It’s not often we can draw a connection between Motown recording artist Freda Payne and an FTC law enforcement action, but here goes: Ms. Payne topped the charts in the 70s with “Band of Gold” and the FTC recently announced a “Banned of Sterling” — a settlement with business opportunity pitchman Christopher Andrew Sterling that will ban him for life from marketing work-at-home promotions.
The case, filed as part of a federal-state crackdown called Operation Lost Opportunity, is among the first to allege violations of the FTC’s amended Business Opportunity Rule. Anyone selling a biz opp covered by the Rule must give prospective buyers a one-page disclosure document at least 7 days before they sign up or pay anything. The Rule also requires that ads in general media include specific information to help consumers evaluate the offer.
According to the FTC, California-based Sterling claimed on his websites that buyers would make big bucks by doing the data processing necessary for online applications for rebates or credit cards offered by a select group of marketers that he would furnish. The pitch was persuasive: “MAKE $200 - $1000+ A DAY,” “well over $500+ per day,” and “you too can get $15,526 in 29 days.”
But the FTC says all buyers got was information about how to become an affiliate marketer — a person who creates their own ads and generates revenue when consumers click through and buy something on the linked website. The rebate and credit card application work Sterling promised? “Illusory or incidental at best,” charged the FTC. Buyers could process only the rebates or credit card applications they themselves advertised as affiliate marketers, and only after successfully converting clicks on those ads into purchases. As a result, buyers didn’t make the kind of money Sterling promised — and many didn’t even recoup the cost of the programs they bought from him.
Among other things, the complaint alleged that Sterling violated the Business Opportunity Rule by making unsubstantiated earnings claims, by advertising earning claims in general media without including required information, and by failing to give prospective buyers that one-page disclosure document. A key part of the FTC’s settlement: a lifetime ban that prohibits Sterling from selling any biz opp covered by the Business Opportunity Rule and any other work-at-home opportunity.
There’s a lot both sellers and buyers can take from the settlement. If you sell biz opps:
► Learn more about your legal responsibilities. Watch this video and read Selling a Work-at-Home or Other Business Opportunity? Revised Rule May Apply to You for some specifics.
► Under the Rule, if you make earnings claims, you've triggered certain disclosure requirements both in general advertising and in dealings with prospective buyers. For example, express or implied representations that people can earn a specific level of sales, income, or profit kicks in an obligation to attach an Earnings Claims Statement to the one-page disclosure document. But whether or not your biz opp is covered by the Rule, you still need proof to support any earnings claim you make.
► Don’t cherry-pick the data. It can be deceptive to make earnings claims based on extraordinary results from just a few customers.
Thinking about buying a business opportunity covered by the Rule?
► Study the seller’s one-page disclosure document. Reading it carefully — and reading between the lines — can give you insights into the kind of company you’re dealing with. Contact previous buyers named on the disclosure document. Listen to what they have to say and follow up with detailed questions.
► Grill sellers about any earning claims. Legit operators are only too happy to offer objective, verifiable proof. Scammers are more likely to respond with pie-in-the-sky generalizations.
► Before buying a biz opp or work-at-home offer, consider these tips from the FTC.