Biz Opp Alert: The FTC Is Watching

Federal Trade Commission Logo
Federal Trade Commission Logo

The nation’s consumer protection agency is actively enforcing their new Biz Opp rules. On October 31, 2012, the Federal Trade Commission, in conjunction with other federal task forces, the U.S. Postal Inspection Service and Attorneys General in Arizona, Colorado, California and Indiana filed 108 new legal actions against Biz Opp companies that authorities allege are unfairly scamming would-be entrepreneurs.

Operation Lost Opportunity: The FTC’s Latest Crackdown On Biz Opps

With a 3-0-2 vote, the FTC put operation lost opportunity into action. Seventy civilian actions and 38 criminal actions were filed in the District Court for the Southern District of Florida against a slew of companies offering “be your own boss” prospects. Specifically, a group of companies that offer mystery shopping, credit card processing, website operation, and government insurance refund processing opportunities are being charged with violating various consumer protection rules.

Authority Operation Lost Opportunity Involvement
Department of Justice 22 actions filed
Attorneys General IN, CA, AZ, CO Combined 20 actions filed
U.S. Postal Inspection Service 15 administrative actions filed
Working Group of the Financial Fraud Enforcement Task Force Coordination and 51 actions filed

What Are The New Biz Opp Rules, Anyway?

The companies caught up in this imbroglio are primarily being accused of misrepresenting the amount of money potential buyers can make – a clear violation of Article 5 of the FTC Act and the Telemarketing Sales Rule. Several of the defendants also engaged in negative-option billing – a big FTC no-no, especially for Biz Opps. Noncompliance with the new 7-day disclosure statement rule seems to be another issue in this FTC sweep.

Perhaps the most egregious violations of the lot, though, were the double-blind enrollment schemes. Several companies caught up in this sting enrolled customers in two programs at once; when the client canceled their subscription, they’d still be charged the following month. When they inquired as to why they were still being charged, only then did they find out they were enrolled in both programs.

All of the above violations are mentioned in the new Biz Opp rules released by the FTC earlier this year. If you have not yet reviewed the updated statutes, be sure to catch up here.

Temporary Restraining Order Issued To Companies Being Investigated

In brief, a temporary restraining order is a legal action that constrains a party to refrain from a given activity or compels them to engage in an activity. In the context of litigation, temporary restraining orders are essentially stop-gap actions used in the period before an injunction hearing. TROs are decisions made by a single judge and cannot be overturned.

On October 31, 2012 a court issued TRO was executed; it halted activity, froze assets and put the targeted companies in a temporary receivership.

Need A Biz Opp Lawyer?

The FTC gave notice that they plan to pay close attention to Payday lending websites, Internet schemes, and EDU scams in the near future. So, if you’re an affiliate or online marketer being investigated by the FTC and you need of a lawyer, contact Kelly / Warner Law. We’re not just attorneys, but also affiliate marketers. We understand the business, in addition to the nuances of Internet marketing law and compliance.

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