Ads for Business Opportunities: How To Detect Deception

It’s not hard to see why ads for business opportunities that promote the benefits of being your own boss and making money quickly are appealing. But the Federal Trade Commission (FTC), the government agency that monitors advertising for deception, says that some ads for business opportunities feature empty promises and false claims that potential entrepreneurs could never realize.

Promoters of fraudulent business opportunities run ads where their targets are likely to see them: in daily and weekly newspapers, in magazines, and on the Internet. The FTC is asking for your help in finding these ads first. By doing so, you can protect your company and your readers from being left holding the bag.
As part of an advertising sales or production staff, you customarily review ad claims for taste and appropriateness. It’s just good sense to take that extra moment to review a business opportunity claim for telltale signs of fraud, too.

• It can protect your company from being known as one that promotes rip-offs. Your readers may believe an offer is legitimate because it’s in your publication or on your website. When the claim turns out to be false, they may well blame you for running the ad.
  
• It can keep you from getting cheated by those who are making the false claims. There’s a good chance they won’t pay their bills, and will have left town by the time you try to collect.
  
• It can keep you from harming your readers and your legitimate advertisers.

Spotting False Claims
How can you spot claims for a fraudulent business opportunity? One clue may be the type of opportunity being advertised. Fraud has most often been associated with promotions for vending machine, display rack, pay phone, medical billing, and some Internet-related businesses.
Here are several other claims that have made it into the pages of legitimate papers, magazines and websites recently:

“Work Part-Time from Home.” Most scammers promise an ideal work situation — the ability to set your own hours, be your own boss, or work from home. In fact, this rosy scenario is far from reality for most small business owners. “Be Your Own Boss” “Own a Dealership Today”

“Earn $2,000 a month.” If an ad claims buyers can make a certain amount of money, the law says the promoter must give the number and percentage of previous purchasers who earned the income. If an earnings claim is there, but the additional information isn’t, ask for more information: the business opportunity seller may be violating the law. “$50K/yr” “Vending route nets $1,700/wk”

“No risk! Guaranteed!” Ads that promise a big payout with little or no risk are usually a telltale sign of a fraud. Legitimate business ventures involve risks — usually in proportion to the promised return. “Huge Income” “100% return on your investment!”

“Quick and Easy!” Successful start-up businesses, including franchises, require a lot of work to get off the ground, let alone manage. Only a few are profitable from the start. If ads promise vending locations, they may not be current or high-traffic; the merchandise also may be out-of-date or of poor quality. “Start Earning Today” “Prime locations available now”

These are examples of possibly deceptive claims. If you see them, highlight them for the appropriate person in your company. At the same time, know that many fraudulent business opportunity promoters use more subtle language when making promises, guarantees, and claims that they can’t possibly keep.

By taking a few moments to review the claims made in business opportunity ads, you can protect the reputation of your company — and the consumers in your community.

For More Information
For information on red flag claims for weight loss products, visit ftc.gov/redflag. If you see an ad you think is deceptive, you can report it to the FTC using the complaint form at ftc.gov.

Other Business Opportunity and MLM-Related Web Sites

• MLM Legal. MLM Legal contains interesting articles and information about legal developments affecting the Multi-Level Marketing and Direct Sales Industry. For example, the site contains a page devoted to FTC's Proposed Business Opportunity Rule Resources and Analysis.
• Business Opportunity Defined. Wikipedia defines business opportunity - or biz-op - in part as involving "the sale or lease of any product, service, equipment, etc. that will enable the purchaser-licensee to begin a business."
• Business Opportunities Weblog. A moderated list of business opportunities for entrepreneurs that includes chronological archives and extensive links.
• Net Based Business Opportunities Pamphlet. Website provides full-text of government publication concerning Net Based Business Opportunities and links to additional information on MLMs and business opportunities.
• Business Opportunity Resources. FTC has extensive page links to websites of other organizations, including links to state information, Franchise and Business Opportunity FAQs, North American Securities Administrators Association, and more.
• Entrepreneur.com. Web pages devoted to home based business and at home business opportunities, including information and articles on legal issues, zoning issues, home based basics, how-to guides, home based business ideas, and more.
• Business Opportunity Information. Articles, examples, links.
• Multilevel Marketing Plans - Online Pamphlet. Website provides full-text of government publication concerning Multilevel Marketing Plans plus links to additional information on MLMs.
• Pro-MLM Website. Website lists state and federal regulatory sites and MLM attorneys.
• Ten Big Lies of Multilevel Marketing. Critical article about MLMs.
• TRUTH ON MLM. MLM research, statistics, law enforcement, news, articles, case studies, and more.
• What's Wrong With Multi-Level Marketing?. Website devoted to Anti-MLM resources, cases, and information.
• Multi-Level Marketing (MLM). The main thesis of this site is that MLMs were once legitimate, but now are scams.
• Business Opportunities in Internet Marketing. Many Useful Links.
• MLM Survivor's Homepage. Posts involving MLM are reprinted.
• MLMWatch. The Skeptical Guide to Multi-level Marketing.
• Home Based Business Opportunities. This site's stated purpose is to educate you with all aspects of starting and running a home-based business.

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