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September 2, 2013

Inside the NY-AG’s Lawsuit Suing Donald Trump Over “Trump University”

Filed under: Business,Finance — Edgar (aka MrConsumer) @ 5:46 am

Last week, the New York Attorney General sued Donald Trump and others claiming a host of illegal practices engaged in by Trump University, the Donald’s real estate education program.

Among the AG’s allegations (and some things you didn’t hear in the news):

  • Students were induced to sign up for classes under the belief they would be taught Donald Trump’s personal strategies and techniques for investing in real estate. The material in the courses was never reviewed by Donald Trump and actually came from other seminars and courses about real estate. It also did not include some of the topics specifically advertised.
  • Trump’s free education seminar was really a sales pitch for a $1495 three-day course. His three-day program was itself in part an upsell sales pitch for an elite course costing up to $35,000. Trump University claimed this was a philanthropic endeavor that Trump would not profit from. In fact, they took in $40 million in sales, and Trump himself pocketed some $5 million in profits.
  • Trump University was repeatedly told by the New York State Education Department as far back as 2005 that it needed to be licensed and could not use the term “university” in its name. They didn’t change the name, however, until 2010.
  • Trump claimed in advertisements that he handpicked the instructors/mentors in the program, when he never did.
  • There were claims that the instructors were real estate experts, when some of them had just filed for real estate-related bankruptcies.
  • Students were told they would easily and quickly make back the money they spent on courses because mentors would in essence hold their hand through their first transaction. Mentors, however, disappeared after the course was over in some cases and students were left with significant credit card debt for the classes.
  • After the lawsuit was filed, Donald Trump defended the educational program saying that students filled out an evaluation and 98% said they were satisfied. What Trump didn’t say, and what the NY-AG alleges in his complaint, is that students filled out the non-anonymous evaluations before the course was over, were pressured to give the course good grades, and in some cases negative evaluations were changed to positive ones by staff.

And it goes on and on.


Here is a link to the actual complaint filed by the New York AG, with great detail about the promises made, and what was really going on behind the scenes. For example, most of the instructors/mentors were paid commissions based on the number of students they convinced to pay for the advanced seminars.

It is fascinating reading beginning to end. [Click the icon in the bottom right corner below to see the complaint full screen.]


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May 27, 2013

Kohl’s Sued Over Fake Sales

Filed under: Business,Retail — Edgar (aka MrConsumer) @ 5:44 am

This is the final part (for now) in our series of stories about retailers that are alleged to inflate their regular prices as a means of offering fictitious discounts during “sales.”

In 2010, a California consumer sued Kohl’s for just that, but the lower court threw out his case saying that he did not suffer a loss of money. A federal appeals court last week, however, overturned that decision. Here is the case decision.

Antonio Hinojos, the consumer in the case, made a whole bunch of purchases at Kohl’s of items that he thought were great bargains:

Samsonite luggage that was advertised as 50% off its “original” price of $299.99, Chaps Solid Pique polo shirts that were marked down 39% from their “original” price of $36.00, Chaps Solid Pique polo shirts that were marked down 32% from their “original” price of $39.50, Chaps t-shirts that were marked down 40% from their “original” price of $26.00, and Sonoma Life & Style Henley Tops that were marked down 40% from their “original” price of $22.00.

He later found out (not clear how) that he had been taken — presumably learning that those goods rarely if ever sold for the so-called “original” or “regular” price.

Kohl’s defended itself by arguing that Hinojos lost neither money nor property because he acquired the merchandise he wanted at the price that was advertised, even if the advertised price was falsely represented as a “sale.” And therefore, under California law, they said, absent a loss of money or property, the consumer had no case.

The consumer’s key argument was that he did have a loss of money because he “would not have purchased [these] products at Kohl’s in the absence of Kohl’s misrepresentations.”

The judge agreed, ruling:


“Most consumers have, at some point, purchased merchandise that was marketed as being “on sale” because the proffered discount seemed too good to pass up. Retailers, well aware of consumers’ susceptibility to a bargain, therefore have an incentive to lie to their customers by falsely claiming that their products have previously sold at a far higher “original” price in order to induce customers to purchase merchandise at a purportedly marked-down “sale” price.

In sum, price advertisements matter. Applying Kwikset [a related court case] in a straightforward manner, we hold that when a consumer purchases merchandise on the basis of false price information, and when the consumer alleges that he would not have made the purchase but for the misrepresentation, he has standing to sue under the UCL and FAL because he has suffered an economic injury.” — Judge Reinhardt

The case now heads back for trial.

The FTC has guidelines about deceptive price advertising:

§ 233.1 Former price comparisons.

(a) … If, on the other hand, the former price being advertised is not bona fide but fictitious—for example, where an artificial, inflated price was established for the purpose of enabling the subsequent offer of a large reduction—the “bargain” being advertised is a false one; the purchaser is not receiving the unusual value he expects. In such a case, the “reduced” price is, in reality, probably just the seller’s regular price.

(b) … The advertiser should be especially careful, however, in such a case, that the price is one at which the product was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of his business, honestly and in good faith—and, of course, not for the purpose of establishing a fictitious higher price on which a deceptive comparison might be based.

