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The Federal Trade Commission has given final approval to a consent agreement with Gateway Educational Products, Ltd. and its officers, John Shanahan and John Herlihy. The agreement, now a final and binding consent order, settles allegations that the respondents did not have a reasonable basis for certain broad advertising claims about the ability of "Hooked on Phonics" to teach users to read. For example, the FTC alleged that Gateway made unsubstantiated claims that Hooked on Phonics quickly and easily teaches those with reading problems or disabilities to read, regardless of the nature of the problem or disability.

The FTC received thousands of comments on this settlement during the public comment period. In responding to these com- ments, the FTC has clarified that, while its action challenges certain advertising claims for Hooked on Phonics, the FTC did not challenge the educational value of phonics instruction itself or any other approach to teaching reading. The FTC action also does not prevent the public from buying Hooked on Phonics or any other educational product. Among other things, this action challenges the company's claims that Hooked on Phonics is a self-help tool that is effective without any additional assistance. The action, however, does not address the effectiveness of Hooked on Phonics when used in the home with the assistance of a professional, parent or other literate person. In addition, the FTC action does not challenge the effectiveness or appropriateness of home schooling or any other educational approach.

The final order requires Gateway and the two individual respondents to have competent and reliable evidence to back up any future educational-benefit claims they make for Hooked on Phonics or any other educational product or program they market. They also are required to have substantiation before represent- ing, among other things, that Hooked on Phonics or any other educational program or product:

  • will quickly and easily teach those with reading problems or disabilities to read, regardless of the problem;

  • will enable users with reading problems or disabilities to improve significantly their reading levels and classroom grades;

  • can teach those with dyslexia, attention deficit disorders, and other learning disabilities to read; and

  • can teach reading in a home setting without additional assistance.

The respondents also are prohibited from using testimonials that purport to represent the typical experience of consumers who use an educational product or program, unless they can substan- tiate that the represented experience is, in fact, typical.

Finally, the order contains various reporting provisions to assist the FTC in monitoring compliance.

Gateway is based in Orange, California.

The consent agreement was announced for a public-comment period on Dec. 14, 1994. The Commission vote to issue it in final form occurred on June 1, and was 5-0.

NOTE: A consent agreement is for settlement purposes only and does not constitute admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions by the respon- dents. Each violation of such an order may result in a civil penalty of up to $10,000.

A news release summarizing the complaint and consent agree- ment was issued at the time the Commission accepted the consent agreement for public comment. Copies of that release and of the complaint and final order are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580. A news release summarizing the complaint and consent agree- ment was issued at the time the Commission accepted the consent agreement for public comment. Copies of that release and of the complaint and final order are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

(FTC File No. 922 3021) (Docket No. 3581) (gateway2)

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