics of the repeat playing companies themselves (the “defendant-specific” hypothesis). This Article begins to address this issue by analyzing 4,570 consumer arbitration awards from the American Arbitration Association. Using a unique regression specification that includes both discrete and continuous random variables (a combination of functional forms not used in previous literature), it finds that the repeat player effect is more consistent with the defendant-specific hypothesis than it is with the experience hypothesis. Indeed, to the extent that repeat-playing businesses enjoy an advantage in arbitration, it likely emanates from company-specific characteristics.

House passes anti-robocall bill

By a vote of 417-3, the House of Representatives today passed a bill restricting robocalls. The TRACED Act would require phone companies to block robocalls without charging customers any extra money, require most carriers in the U.S. ensure that calls are coming from real numbers, and expand government authority to penalize robocallers.

The Hill reports that the Senate is expected to vote on the bill in the next coupe of weeks. The story is here.

Dept of Education discloses that it tried to collect from even more Corinthian Colleges students -- in violation of a court order

The Department of Education stated in a court filing this week that it had pursued 29,000 more former Corinthian Colleges students for federal student loan payments than it had previously identified, despite a court order barring collection.

As we noted in a post in October, a federal judge held Education Secretary Betsy DeVos in contempt and fined the department $100,000 after the agency said it attempted to collect payments from 16,000 former students in violation of the order.

ProPublica story on how Utah payday lenders get borrowers jailed for missing payments

Here. Excerpt:

Across Utah, high-interest lenders filed 66% of all small claims cases heard between September 2017 and September 2018, according to a new analysis of court records conducted by a team led by Christopher Peterson, a law professor at the University of Utah and the financial services director at the Consumer Federation of America, and David McNeill, a legal data consultant and CEO of Docket Reminder.

Companies can sue for up to $11,000 in Utah’s small claims courts, which are stripped of certain formalities: There are rarely lawyers, judges are not always legally trained and the rules of evidence don’t apply.

Lenders file thousands of cases every year. When defendants don’t show up — and they often don’t — the lenders win by default. Once a judgment is entered, companies can garnish borrowers’ paychecks and seize their property. If borrowers fail to attend a supplemental hearing to answer questions about their income and assets, companies can ask the court to issue a bench warrant for their arrest.

Arrest warrants were issued in an estimated 3,100 small claims cases during the period studied by Peterson’s team. Almost all of the warrants — 91% — were issued in cases filed by payday, auto title or other high-interest lenders. The number of people who are jailed appears to be small. * * * 

There's a lot more in the article worth reading.

Combating social security scam phone calls

Consumer reporter Michelle Singletary has just written a column entitled Have you received one of those Social Security scam calls? There’s a new way to report it. He column explains the varied and widespread nature of these scams and that the "Social Security Administration and its Office of the Inspector General (OIG) recently announced a new online reporting form for impostor scam calls." The agency hopes to use the information culled from consumer reporting to analyze ... trends and to help identify scammers."

Essay on the fight over on-line children's privacy

In Slate, Georgetown Law students Harsimar Dhanoa and Jonathan Greengarden have written Misinformed YouTubers Are Undermining the Fight for Children’s Privacy Online.

Just in time for the holidays: U.S. PIRG's 34th annual "Trouble in Toyland" report

Just in time for the nation's annual gift-buying orgy, U.S. PIRG has issued its 34th annual Trouble in Toyland report. It's a guide to help consumers avoid buying toys that contain lead, have small parts on which kids can choke, or are otherwise unsafe. PPIRG explains that "[o]ver the past 33 years, our annual reports have led to more than 150 recalls of unsafe toys, inspired legislation like the Consumer Product Safety Improvement Act, and empowered parents to take key actions to ensure toys are safe." More work is needed, but because of consumer protection efforts, toys are safer than ever. Here are the first three paragraphs of the Report's introduction:

Every year millions of parents, grandparents and caregivers buy toys for the loved ones in their lives.Luckily, these toys are safer than ever thanks to years of progress driven by consumer non-profits, public health organizations, elected officials, and the U.S. Consumer Product Safety Commission (CPSC).

For 34 years, our annual Trouble in Toyland has helped expose threats, including high levels of lead, “smart” toys with data security flaws, choking hazards, and more. By revealing these dangers, the report has empowered parents to take action to ensure toys are safe, while simultaneously pushing decisionmakers to enact legislation like the Consumer Product Safety Improvement Act to remove these threats completely.  

Despite that progress, dangerous toys continue to reach the market and injure children. In May, the Washington Attorney General announced testing, which revealed illegal levels of lead and cadmium in supplies and kids’ jewelry. There were 15,000 purchases of these products. In August, the Wall Street Journal found thousands of toys that failed to meet safety standards for choking hazards, toxics, and other threats--including two toys with illegal levels of lead.