The Federal Trade Commission filed seven enforcement actions as part of a combined federal-state initiative focusing on “business opportunity” scams.
The cases are part of “Operation Lost Opportunity,” the agency’s attempt to halt businesses that falsely promise jobs to unemployed consumers. The defendants – Shopper Systems, Inc., American Business Builders, The Online Entrepreneur, Career Advancement Group, Smart Tools, Rebate Data Processor, and The Zaken Corp. – allegedly lured consumers with deceptive offers to help them start businesses as mystery shoppers, credit card processors, Web site operators, and government insurance refund processors.
In addition to the FTC’s seven suits, the Department of Justice brought 22 actions, the U.S. Postal Inspection Service filed 15 administrative actions, and 20 more suits were launched by state attorneys general in Arizona, California, Colorado, Indiana, and Ohio.
According to the FTC, the defendants committed multiple violations of the Federal Trade Commission Act by misrepresenting how much consumers could earn from the business opportunity. Six of the cases also allege violations of the Business Opportunity Rule. That Rule mandates that specific information be provided by business opportunity sellers in a one-page document that includes the seller’s identifying information, whether the seller makes a claim about the purchaser’s likely earnings, and whether the seller has a cancellation or refund policy.
In one of the FTC’s complaints, it alleged that The Zaken Corp. and its principal used a Web site and direct mail to induce consumers to pay a $164 fee for which they would be furnished with the names of companies with excess inventory. The defendants said they would find a buyer for the inventory and pay the consumer a “finder’s fee” of half the sales price. Zaken claimed that consumers could earn at least $1,500 or more in the first 30 days and an average of $4,280 per deal, and asked consumers “What Would You Do With an Extra $5,000 (or more) a Month?” But the promises were false, the FTC said, and consumers did not earn substantial income from the business opportunity.
To read the complaints against the FTC defendants, click here.
Why it matters: “The scam artists the FTC shut down lied to people trying to make an honest buck, and robbed them of their money as well as their hopes,” David C. Vladeck, director of the FTC’s Bureau of Consumer Protection, said in a statement. “We brought these cases on behalf of millions of people who wanted to jumpstart their incomes and rebalance their budgets – people who placed their hopes in a business opportunity so they could better provide for their families.”