Advertising lawyers, including in-house counsel and outside counsel, need to comply with laws involving false, unfair and deceptive acts

'Net Based Business Opportunities: Are Some Flop-portunities?

Whether it's recruiting people to sell so-called Internet-access devices, placing kiosks with Internet access in public places, or dealing in other Internet-related activities, consumers are being lured to the vast commercial potential of the Web by business promoters.

However, the Federal Trade Commission (FTC) says that many of these business opportunities are scams that promise more than they can possibly deliver.

The scam artists lure would-be entrepreneurs with false promises of big earnings for little effort. They pitch their fraudulent offerings on the Web; in e-mail solicitations; through infomercials, classified ads and newspaper and magazine "advertorials"; and in flyers, telemarketing pitches, seminars, and direct-mail solicitations.

Here are a few examples of Internet-related business opportunities that didn't live up to their promises:

Example 1: Providing TV access to the Internet

The Pitch: The promoter promises that you can earn thousands of dollars a month by recruiting people to sell devices that provide television access to the Internet.

The Problem: The program claims to pay participants based on how many people they recruit into the program, not on their product sales. That makes the program a pyramid scheme - not a legitimate multi-level marketing plan. Pyramid schemes are illegal. Mathematically, nearly everyone who participates in them loses their money. When there are no new recruits, the pyramid collapses.

Example 2: Selling walk-up Internet access

The Pitch: The promoter claims you can earn big money by selling machines or kiosks that provide walk-up Internet access - for a fee - in places like airports, hotels and shopping malls. The machines cost thousands of dollars, but the promoter says the cost can be recovered because the machines generate "amazing" earnings. And, the company promises to help find profitable locations for the machines.

The Problem: Rather than the high-traffic locations that the promoter promises, the buyer's machines get placed where demand for Internet access is low. As a result, a would-be entrepreneur can't possibly make the promised earnings.

Example 3: Giving seminars on making money on the Internet

The Pitch: The promoter advertises that you can earn more than $150,000 as an "Internet consultant" who sponsors free seminars to teach other consumers how to make money on the Internet.

The Problem: The seminars really feature high-pressure sales pitches for the promoter's Internet yellow pages or Internet advertising. And, even though the promoter promises to provide Internet and sales training to buyers - for a fee of several thousand dollars - the buyers never get the promised training. In the end, they never earn the promised amounts.

The FTC offers this advice to consumers considering an Internet-related business opportunity:

Reporting Possible Fraud

If you suspect a business opportunity promotion is fraudulent, report it to:

 

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
 

 

June 2002

 


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