Get Rich Quick Schemes, Illegal Pyramid Schemes Caught in an International Law Enforcement Web; Nearly 200 On-Line Business Put on Notice

Hundreds of get-rich-quick business opportunities and pyramid schemes operating on the Internet have been warned by law enforcement authorities across the country and around the world that their "fabulous offers" may be illegal operations. Three federal law enforcement agencies, 23 state agencies and consumer protection officials in 24 countries participated in the first "International Internet Sweep Day," to target get-rich-quick scams mushrooming on the 'net.

"The Internet offers an instant, international marketplace to consumers around the world," said Jodie Bernstein, Director of the Federal Trade Commission's Bureau of Consumer Protection. "It also opens a new arena where hi-tech con artists can peddle their fraudulent wares. We want to put computer con artists on notice: Law enforcement agencies throughout the country and around the world are patrolling the Internet. We intend to make sure it's a fair and free marketplace."

The International Marketing Supervision Network ("IMSN"), an association of consumer protection law enforcement agencies from over two dozen countries, sponsored the International Internet Sweep Day. The Australian Competition and Consumer Commission coordinated this international law enforcement effort. The FTC coordinated its own participation with that of the U.S.Securities Exchange Commission (SEC), the U.S. Commodity Futures Trading Commission (CFTC) and 23 state consumer protection agencies and securities regulators.

The FTC and its state counterparts identified hundreds of web sites offering get-rich-quick schemes and sent the operators of 180 of those sites educational e-mail messages. Potential pyramid sites received messages that described the distinction between legitimate multi-level marketing plans and pyramid schemes. Business opportunity promoters received messages emphasizing their legal obligation to be truthful when making earnings claims and to be able to substantiate them. These messages referred site operators to the FTC's web site for additional information. The web sites will be revisited in the future, and if additional information suggests that they are illegal operations, law enforcement actions may be taken.

The SEC and the CFTC, the federal agencies responsible for administering and enforcing the U.S. federal securities and futures laws, respectively, participated in the Sweep Day by identifying and determining whether Internet sites may violate the U.S. securities or futures laws and related regulations.

Twenty-three consumer protection law enforcement agencies and securities regulators from the following states participated in the International Sweep: Alabama, Arkansas, California, Connecticut, Delaware, Florida, Ohio, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, New Jersey, New York State, Nevada, North Dakota, Rhode Island, Texas, and Wisconsin.

International participants included: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Hungary, Ireland, Jamaica, Japan, Korea, Mexico, New Zealand, Norway, Philippines, Poland, Portugal, South Africa, Spain, Sweden, Switzerland, and the United Kingdom.

A prime objective of the Sweep was to educate businesses using the Internet about consumer protection laws and to deter those who are violating the laws from continuing to do so. Low cost and ease of access make the Internet an attractive medium for entrepreneurs who may be starting up their first business, and may not be aware of their legal obligations.

To assist consumers, the FTC has developed educational materials that offer the following advice:

• Investigate all earnings claims. Talk to others who have purchased the opportunity to see if their experience verifies the claims. Demand to see the company's basis for its claims in writing. Be skeptical in judging whether the claims are backed up.

• Beware of "shills" or phony references. Don't accept a list of references selected by the company offering the business opportunity as a substitute for a complete list of franchise or business opportunity owners.

• Avoid any plan that includes commissions for recruiting additional distributors, because it may be an illegal pyramid scheme that ultimately must collapse for lack of new recruits. Many state laws prohibit pyramids by allowing commissions to be paid only for retail sales of goods or services, not for recruiting new distributors.

• Ask for the disclosure document if you're investing in a franchise. This document, required by law, should provide detailed information to help you compare one business to another. If the company has no disclosure document, beware!

• For work-at-home plans, get specific information about the tasks you will perform, how you will be paid, by whom and when; and the total costs and fees and what you get for your money.

• Get all promises in writing, including any refund policy, in any contract you sign. Check out the company with the state securities agency, attorney general's office or other consumer protection agency not only in the state where you live, but also in the state where the company is headquartered. The Better Business Bureau is another good resource. These organizations can tell you if they have any consumer complaints about the company on file.

Copies of the consumer education materials are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov and also from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.