[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