Featured News Article Image, Grand Canyon University in Arizona photograph, graphic of Federal Trade Commission emblem

FTC Files Lawsuit Against AZ’s Grand Canyon University

Dec. 28, 2023 6:49 am PST | SEO Gazette | By Luke Ross

December 28, 2023 – The Federal Trade Commission (FTC) has initiated legal action against Grand Canyon University (GCU), an Arizona-based Christian institution, along with Grand Canyon Education (GCE), Inc., and GCE CEO Brian Mueller, who also serves as the president of GCU. The lawsuit, filed in the U.S. District Court for the District of Arizona, accuses the defendants of misleading students about the costs of its doctoral programs and falsely representing the university as a nonprofit organization. The FTC’s allegations include deceptive and abusive telemarketing practices, as reported by Fox Business.

GCU’s Alleged Unethical Advertising Practices

The FTC claims that GCU and GCE misrepresented the total cost of the university’s “accelerated” doctoral programs as being equivalent to 20 courses or 60 credits. However, the FTC asserts that nearly all doctoral students are required to take additional “continuation courses,” which incur thousands of dollars in extra costs. This claim is supported by a report from the U.S. Department of Education, which found that fewer than 2% of doctoral graduates at the university complete the course within the advertised cost, and about 78% of the students take five or more continuation classes.

Furthermore, the FTC alleges that GCU has been operated for the profit of GCE and its stockholders, with GCU paying 60% of its revenue to GCE under an agreement designating GCE as the exclusive provider for most university-related services. Mueller, as both CEO and a stockholder of GCE, is said to have received bonuses tied to GCE’s performance.

GCU Denies Federal Trade Commission’s Allegations

In response, GCU has categorically denied these allegations, stating that the FTC’s claims about misleading students regarding the costs associated with the doctoral program have been refuted twice in federal courts. The university also argues that revenue share agreements with third-party education service companies are common in higher education, and GCU’s master services agreement with GCE follows industry norms.

The FTC also accuses the defendants of using abusive telemarketing calls to boost enrollment, allegedly contacting people who requested not to be called and those on the National Do Not Call Registry, thus violating the FTC Act and the Telemarketing Sales Rule.

GCU, recognized as the largest Christian university in the U.S., announced plans to appeal a $37.7 million fine imposed by the Department of Education based on similar allegations of misleading students about the cost of its doctoral programs. The university’s president, Brian Mueller, expressed his intention to fight what he perceives as tyranny from federal government agencies, citing a broader need to stand up against ideological government overreach.

Marketing Ethics: Insights from GCU’s FTC Lawsuit

The lawsuit underscores some critical lessons in marketing ethics and transparency, which are pivotal for all marketing professionals. This case highlights the consequences of potentially misleading advertising practices, especially in sectors as sensitive as education. Marketing, at its core, should be rooted in honesty and clarity, ensuring that consumers are fully informed about the products or services they are considering. The allegations against GCU, involving misrepresentation of program costs and nonprofit status, serve as a cautionary tale about the importance of truthful communication in marketing strategies.

Furthermore, this situation illustrates the growing scrutiny on marketing practices across various industries. With regulatory bodies like the FTC actively monitoring and taking action against deceptive practices, it becomes increasingly vital for marketers to adhere to ethical standards and regulatory guidelines. This case also emphasizes the role of marketing in shaping public perception and trust.

As digital marketing continues to evolve in 2024, maintaining ethical standards and transparent communication is not just a legal obligation but also a strategic imperative for building long-term customer relationships and brand reputation.

Article written by Luke Ross, The SEO Gazette

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