Syndicates are sexy – business opportunity violations are easy
Michael Fortin wrote an interesting post today called a "Disturbing Trend in Internet Marketing". The trend isn't all that new, though. As Michael Fortin points out when he mentions the Internet Marketing Sins report his wife put out over two years ago. Other people like Markus Allen have been trying to get the same kind of message across for as far back as 2003, if not earlier.
But what interested me most about Michael Fortin's post was this statement:
"Even the term “information products” is debatable, too. Because the “products” most gurus sell today aren’t really information. What they really are selling are business opportunities packaged as information and sold under the guise of training systems."
This is something Attorney Michael Webster opened up my eyes to and has tried to get across to the some of the people selling training. Because there's more to it than "I just sell training so I'm not a business opportunity" in many cases according to him.
Here's a great write up he did giving some great insight about this:
BlogMasterMind, Testimonials and Seller Assisted Marketing Plans (note, he mistakenly refers to them as "affiliate marketers" instead of "internet marketers")
Business Opportunity Laws And How They Make It Easy For FTC to Win Cases and Shut Down Companies
According to this FTC page listing State Offices Administering Business Opportunity Laws:
"Twenty-six states have business opportunity laws. Most of these laws prohibit sales of business opportunities unless the seller gives potential purchasers a pre-sale disclosure document that has first been filed with a designated state agency.
State business opportunity laws typically cover every imaginable type of business opportunity that might be offered. If a business opportunity seller is not required to provide pre-sale disclosures by the Franchise Rule, these disclosures will almost always be required by the laws of the states listed below.
The disclosures required by state business opportunity laws differ, and usually provide more abbreviated information than the FTC’s Franchise and Business Opportunity Rule requires. However, most of these laws provide important rights and remedies for business opportunity investors, including required security bonds to cover investor losses.
If you are considering purchasing a work-at-home or other business opportunity, and reside in a state with a business opportunity law, we encourage you to find out more about the protection provided by your state statute before you invest."
Again referring to attorney Michael Webster's blog here he explains why it is so much easier to shut down businesses when they violate business opportunity laws than when they violate Section 5 of the FTC Act. Here's what he says in his post:
"Section 5 actions by the FTC are lengthy and involve a lot of resources; whereas Biz Op actions are relatively easy: You are Biz Op, but you have no mandatory disclosure document so the FTC simply shuts you down."
So not only are Biz Op actions easier to enforce, they're much cheaper to enforce, too.
Syndicates Are Sexier, But "No Safe Harbor" Violations Are Easier
Again I'll turn to observations made by attorney Michael Webster. He made these particular observations when the FTC Published their Final Guides Governing Endorsements and Testimonials when he published this post about Testimonials and Disclaimers explaining how while many bloggers and marketers were debating and worrying over the Endorsement sections, they were completely overlooking the more important introduction of the "No Safe Harbor" rule for testimonials such that "If the testimonial is an outlier, then the company has to report "the typical consumer experience".
He then goes on to note in that same post about Testimonials and Disclaimers (which also has great information about FTC prosecution strategies):
"This means that they cannot make any earnings claim because they don't have any typical consumer experience data. But they will continue to make these claims, making it an easy case for the FTC to prosecute."
If It's So Easy And Cheap Now, Why Doesn't The FTC Prosecute?
Speaking of "no safe harbor", even just a random run through of products on this Joint Venture Launch Announcement list shows NUMEROUS examples of sites with income testimonials where I would be shocked if the publisher has collected "typical consumer experience data".
So if it's so cheap and easy to enforce violations of "no safe harbor" rules and Business Opportunity registration violations why doesn't the FTC prosecute? A few reasons come to mind:
- Lack of resources and funds. Seems doubtful since it would seem that this type of prosecution would be MUCH less expensive than their Operation Shortchange crack down and other similar FTC "operations" targeting large numbers of companies at once.
- The FTC doesn't deem the target market "vulnerable" enough. Personally, my money's on this one.
- They will and just haven't done so yet.
- Political reasons. Maybe it's a stretch, but I thought I'd throw it in to see what kind of feedback I might get on that one.
Related documents:
Related posts:
- The Internet Marketing Syndicate
- List Management, Fake Endorsements, and the Syndicate
- You Are Being Feasted on Alive in the Web Sewers
- 3 Reasons People Fall For Get Rich Schemes
- How Much Money The "Gurus" Make and How They Do It
