## Facts

- The Federal Trade Commission brought an administrative complaint against Arthur Murray Studio of Washington, Inc., affiliated Washington–Baltimore area studios, and certain officer-owners, alleging unfair or deceptive acts or practices in commerce under § 5 of the Federal Trade Commission Act.
- The studios used promotions and “contests” presented as skill-based to induce consumers to visit studios without disclosing the primary purpose was to sell dance lessons.
- The studios represented that lessons would be “free” or “reduced price,” while failing to disclose that customers would be pressured to purchase substantial additional instruction.
- The studios used purported “dance analysis,” “dance aptitude,” or progress evaluations to misstate customers’ progress and potential as a sales method to justify additional purchases.
- Customers were subjected to intensive, same-day “relay” or tag-team sales tactics and additional sales efforts before completing already-purchased lesson series.
- The studios entered customers into large, long-term lesson contracts, sometimes obligating payment in excess of $1,500 at one time, without reasonable safeguards against impulsive commitments.
- Contracts did not include a seven-day cancellation provision.
- After administrative proceedings, the FTC issued a cease-and-desist order addressing misrepresentations, sales tactics, contract terms, and requiring both a $1,500 limit on consumer indebtedness at any one time and a seven-day cancellation right; the order was later enforced on judicial review.

## Issues

1. Whether the studios’ promotions, representations, and high-pressure sales tactics constituted unfair or deceptive acts or practices in violation of § 5 of the Federal Trade Commission Act.
2. Whether the FTC had authority to impose an affirmative remedial restriction limiting contracts for dance instruction to no more than $1,500 of consumer obligation at any one time.
3. Whether reopening the administrative record to take evidence relevant to the $1,500 limitation was procedurally permissible.

## Decision

- The FTC found the studios committed unfair or deceptive acts or practices in violation of § 5.
- The FTC ordered respondents to cease and desist from deceptive promotions and misrepresentations regarding contests, “free” or reduced-price lessons, and student progress or aptitude.
- The FTC prohibited specified high-pressure practices, including relay salesmanship and pressuring students to buy additional lessons before completing current lesson series.
- The FTC barred respondents from entering into contracts obligating any individual to pay more than $1,500 at any one time.
- The FTC required future lesson contracts to include a seven-day cancellation provision.
- On review, the order was enforced; the remedial cap and the record-reopening procedure were upheld.

## Legal Principles

- Under § 5 of the Federal Trade Commission Act, misrepresentations and omissions used to induce consumers into purchases, when combined with high-pressure tactics, may constitute unfair or deceptive acts or practices.
- The FTC may craft cease-and-desist relief that is not limited to general prohibitions on deception and may include affirmative restrictions reasonably related to preventing recurrence of the unlawful conduct.
- A monetary cap on consumer contractual obligation may be a permissible remedy when large commitments are a mechanism of consumer injury and are tied to the challenged deceptive and coercive sales practices.
- Contractual safeguards such as a short cancellation period may be required where the record shows sales pressure likely to produce impulsive, harmful commitments.
- An administrative record may be reopened consistent with reserved procedural authority (e.g., for good cause) to develop evidence relevant to remedy, absent prejudice warranting reversal.

## Conclusion

The FTC concluded that coordinated deceptive promotions, misleading “free” lesson claims, misstatements about student progress, and intense sales pressure violated § 5, and it imposed remedial measures aimed at preventing recurrence, including a $1,500 limit on consumer indebtedness at any one time and a mandatory seven-day cancellation right in future contracts.


In re Arthur Murray Studio of Washington, Inc., 78 F.T.C. 401 (1972)