Crackdown on Business Scams

WASHINGTON, March 6, 2000 -- Federal and state agencies have filed more than 68 cases against fraudulent business opportunity promoters, most of them using the Internet and daily newspaper classifieds to peddle their schemes, who bilk hundreds of thousands of consumers out of tens of millions of dollars every year.

Most of the scams involved phony pay phone franchises, vending machine routes and various work-at-home schemes like medical billing opportunities, The schemes typically promise big earnings but usually wind up costing the consumer hundreds or even thousands of dollars.

The crackdown is being conducted by the Federal Trade Commission, the Department of Justice and law enforcement officials from 29 states.

Because many business opportunity offers are pitched to consumers via the classifieds, the FTC and its enforcement partners also announced a partnership with more than 105 newspapers that have voluntarily agreed to run a classified of their own -- one that tells consumers what to look for in a notice for a legitimate business opportunity. The notices refer readers to more complete information from both the FTC and the appropriate state agencies (available at www.ftc.gov/bizop).

More than 85 of the newspapers participating in "Project Classified," as this partnership is known, also have agreed to use their best efforts to screen out potentially deceptive ads, including those that make earnings claims without incorporating a disclosure in the ad about the number and percentage of prior purchasers who have made as much as the promotion claims.

"It's very gratifying that so many newspaper publishers across the country have accepted our invitation to join this partnership to educate consumers about business opportunity fraud," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "They are helping us reach consumers exactly when the would-be entrepreneur is focused on the opportunity."

According to Bernstein, the ads generally make promises like these:

• "MEDICAL BILLING. Work From Home-Full or Part Time. From $24K to $50K+ per year. Home Computer Required. CALL NOW!"

• "OWN PAYPHONES. $10K plus monthly potential,"

• "1000 Envelopes=$4000. From Home! $4 per envelope you stuff GUARANTEED!

• FREE info. Call now;" and

• "HERSHEY AND NABISCO VENDING - High weekly income potential. Work 6-8 hrs./wk. Secured and guaranteed locations. $7,000 investment required."

The FTC has a new consumer brochure, Could 'Biz Opp' Offers Be Out for Your Coffers?, with tips on how to spot and avoid these scams. Copies of the brochure are available from the FTC's Consumer Response Center or at www.ftc.gov/bizop. If consumers suspect a business opportunity promotion is fraudulent, they can file a complaint with the FTC's Consumer Response Center by calling toll-free 1-877-FTC-HELP (382-4357). The FTC also has a booklet for classified ad managers, Screening Ads: A Guide for the Media.

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