All Commentary
Monday, July 1, 1996

When Entrepreneurs Become Victims

Why Did the FTC Pursue the Publisher of Hooked on Phonics?

Dr. Groff is professor emeritus of education at San Diego State University.

For a capitalist economy to function, entrepreneurs must not be subject to gratuitous or capricious government action.

It is a violation of the cardinal precepts of free markets, as well as common moral sensibilities, for government to publicly vilify legitimate entrepreneurs.

The Federal Trade Commission has often been guilty of such vilification. Recently it took after a popular educational product called “Hooked on Phonics,” driving the producer, Gateway Educational Products, into bankruptcy. The product may be forced from the marketplace.

Anyone who views, listens to, or reads the mass media regularly is doubtless aware of the catchy slogan “’Hooked on Phonics’ works for me!” The large amount of advertising for “Hooked on Phonics” made the product highly recognizable. The company was planning to take the product to the United Kingdom. Then it was targeted by the FTC.

For anyone who is too far removed from his or her school days to remember, “phonics” is a method of teaching reading that relates how letters are used to represent the sounds of spoken words. The aim of phonics teaching is to develop students’ abilities to look at a written word, recognize its letters, attach speech sounds to them, blend the sounds together, and finally pronounce the word. According to experimental research, students who learn to decode written words through application of phonics information inevitably learn to read better than those who do not do so. By learning the relationship between spoken and written language, students acquire an independent means to read and understand any written text that they could fathom were it read aloud to them. “Hooked on Phonics” was designed in accordance with the research results.

The FTC Charges

As a specialist in reading development who closely follows the experimental research, I was shocked to learn that the FTC charged that advertising for “Hooked on Phonics” illegally exaggerated its potential for helping people learn to read. As those who have seen the ads will recall, they by and large contained testimonials by ordinary people who used the product, and found that it dramatically improved their or their children’s reading.

The FTC does not usually file complaints against advertising that contains testimonials, especially by noncelebrities. Nonetheless, the agency ordered Gateway “to forthwith cease and desist from representing, in any manner, directly or by implication,” that “Hooked on Phonics” will “quickly and easily teach [large numbers of] persons with reading problems or disabilities to read.” In deciding to proceed against “Hooked on Phonics,” the FTC had to reject or ignore the abundant evidence that phonics teaching is the best way for students to learn to recognize written words quickly and accurately. Gateway was prohibited from telling potential customers that no method of teaching reading has been more successful, or that a great number of parents who school their children at home say its product works.

The FTC also dismissed, without reasonable cause, the results of a recent, well-designed experimental study of “Hooked on Phonics” in schools with low-income urban children. The independent study revealed that those children made uncharacteristically high gains in reading competence thanks to “Hooked on Phonics.” The company’s unconditional money-back guarantee did not deter the FTC from telling the public that the product could not be trusted to meet its claims. The mass media, always attracted to a scandal, interpreted the FTC’s action to mean that “Hooked on Phonics” is a fraudulent product that consumers should avoid.

Challenges to the FTC Action

After the FTC announced that Gateway was guilty of false advertising, satisfied customers and defenders of phonics protested. The FTC said it received thousands of letters from “Hooked on Phonics” customers. Michael Farris, president of the Home School Legal Defense Association, challenged the FTC’s contention that reading can only be taught by trained professionals. He reminded the agency that “more than 96 percent of home school parent-teachers” have no professional training. Farris offered the FTC standardized test data that indicated children aged five to eight who were taught phonics at home on average achieve the 87th percentile in reading. By contrast, only 24 percent of public school fourth-graders read proficiently, according to the National Assessment of Educational Progress.

House Majority Leader Richard Armey headed a congressional delegation that objected to the FTC’s treatment of Gateway. James C. Miller III, a former chairman of the FTC, complained that the agency had used the “power of the state to suppress a competing technology.” Robert Sweet, head of the research department of the U.S. Department of Education in the Reagan administration, strongly questioned the validity of the advice the FTC said it had received from unnamed “outside experts” that “phonics instruction may not help many people with reading problems.” Sweet concluded that the FTC had acted against “Hooked on Phonics” in an attempt to disable “the phonics movement in this country.”

Thanks to the massive protest, the FTC reversed itself, pleading that it had not intended to put Gateway out of business. It would be naive, however, to assume that the FTC had no preconception of the effect of its original action. The product’s reputation was largely damaged. Its sales plummeted. Gateway was driven to seek relief in bankruptcy court.

Who Profits?

It is unlikely that anyone will ever discover what special interests prompted the FTC to go after “Hooked on Phonics.” But we can determine who would benefit most from its demise. (It certainly would not be people with reading problems.) Sweet, who is now president of the National Right to Read Foundation, points out that “the antagonism of the education industry and its professional associations against teaching intensive, systematic phonics in schools is almost palpable.” The obvious winners in the “Hooked on Phonics” affair turn out to be two influential educational organizations, the International Reading Association (IRA) and the National Council of Teachers of English (NCTE). The great commercial success of “Hooked on Phonics” was a constant embarrassment to those groups, since they strongly promote an alternative approach to reading development called “whole language.” IRA and NCTE regard direct and systematic phonics teaching as dangerously anachronistic, and cavalierly dismiss the empirical evidence of its superiority as bogus.

The groups’ devotion to the whole-language method is exemplified by their unwillingness to take seriously the disastrous consequences of its mandated use. Whole language is more popular in California than in any other state. As a result, California students are the worst readers in the nation. Whole-language teaching in Massachusetts has hurt reading achievement so badly that last year 40 distinguished professors of linguistics, cognitive science, psychology, and neurology from several eminent universities petitioned the state’s commissioner of education to stop promoting it. According to those experts, whole language’s practices “run counter to most of the major scientific results of more than 100 years” in their respective fields.

The widespread acceptance of the whole language approach by educators, despite the lack of supporting evidence, is ominous. The FTC attack on “Hooked on Phonics” therefore was more than just a federal agency trying to destroy a small business. The action also represents a setback to effective reading instruction at a time when, according to the U.S. Department of Education, almost 50 percent of American adults are functionally illiterate. These are ex-students, of course, many of whom learned to read by the method recommended by the IRA and NCTE.

Thus the publisher of “Hooked on Phonics” is not the only victim of the FTC’s action. The injured parties in this notorious affair number in the tens of millions. They are people of all ages across the nation, who, because of the FTC’s interference, may have lost their opportunity to learn to read in the most effective manner possible.