Cracking down on contrepreneurs

Call them contrepreneurs — marketers who use hyped-up promises to sell business opportunities to people eager to be their own boss.  As part of a federal-state blitz on bogus bizopps, the FTC announced seven law enforcement actions and developments in five other cases against outfits the agency says used illegal tactics to take more than half a billion dollars from two million Americans trying to make ends meet in a challenging economy.

The crackdown by the Consumer Protection Working Group of the Financial Fraud Enforcement Task Force also includes 38 criminal actions by the Department of Justice, 15 cease and desist orders by the U.S. Postal Inspection Service, and another 20 from state AGs in Arizona, California, Colorado, Indiana, and Ohio.

The FTC actions illustrate the breadth of questionable business opportunities out there:  mystery shopper services, credit card processing operations, websites claiming affiliations with high-end brands, promoters promising the inside track on Postal Service jobs, bizopps related to refunds for mortgage insurance premiums, rebate and credit card application processing, and an operation claiming to match companies with excess inventory and businesses looking to buy.  But according to the FTC, they all had one thing in common: They used deceptive tactics to peddle their bizopps.

The new cases dovetail with related FTC actions, including an August 2012 $478 million judgment against John Beck Amazing Profits and the return of almost $6 million to buyers as a result of lawsuits against Infusion Media Inc., AED Inc., and Abili-Staff Ltd. 

The tactics targeted in today’s cases aren’t new — the FTC has a history of challenging bogus bizopps — but this time the agency has a new tool for taking on the contrepreneurs:  the amended Business Opportunity Rule, that requires a wide range of bizopp sellers to disclose key information upfront in a streamlined one-page document.

The message for people eager to be their own boss:  Before investing so much as a dime, consult free resources from the FTC to help you evaluate what’s out there and avoid bizopp barracudas.

What do bizopp sellers need to know?  First, federal and state partners take bizopp deception seriously.  Illegal activities can result in tough injunctive provisions, multi-million dollar judgments – and prison time.  But for sellers eager to avoid an enforcement run-in, we have materials to make it easier to comply with the law.  Watch this video for more on your obligations under the amended Business Opportunity Rule.