Today, in a live online business forum, officials from the Federal Trade Commission and the North American Securities Administrators Association (NASAA) announced that 215 of the hundreds of business opportunity Internet advertisements identified during "Business Opportunity Surf Day" have been sent notices warning them that state and federal laws require them to have solid evidence to back up all earnings claims they make. The Internet ads were identified by officials from the FTC, securities regulators and attorneys general offices from 24 states, the U.S. Postal Inspection Service, and Canada and Norway, who spent the better part of a day last month surfing the Internet for marketers touting the potentially fantastic earnings to be made by consumers who buy into their business opportunity schemes.
Officials saved a copy of each of the 215 potentially problematic sites and made follow- up visits on April 21. They found that seven of the sites had been changed to remove the earnings claims; and another 37 sites had been taken down completely. Twenty-four of the ads turned out to be messages that had been posted on forums and will disappear automatically. Therefore, of the 191 actual websites, 23 percent were changed or taken down. The FTC said it could not confirm or deny whether it or other law enforcement authorities would investigate the remaining sites, but noted that evidence of false or unsubstantiated earnings claims can land a firm in court for alleged violations of the FTC Act or state statutes against deceptive business practices. The FTC, NASAA members and state Attorneys General have brought hundreds of cases in recent years against firms offering business opportunities illegally.
"The Surf Day approach to policing fraud on the Internet takes advantage of a vast new medium that, on the one hand, could make it easier to perpetrate a deceptive scheme and get away with it, and turns that medium into a tool for warning potential scammers that they can’t count on going undetected," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "Part of our goal is to inform marketers about the law, which says that a company making earnings claims must have hard evidence to back them up. We encourage consumers surfing the web for a new business opportunity to insist on seeing substantiation for every objective claim a company makes, as well as a list of every person who has signed up for the business. While the Internet offers innovative, cutting-edge opportunities, it is still old-fashioned legwork -- poring over the numbers, and telephoning and visiting in-person the sites of other participants -- that will best protect consumers from becoming the victims of fraud."
Dale Cantone, chair of the NASAA Franchise and Business Opportunity committee and Assistant Attorney General for the state of Maryland, noted that many states have specific laws governing the offer and sale of business opportunities. "Before investing any money with a company that promises to help set you up in a business, contact your state securities agency to find out what laws protect you and what you should watch out for -- including unsubstantiated claims about income and earnings. As with any investment, be prepared to take the time to do your homework. Surfing the net can be a good place to gather information about business opportunities, but prospective investors shouldn’t be fooled by a flashy web site."
Cantone and Bernstein announced the results of Business Opportunity Surf Day this afternoon at a business lunch in a real-time online chat hosted by The Business Strategies Forum on America Online.
A wide range of investor education materials, including such pertinent documents as "Cyberspace Fraud and Abuse" and "How to Spot and Avoid Boiler Room Scams," are posted on the NASAA website at www.nasaa.org. In addition, on April 25, a transcript of the forum will be posted on the NASAA website and will join a library of materials now available on the FTC’s website at www.ftc.gov/opa/busops to assist consumers who are checking into various business opportunities. Officials urged consumers with complaints about business opportunities adver tised on the Internet to report them to the National Fraud Information Center, a project of the National Consumers League, at 1-800-876-7060.
The Postal Inspection Service; the Competition Bureau of Canada, with help from members of provincial, territorial and law enforcement organizations; as well as officials from Norway, also participated in Business Opportunity Surf Day and identified some of the sites that were sent warning messages. Complaints about possible violations of the Canadian Competition Act may be filed by calling 1-800-348-5358. Complaints regarding possible violations of the Norwegian Marketing Control Act may be filed with the Consumer Ombudsman by calling 47- 67-59-96-00 or fax 47-67-58-20-61.
Among the tips NASAA and the FTC offered consumers investigating business opportunities advertised on the Internet are:
All of the news releases and consumer brochures included in the FTC’s web site also are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Scott Peterson, NASAA Public Affairs, 202-737-0900
Bonnie Jansen, FTC Office of Public Affairs, 202-326-2180
Trine Lise Corneliussen, Norway, Consumer Ombudsman, 47 67 59 96 58
Cecile Suchal, Canada, Competition Bureau, 819-953-5303
FTC Bureau of Consumer Protection
Eileen Harrington, 202-326-3127
Tom Hughes, 202-326-3730
NASAA Franchise and Business Opportunity Committee
Dale E. Cantone, Maryland Assistant Attorney General, 410-576-6368
Martin Cordell, Washington state Securities Examiner, 360-902-8732