MrConsumer investigated Kohl’s a decade ago, tracking prices of 20 items for 103 consecutive days. The result: the average item was on sale 86 percent of the time, and one-in-four items never sold for the so-called “regular” or “original” price at any time in that three and half month period. Looks like little has changed.


• • •

March 18, 2013

FTC Warns Against Mouse Print in Online Ads

Filed under: Business,Computers,Internet,Retail — Edgar (aka MrConsumer) @ 6:37 am

Last week, the Federal Trade Commission (FTC) revised its guidelines for disclosures in online advertising, including new guidance for ads that appear on cellphone screens.

One of the most important points made by the new “rules” is that when practical “advertisers should incorporate relevant limitations and qualifying
information into the underlying claim, rather than having a separate disclosure qualifying the claim.” That means don’t advertise “all books* on sale” with a disclaimer that says “*hardcover only”, when you could have clearly advertised “All Hardcover Books on Sale” to start with.

Some of the other basic principles include:

  • Required disclosures should be clear and conspicuous;
  • They should be close to the claim to which it relates;
  • Only in rare circumstances should a hyperlink lead to the disclosure;
  • You shouldn’t have to scroll to find the disclosure;
  • Even small banner ads and tweets need appropriate disclosures.

Here are some sample ads created by the FTC to demonstrate some of their new principles:


cell ad

In this ad, 3/4 Ct. is a link that goes to a disclosure that reveal that the diamonds actually may weigh between .72 and .78 carats. The FTC wants to see that disclosure right on this screen, near the 3/4 carat claim.


cold box

There is a health disclaimer at the bottom of this ad which warns that when temperatures are over 80 degrees, this cooler is not capable of keeping foods cold enough to prevent the growth of bacteria which could cause a foodborne illness. The FTC says that something this important should be right in the ad, and in close proximity to the claim that the box keeps food “fresh and cold.”


banner ad

The FTC has separate testimonial rules that require people who are paid to express their opinion to disclose that fact. In this case, “JuliStarz” was a paid endorser. In addition, also in that set of guidelines is the requirement that the average benefit to be derived from a weight loss program be disclosed if the example given is atypical. In this case, the average person will much less than 30 pounds in six weeks, so the disclosure has to say, for example, avg weight loss = 3-lbs/wk.

Don’t hold your breath waiting to see online ads follow all these rules.


• • •

March 4, 2013

PC World: Thanks for Subscribing?

Filed under: Business,Computers — Edgar (aka MrConsumer) @ 5:51 am

Recently, MrConsumer’s PC World subscription was running out, and he had no intention of resubscribing. Then comes this surprising letter:

PC World envelope

What? Thank you for what? This says you are confirming my order. What order? I didn’t place an order? Did you charge my credit card without my permission?

Inside is a “new order confirmation” which says…


PC World confirmation

“Thank you for your previous subscription….”

What a bunch of crap.

Mouse Print* wrote to the publisher, IDG, asking why they would stoop to using this type of deception, and whether they would now discontinue such a misleading practice.

Their response: they sent none.


• • •

December 17, 2012

Yuuup, Storage Wars Auctions May be Rigged

Filed under: Business — Edgar (aka MrConsumer) @ 5:49 am

Storage Wars MrConsumer admits it — he is a fan of Storage Wars, the A&E cable series. In the show, the contents of abandoned storage lockers are auctioned off each week to the highest bidder. There are four recurring and quirky cast members, who, along with members of the public, bid blindly on these storage lockers in the hopes of finding some treasure amongst the junk. The cast members almost always win a storage locker in each auction, and many times they find an antique or other unexpected treasure worth thousands of dollars.

Now, one of the four regulars, Dave Hester (famous for placing bids by exclaiming “yuuup”), alleges in a lawsuit that the show is rigged. He claims, among other things, that the producers “salt” lockers with high-value items to heighten excitement when a successful cast member “finds” it, and that they assist the less well-financed cast member bidders who would not otherwise have enough money to pay for the storage lockers on which they are bidding.

Hester spoke out about these problems to A&E executives, suggesting that these practices were in essence rigging a game show, which is against federal law. Hester says he was then fired after the producers had already exercised an option to renew his $25,000 per episode contract. He filed a lawsuit against them last week.

*MOUSE PRINT: Excerpt from lawsuit:

Storage Wars suit

As a regular viewer, MrConsumer always wondered about several things in this “reality” show:

1. With dozens of bidders present at most auctions, how is it that the cast members almost always seem to be the winners?

2. Why would cast members bid often thousands of dollars for abandoned junk, that on its face, is worth no more than a few hundred dollars?

3. If such valuable items were stored in these lockers, why wouldn’t the true owner have paid the minimal storage bill or removed the valuable items before failing to make monthly payments?

4. With cast members seemingly only bidding against each other as the prices rose beyond what an average citizen would bid for a pile of used household goods, were the producers subsidizing those above fair market value bids?

Now we may know the answer.


As we have asserted before, some of the worst mouse print is the mouse print that is missing. There is no disclaimer in the television program credits stating that the producers of the show offer financial assistance to some bidders and that some items are “found” for dramatic effect.

A&E has had no comment on the lawsuit yet, but earlier this year said in a statment, “there is no staging involved. The items uncovered in the storage units are the actual items featured on the show.”


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