Big fines for Phoenix


December 13, 2019

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Happy Friday the 13th, folks and gentlepeople. It’s a strange, scary world out there. Today:

  • The University of Phoenix misled students and got busted
  • Toys “R” Us is back but you might not wanna trust it
  • Shark chain mail is for sale (and hopefully not rusted)

Stay safe. Stay curious.

The Hustle Daily Email

University of Phoenix put out another fire. But can it rise from its ashes again?

The University of Phoenix recently agreed to a $191m settlement with the Federal Trade Commission after it was accused of advertising so fraudulent that even the university’s own executives described it as “smoke and mirrors.”

As part of the settlement, the once-massive for-profit university will pay a $50m penalty to the FTC and cancel $141m of debts owed by students who enrolled in the university between 2012 and 2016.

What, exactly, happened? 

According to a complaint the FTC filed, in 2012 the university started running TV and online ads touting “corporate partnerships” with companies including Twitter, Microsoft, Yahoo, and AT&T.

But, as Twitter and other companies are quick to point out, those “partnerships” never actually existed.

So… why so spurious?

The U. of Fee-nix stretched the truth because it was desperate to increase attendance.

Enrollment peaked at Phoenix in 2010 with more than 460k students. Enrollment has fallen to 97k students.

On top of that, its physical campuses have dwindled from a high of more than 500 to just a few dozen.

Now, Phoenix’s fortune could go up in flames

In a fact sheet issued as a part of the settlement, the university — which has been owned by the private equity firm Apollo Global Management since 2017 — stated: “We are committed to responsible marketing.”

The university also said it “continues to believe it has acted appropriately.” 

Still, this wouldn’t be the first time feisty Phoenix has been called out for malfeasance and survived in spite of failing to change its ways: The university has paid out fines and settlements for past wrongdoings in 2000, 2003, 2004, and 2009.

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What’s News

The world’s first $2T company has arrived. Saudi Aramco hit a $2T market cap just 2 days after its historic IPO (the largest ever). Remember when Apple became the first $1T company 16 months ago? Yeah, neither do we.

Goodbye, recession? Not quite. But predictions made this summer of an economic decline are less dire largely because a surefire indicator known as the yield curve has un-inverted. Still, consumer confidence is trending downward.   

A blue, blue Christmas: New tariffs could soften holiday sales of cell phones, laptops, and even artificial trees.

Your sweet tooth is big business… Nestlé, the No. 2 ice cream colossus in the US, sold its ice cream business for $4B to a private equity joint venture called Froneri in an effort to catch up to Unilever, the kingpin of cream.

Keep an eye on the new Toys ‘R’ Us (it’s keeping an eye on you)

Like Santa, who sees you when you’re sleeping and knows when you’re awake, Toys “R” Us sees what you are doing in its stores. Specialized technology tracks consumer behavior to better inform marketing practices — but it might violate a law meant to protect children’s privacy.

Toys ‘R’ Us comes back from the dead

After racking up $5B in debt, Toys “R” Us in 2017 filed for bankruptcy protection and shuttered 800+ stores. But now backed by private equity, the retailer has opened 2 new mall locations: a flagship in New Jersey and another in Texas.

The dead have eyes

A new aspect to Toys “R” Us 2.0 is its video monitoring system, supplied by the startup b8ta and powered by the surveillance biggie RetailNext. Brick-and-mortar stores have long used surveillance to nab shoplifters, but this new technology tracks consumer behavior to inform future marketing efforts. 

The tech could also be monitoring children’s activity — a potential violation under the Children’s Online Privacy Protection Act, a digital privacy law that protects children under 13.

RetailNext says its depth-sensing cameras skip over people under 4 feet tall and blur facial imagery to protect anonymity. However, according to the CDC, it’s not unusual for boys to hit 5 feet by the age of 10 — meaning some children’s activity could still be included in Toys “R” Us’s marketing data.

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This week’s weirdest ways to spend money

Let’s face it — we’re all spending money in weird ways this time of year (why does Uncle Mike collect porcelain ducks, anyway?). 

But as Warren Buffett once said, “A dime isn’t always a dime. Not every time.” (He didn’t actually say that.)

Here are some winners from this week:

  • Chainmail sharkproof suit, $7.5k. Are you an avid shark enthusiast who’s sick and tired of losing massive amounts of blood when you spend time with your favorite sea creatures? Well have we got news for you… This chainmail sharkproof suit — whose integrated gloves feature trap doors for those precious moments where you might want to take a shark selfie — lets you keep your shark time and all your appendages, too!
  • Neeo smart, touch-screen remote, $600. Are you sick and tired of teaching your parents how to use their Apple TV remote? (Or, just as likely, asking your parents to teach you how to use their 16 separate remotes?) Spare yourselves the trouble with a smart remote that lets anyone play God of the airwaves.
  • Long furby, $300. Are you still traumatized by the Furby you got from your aunt Susan when you were 12? Well, here’s your chance to pay it forward… by giving someone else an even more terrifying version of Furby with grotesquely elongated limbs. It’s just as useless, but twice as likely to induce nightmares.
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What Else

⚡ A new board joins the e-skateboard wars. Electric skateboard startup Dot hopes to skate past industry leader Boosted Boards with its new line of boards (starting at $1,279) that are advertised as more modular than the industry leader’s (which start at $749). It’s far from the only upstart e-board company: others include Lou, Meepo, Acton, Teamgee, Koowheel, Evolve, Acton… and the list goes on.

🏃 iFit is in good shape. The interactive fitness streaming company raised $200m to continue developing its catalog of virtual coaching programs. Like Peloton, iFit capitalizes on the continuing trend of at-home workouts. Unlike Peloton, it doesn’t require users to shell out more than $2k for a piece of workout equipment… and it doesn’t have to deal with the fallout from the Peloton girl commercial.

🍦 It was a good day for Perfect Day. The animal-free dairy company Perfect Day raised $140m to continue expanding the distribution of its line of lab-manufactured dairy products.

💁 Well, the first step is admitting you have a problem… Under pressure from investors, the tech giant Intel released pay data by gender and race — and the results show a troubling lack of diversity. Of Intel’s top 52 executives, 41 were men and 37 were white.

Shower Thoughts
  1. “Male reindeer lose their antlers in the winter, so Santa’s reindeer would be all female… Rudolf is a strange name for a girl.” – Jacob
  2. “Of all the words, shouldn’t phonetic actually be…. phonetic?” – Warren
  3. Technically, origami is a kind of woodworking.
  4. The farther away you can wave hi to someone, the closer you are as friends.
  5. Roombas keep your house cleaner by forcing you to constantly pick your stuff up off the floor so the roomba doesn’t get caught on something.
  6. via Reddit

We’ve still got one more shower thoughts before Christmas. Share your holiday head-scratchers with us here.
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