Late last week, the U.S. Federal Trade Commission (FTC) and its federal and state partners announced a significant development in the agency’s ongoing “Operation Lost Opportunity” crackdown on illegitimate business opportunities that over promise and under deliver to millions of consumers. A number of these latest enforcement actions and developments are the first cases to be brought under the FTC’s newly updated Business Opportunity Rule, which requires that business opportunity sellers provide specific disclosure information to help potential buyers evaluate their realistic prospects of success.
“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,” according to the Director of the FTC’s Bureau of Consumer Protection, David C. Vladeck. “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.”
The seven new defendants named by the FTC—Shopper Systems LLC, American Business Builders LLC, The Online Entrepreneur, Inc., Career Advancement Group, Smart Tools LLC, Rebated Data Processor and The Zaken Corp.— have all been charged with committing multiple violations of the FTC Act, the recently revamped Business Opportunity Rule or some combination thereof. More specifically, these business opportunity sellers “allegedly lured consumers with deceptive offers to help them start businesses as mystery shoppers, credit card processors, website operators and government insurance refund processors.”
While there are hundreds of legitimate business opportunities available in these and other industry sectors, those named by the FTC are said to involve “scams” that prey on millions of unemployed or underemployed individuals who dream of being their own boss and taking control of their financial future.
This latest development is just one more example of why aspiring entrepreneurs who want to protect themselves from bogus business opportunities need to be informed consumers. They need to do their homework. And it's an even bigger reminder to business opportunity sellers—including those offering work-at-home opportunities—that they must adhere to the requirements outlined in the FTC’s amended Business Opportunity rule.
The Rule requires most business opportunity sellers to provide a simple one-page disclosure statement, provided in the language in which the sale is conducted, to all prospects that includes:
• The seller’s identifying information
• Whether the seller makes a claim about the purchaser’s likely earnings (If so, then information supporting such claims must be provided.)
• Whether the seller, its affiliates or key personnel have been involved in certain legal actions (If so, then a list of such actions must be included.)
• Whether the seller has a cancellation or refund policy (If so, a document outlining the terms of the policy is required.), and
• A list of persons who bought the business opportunity within the previous three years.
Any misrepresentations and omissions included in the disclosure statement are prohibited under the Rule.
Given “reason to believe” that the law has been or is being violated and that further action would be in the public interest, the FTC then files a complaint or refers a complaint to the Department of Justice, where the final verdict is decided by the courts.
Important Resources to Review BEFORE You Buy or Sell a Business Opportunity…
Prospective business opportunity buyers who are interested in educating and protecting themselves from potential harm in the sales process can start by going to the FTC’s Business Opportunity Scams web page.
Business opportunity, as well as franchise, sellers who want to make sure they are in compliance with the FTC’s rules and requirements are encouraged to check out these very important resources:
• Franchises, Business Opportunities and Investments
• Selling a Work-at-Home or Other Business Opportunity? Revised Rule May Apply to You
• The Business Opportunity Rule Video
To read the FTC’s recent statement regarding this latest crackdown on deceptive business opportunities, click here now!