Fair Guide. Is it a list of consumer protection laws? With summer coming, maybe ratings of the best funnel cakes and Ferris wheels? Forgive the flight of fancy, but we see it as a great title for a compendium of blog posts about business compliance. But that’s not what it is — not by a longshot.
A federal judge in Illinois issued an order stopping for the time being a Slovakia-based outfit the FTC says ripped off small companies and non-profits for millions of dollars. The modus operandi? Pressuring entrepreneurs into paying for worthless online “business directory listings" they didn’t authorize in the first place.
According to the lawsuit, Construct Data Publishers — also doing business as Fair Guide — send mailings to retailers, home-based businesses, local associations, and others who attend trade shows. The mailings mention a specific trade show and look to be just asking the business to check the accuracy of information in a free “exhibitors directory” for the event. The form goes a step further by implying that they’ve done business together before, so this is just a routine confirmation.
But buried in fine print at the bottom of the form is a statement that by signing it, the company agrees to pay $1,717 a year for three years. The FTC says the form is often returned by an administrative employee who isn’t even authorized to sign contracts for the company or non-profit.
When businesses refuse to knuckle under and pay up, the high-pressure tactics begin. After the 10-day cancellation period expires, the defendants demand payment to a Slovakian bank account. Late payment notices — with mounting late fees added — start arriving. Some entrepreneurs pay just to stop the harassment.
The Fair Guide defendants aren’t newcomers to international enforcement officials. They shifted their operations to Slovakia in 2008 after Austrian authorities went after them for deceptive practices. To settle that case, they agreed to stop soliciting business in the EU. The FTC has filed suit to shut down the scam and has asked the court to order refunds.
What can small businesses and non-profits do to protect themselves?
Train your employees and volunteers on how to spot this scam. Maybe it’s the influence of CSI-type shows, but people seem to keep their guard up once they're in the know about how frauds like this work. Issue an alert at a staff meeting or print this blog post and put a copy in your break room.
Consolidate purchasing authority in your operation. Of course, acquisitions procedures for a national corporation aren’t suitable for a home-based business or local retailer. But a system where Mary orders the toner, Carlos pays for ad space and business cards, and Fred picks up paper, software, and coffee filters at the warehouse store — and nobody knows who’s buying what — can make a small business or non-profit more vulnerable to scammers. Designate a specific team to handle purchases, including things like business directory listings, and have everyone on your staff forward inquiries to them. That can make it tougher for crooks to exploit the goodwill of unsuspecting employees just trying to be helpful.
Looking for more? Read Throwing the Book at Business Directory Scams.