The FTC’s attack on business opportunity scams

By Felix Salmon
July 1, 2009

Well done to the FTC for putting some serious resources into attacking business opportunity scams. It doesn’t hedge, it doesn’t say that some are better than others — instead it says in a simple and forthright manner that if someone is advertising a “business opportunity”, even if it’s a celebrity like Adam West, you should run fast in the other direction:

Want to “be your own boss,” “work from home,” or just “make extra money“? Then you may be tempted by an ad for a business opportunity. Before you open your checkbook, check out the offer. Fraudulent business opportunity promoters use the classifieds and the Internet to tout all kinds of offers, from pay phone and vending machine routes to work-at-home businesses like medical billing and envelope stuffing. Too often, these ads make promises – about earnings, locations, merchandise, or marketability – that sound great, but aren’t truthful. The result: consumers are getting ripped off, losing money instead of making it.

The FTC does have a guide for the media, which seems to be very widely ignored: is there any way that it could grow some teeth and actually punish media outlets which willingly broadcast these scams? I hope TV and radio stations, in particular, don’t manage to wriggle their way out of the oversight of the FTC, the FCC, and the new consumer financial product commission: these ads really should be regulated heavily.

4 comments

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Going after the originators of the scams is great – but to make a real dent in this onslaught of online “business opportunity” / “work at home” scams – the FTC needs to go after the affiliates creating the fake blogs /fake news sites and the CPA affiliate networks which act as middlemen. It is these two groups which give the scams the oxygen they need to spread like wildfire across the internet.If you visit wickedfire.com you will find these shady characters discussing their promotion of said offers and if you visit findaffiliateoffers.com or offervault.com and enter google into the search box you will find a list of the CPA affiliate networks promoting these so called bizopp offers on behalf of their clients.Affiliates get a bounty of around $40 for each “free trial” sign-up they recruit.So there are actually three guilty parties involved in the deception – affiliates (responsible for some of the worst examples of misleading advertising), CPA affiliate networks (middlemen) and the company with the offer.Same thing and same people behind Acai offers, Govt Grants, resveratrol, work from home offers, etc.Until Attorney Generals and the FTC crack down on the affiliates and the CPA networks, rather than just the original companies or individuals behind the offers, these fraudulent deceptions (and misleading websites) will continue – as CPA affiliates and networks just shift their focus to the next offer…Many CPA affiliate networks often encourage their affiliates to use fake blogs /news sites, use fake testimonials etc – so it’s not just a case of a few rogue affiliates but rather widespread acceptance of unethical and illegal methods within this sector of the affiliate marketing industry as “the norm”.

Posted by John Hooper | Report as abusive

Felix;Business opportunity fraud is a great way to understand investment fraud in general. The elements of the fraud are easy to replicate, but every year people in North America lose hundreds of millions of dollars in these schemes – despite the disclosure requirements being over 30 years old.What is fascinating is the the FTC continues to rely upon disclosure as the main weapon to defeat fraud, when there is no evidence that this works!Indeed, in the last 10 years I have worked with victims of business opportunity frauds, both as an attorney and decision theorist, virtually all of the people saw red warning flags – and drove through them anyways.The psychological compliance tricks used by con criminals like Vitale have to be better documented so that we can develop simple responses to these pitches.The FTC is currently doing some behavioral research, finally. But they are focusing on framing effects and not compliance tricks, which will probably make the study less than helpful.

Does this refer to companies like cearner or ECAOS ?

Posted by Felix Chesterfield | Report as abusive

Business opportunity just like multi-level marketing should require license to conduct business. Internet users should also be educated about it.Sincerely,Alexander