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Whether it's recruiting people to
sell so-called Internet-access devices, placing kiosks with
in public places, or dealing in other Internet-related activities, consumers
are being lured to the vast commercial potential of the Web by business
However, the Federal Trade Commission (FTC) says that many of
opportunities are scams that promise more than they can
The scam artists lure would-be entrepreneurs with false
promises of big earnings for little
effort. They pitch their fraudulent
offerings on the Web; in e-mail solicitations; through
classified ads and newspaper and magazine "advertorials"; and in flyers,
telemarketing pitches, seminars, and direct-mail solicitations.
are a few examples of Internet-related business opportunities that didn't live
Example 1: Providing TV access to the
The Pitch: The promoter promises that you can earn thousands of
dollars a month by
recruiting people to sell devices that provide
television access to the Internet.
The Problem: The program claims to pay
participants based on how many people they
recruit into the program,
not on their product sales. That makes the program a pyramid
not a legitimate multi-level marketing plan. Pyramid schemes are illegal.
Mathematically, nearly everyone who participates in them loses their money.
are no new recruits, the pyramid collapses.
2: Selling walk-up Internet access
The Pitch: The promoter claims you can
earn big money by selling machines or kiosks
that provide walk-up
Internet access - for a fee - in places like airports, hotels and
shopping malls. The machines cost thousands of dollars, but the promoter
says the cost
can be recovered because the machines generate "amazing"
earnings. And, the company
promises to help find profitable locations
for the machines.
The Problem: Rather than the high-traffic locations
that the promoter promises, the buyer's
machines get placed where demand for
Internet access is low. As a result, a would-be
entrepreneur can't possibly
make the promised earnings.
Example 3: Giving seminars on making money on
The Pitch: The promoter advertises that you can earn more
than $150,000 as an "Internet
consultant" who sponsors free seminars to teach
other consumers how to make money
on the Internet.
The seminars really feature high-pressure sales pitches for the
Internet yellow pages or Internet advertising. And, even though
the promoter promises to
provide Internet and sales training to buyers - for
a fee of several thousand dollars - the
buyers never get the promised
training. In the end, they never earn the promised amounts.
offers this advice to consumers considering an Internet-related business
opportunity: Consider the promotion carefully. If it claims buyers can earn
income, then it also must give the number and percentage of
previous purchasers who
achieved the earnings. If an earnings claim is
there - but the additional information isn't -
the business opportunity
seller is probably violating the law.
Get earnings claims in writing. If
the business opportunity costs $500 or more, then the
promoter must back up
the earnings claim in a written document. It should include the
earnings claim, as well as the number and percentage of recent clients who
at least as much as the promoter suggested. If it's a
work-at-home or other business
opportunity that involves an investment
of under $500, ask the promoter to put the
earnings information in
Study the business opportunity's franchise disclosure document.
Under the FTC
Franchise Rule, many business opportunity promoters are
required to provide this
document to potential purchasers. It includes
information about the company, including
whether it has faced any
lawsuits from purchasers or lawsuits alleging fraud. Look for a
statement about previous purchasers. If the document says there have been
purchases but the seller offers you a list of references,
be careful: the references probably
previous purchaser in person, preferably where their business operates.
The FTC requires most business opportunity promoters to give potential
names, addresses and phone numbers of at least 10
previous purchasers who live the
closest to the potential purchaser.
Interviewing them helps reduce the risk of being
misled by phony
Contact the attorney general's office, state or county
consumer protection agency and
Better Business Bureau both where the
business opportunity promoter is based and
where you live to find out
whether there is any record of unresolved complaints. While a
record may indicate questionable business practices, a lack of complaints
doesn't necessarily mean that the promoter and the business opportunity
problems. Unscrupulous dealers often change names and
locations to hide a history of
If the business
opportunity involves selling products from well-known companies, call the
legal department of the company whose merchandise would be promoted. Find
whether the business opportunity and its promoter are affiliated
with the company. Ask
whether the company has ever threatened trademark
action against the business
attorney, accountant or other business advisor before you put any money
down or sign any papers. Entering into a business opportunity can be
costly, so it's best
to have an expert check out the contract first. If
the promoter requires a deposit, ask your
attorney to establish an
escrow account where the deposit can be maintained by a third
until you make the deal.
Take your time. Promoters of fraudulent business
opportunities are likely to use
high-pressure sales tactics to get you
to buy in. If the business opportunity is legitimate,
it'll still be
around when you're ready to