On June 24, 2020, the Educational Records Bureau (ERB) announced an exclusionary marketing arrangement with the private, for-profit test prep company Test Innovators. Test Innovators charges $380 for access to the only official, full-length ISEE practice test.
Piqosity believes that this exclusive dealing arrangement is unethical and potentially unlawful. A not-for-profit, supposedly independent arbiter of student academic performance should not be getting paid to exclusively endorse a for-profit test prep company.
Setting aside ethics and the unprecedented nature of this arrangement, ERB and Test Innovators must abide by the law by clearly and conspicuously disclosing their financial relationship.
Below is our analysis of the timeline of events that led to this arrangement and how we think parents and educators can respond to ensure that this type of unethical behavior does not become the new normal.
ERB Loses Contract with its Largest Client Boston Public Schools
On February 5, 2020, the Educational Records Bureau (ERB) lost its $600,000 annual contract with Boston Public Schools (BPS), a relationship it had held for 25 years. ERB and BPS publicly feuded over whether or not the ISEE test was fueling racial inequity in access to Boston’s most elite public schools including the prestigious Boston Latin School.
The loss of this one, $600,000, 25-year-old relationship accounted for nearly 3.6% of ERB’s testing revenue or nearly 30% of its net cash flow according to the not-for-profit’s most recent financial disclosure, 2018, available from the New York State Attorney General.
ERB Makes Exclusive Dealing Arrangement with For Profit Test Prep Company
Around the same time that ERB was publicly feuding with BPS and risking the loss of its largest customer, the ERB Board of Trustees began to have “extensive conversations” with the for-profit test-prep company Test Innovators.
On June 24, 2020, ERB publicly announced that the “[Test Innovators] platform is the only comprehensive test preparation program endorsed by ERB” and directed its test registrants to also sign-up for the for-profit test-prep company’s website.
While exclusive dealing arrangements are not automatically illegal, they could run afoul of the Sherman Act.
ERB Removes Formerly Free Resources; Makes Available only on Test Innovators
In forming its exclusionary arrangement with Test Innovators, ERB removed formerly free test prep materials from its official “What to Expect on the ISEE” guide.
The formerly free materials are now part of a $380, ERB-endorsed package from Test Innovators, which includes the only full-length practice test released by ERB. To be clear, preparation material that was completely free on June 23, 2020, was pulled and placed behind a Test Innovators paywall on June 24, 2020.
When asked, ERB stated that this full-length practice test can only be purchased at Test Innovators; they declined to sell it directly.
ERB Conspicuously Markets Test Innovators
In reinforcing that ERB is “proud” of its new paywall and exclusionary relationship, it clearly and conspicuously marketed its new relationship with Test Innovators including:
- Issuing a press release
- Posting an “ALERT!” pop-up across its homepage
- Placing a banner ad for Test Innovators on its homepage
- Placing multiple ads on its official registration page for the ISEE exam
- Updating its free “What to Expect on the ISEE” PDFs to include a full-page ad
- Hosting web infomercials for Test Innovators
ERB Does Not Disclose How Much It’s Getting Paid for the Endorsement
According to FTC regulation (16 CFR § 255.5) under the FTC Act: “When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) such connection must be fully disclosed.”
Furthermore, the FTC states that the manner of informing the customer must “clearly and conspicuously disclose either the payment or promise of compensation.”
However, ERB neglects to mention how much money it is poised to make off of its captive referrals to Test Innovators. Similarly, its for-profit, test-prep partner Test Innovators claims that their relationship with ERB is not a “paid endorsement.”
ERB Seems to Acknowledge a Financial Arrangement
Only after repeatedly being pressed by Piqosity, does ERB seem to tacitly acknowledge the payments:
- ERB President Thomas Rochon writes that they do not have to release “detailed information on our arrangement” not because it doesn’t exist but because they “post a disclosure on our website regarding relationships with third parties.”
- ERB updates its initial press release from June 24, 2020 to include a link at the bottom to its generic disclosure statement; the original press release lacked this link.
Although ERB later referred to this disclosure after Piqosity’s inquiries, the website only reads, “Some providers pay a royalty fee to ERB for the use of its intellectual property.”
Found only on one webpage, this statement is not conspicuously displayed alongside all of ERB’s marketing of the relationship with Test Innovators, and it does not seem to clearly disclose the financial arrangement with Test Innovators.
Let ERB Know You’re Unhappy
If you have purchased the $380 package from Test Innovators and feel like you were compelled to do so and misled by both ERB and Test Innovators, don’t let them get away with it:
- Ask Test Innovators to refund your payment, especially if all you wanted was the official practice test that isn’t even completely new
- Submit a complaint to the Federal Trade Commission
- Submit a complaint to the New York Attorney General Charities Bureau