Higher Education Policy: FTC Resurrects Penalty Offense Authority Concerning Deceptive or Unfair Conduct in the Education Marketplace

Published on Oct 06, 2021

Earlier today, the Federal Trade Commission announced that it was resurrecting its Penalty Offense Authority under Section 5 of the FTC Act to put for-profit higher education institutions on notice that the agency would “hit violators with significant financial penalties” of up to $43,792 per violation for misleading acts and practices to include false promises about job and earnings prospects or other outcomes.

The Commission sent notices to 70 for-profit institutions putting them on notice of penalty offenses. The notice spells out deceptive, unfair, and unlawful acts or practices that were previously determined by a prior FTC order to be illegal. The FTC determined which institutions would receive the letter after analyzing for-profit schools’ revenue and enrollment data from the Department of Education.

The FTC will be monitoring the market closely, taking action to hold bad actors accountable, and enhancing its enforcement cooperation with other enforcement agencies, including the Education Department, the Department of Veterans Affairs, and state enforcement partners.

FTC Commissioner Rohit Chopra and FTC Director of Bureau of Consumer Protection Samuel Levine held a Zoom press conference earlier today to discuss the agency’s Penalty Offense Authority and its use as an enforcement tool.

Levine, during the press conference, warned that all schools will be held to the same standards as those laid out in the notices. For example, non-profit institutions that converted from for-profits and the for-profit educational services companies that manage non-profits are also potentially exposed to enforcement, whether by the FTC itself—if the agency is able to assert jurisdiction—or by other federal and state enforcement and regulatory partners.

In a 2020 law review article, Chopra and Levine made the case for resurrecting the FTC’s Penalty Act Authority. In that article, they articulated five areas in which the FTC could designate penalty offenses based on existing orders, including for-profit college fraud, to deter certain behavior and seek meaningful penalties.

The Capitol Forum previously interviewed Levine about the law review article. In that interview, Levine discussed why the Penalty Offense Authority—which allows the FTC to seek civil penalties—could serve as a better mechanism to deter wrongdoing than seeking equitable relief such as disgorgement or restitution.

The FTC declined to answer a direct question about whether it would resurrect the Penalty Offense Authority in the other areas discussed in the law review article, which include false earnings claims targeting workers, online disinformation, deceptive data harvesting, and illegal targeted marketing.

But during today’s press conference Levine said, “Today’s announcement represents a significant turning point in the FTC’s approach to deterring and punishing harmful practices…Chair Lina Khan is committed to using every tool in our toolbox to protect consumers, workers, and honest businesses. One major tool is our Penalty Offense Authority.”