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NOTE About Multi-level Marketing, also known as "network" or "matrix" marketing, is a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you will receive commissions -- for both your sales of the plan's goods or services and those of other people you recruit to join the distributors. Multi-level marketing plans usually promise to pay commissions through two or more levels of recruits, known as the distributor's "downline."
If a plan offers to pay commissions for recruiting new distributors, watch out! Most states outlaw this practice, which is known as "pyramiding." State laws against pyramiding say that a multi-level marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors.
Our list below is made up of what we believe to be credible associations. However, we cannot tell you whether a particular multi-level marketing plan is legal or honest. Nor can we give you advice about whether to join such a plan. You must make that decision yourself. We suggest that you use common sense, and consider these seven tips when you make your decision:
LOS ANGELES (AP) - Two men received 2-year prison terms for sending a blizzard of 50 million e-mails as part of a scam that overwhelmed the nation's largest Internet providers. Steve Shklovskiy and Yan Shtok, both 23, also must pay more than $100,000 in restitution for their role in the September 1999 scheme, authorities said Tuesday. The men were sentenced Dec. 27, just over a year after they pleaded guilty to fraud charges. Two others were sentenced to probation in July. Authorities said Shklovskiy and Shtok devised a way to use personal computers equipped with commercially available software to ``harvest'' electronic mail addresses. They then sent a mass e-mailing, asking recipients for a $35 ``processing fee'' in exchange for a chance to work at home stuffing envelopes. More than 12,000 people were duped. Internet providers, including AOL, AT&T and Mindspring, were besieged by customer complaints and their systems were threatened by the overload. The plea agreements require the men to reveal to the Internet providers how they accomplished their scheme.
"I visited the Yahoo-Classified-Employment ads seeking a work at home administrative job. I found this terrific ad placed by *** Enterprises for Administrative Help:
*** Enterprises; Clerical Work
Job posted by: Company
Industry: Other/Not Specified
Function: Administrative
Division: Personnel
Number of Openings: 10
Responsibilities: We are looking for honest
and hardworking individuals to work at home
doing one or more of the following; typing,
word processing,transcription,
administrative, data entry, and clerical
work. Full time or part time work is
available. No sales involved. Your main job
will be preparing and editing original
company papers, articles, and reports. This
is an excellent opportunity for home typists.
Desired Requirements: Must have computer and
printer. Software and materials are provided.
Minimum Requirements: Limited positions are
available, if interested contact us
immediately....
"This ad is a complete scam! Once contacted, they email you very
specific information about the job: typing for their company which has an
overload of orders and reports to process. They promise you will earn
between $400 - $800 per week for 20 hours. Further emails to them
produce even more specific and fictitious promises: no cost whatsoever
after the initial $40 software fee. No selling. Guaranteed weekly income
within 2 weeks of registration. Plus two 'references' to email - supposedly
2 people who have been working for them for 2 & 4 years.
"After thoroughly checking everywhere I could possibly think of, I sent my $40 money order registration fee. Here's what they sent: a xeroxed copy of how to scam others by placing classified ads! Yahoo has been notified but so far has continued to run the job ad in their Classifieds in nearly every city. I'd like to get the word out to others before anyone else falls for this sham! Of course, [they] no longer answer my emails."
DEAR SIR,
REQUEST FOR URGENT CONFIDENTIAL
RELATIONSHIP
RE: TRANSFER OF US$48,600,000.00 MILLION
AMERICAN DOLLARS INTO YOUR ACCOUNT
After one deliberation with my colleagues I decided to
forward you this business proposal. However, the current
favorable political /economic climate in the country since the
beginning of this new millennium 2000 fiscal year now
present an opportunity for this money to be transfer out of
the country without being noticed. We want a reliable person
who could assist us to transfer the sum of fourty-eight million
and six hundred thousand united state dollars only (US$48,
600,000.00) into his account
The fund resulted from an over invoiced bill from contract
awarded by us under the budget allocation to my ministry
and the bill was approved for payment by the concerned
ministries.the contract was duly executed, commissioned and
the contractors was paid his actual cost of the contract. We
are left with the balance of US$48,600,000.00 as the
over-invoiced amount which we have deliberately over
estimated for our own use. But under our protocol division
civil servant are forbidden to operate or own a foreign
account. This is why I contact you for assistance. We have
agreed to share the money as follows:
1. 30% for your account owner
2. 60% for us
3. 10%for tax as may be required by your government
The letter goes on to ask for your bank name, account information, etc.
Don't be stupid enough to give them this information.
Produced in cooperation with the North American Securities Administrators Association
Want to earn hundreds of dollars a week
-- at home in your leisure time?
Many people supplement their income
in a very easy way.
Let us tell you how...
Ads like these can be found in newspapers and magazines in every American city. While you may find such offers appealing, especially if you can't work outside your home, exercise caution. While some work-at-home plans are legitimate, many are not. Home employment schemes are among the oldest kinds of classified advertising fraud.
Many ads don't say you may have to work many hours without pay. Or that there may be hidden costs. Countless work-at-home schemes require you to spend your own money to place newspaper ads, make photocopies, or buy the envelopes, paper, stamps, and other supplies or equipment you need to do the job. The companies behind the ads also may demand that you pay for instructions or materials. Consumers deceived by these ads have lost thousands of dollars in addition to time and energy.
Common
Work-at-Home Schemes
Several types of employment are classic work-at-home
schemes.
Envelope-Stuffing.
Promoters usually advertise that, for a "small"
fee, they will tell you how to earn money stuffing
envelopes at home. Later -- when it's too late -- you
find out the promoter never had any employment to offer.
Instead, for your fee, you're likely to get a letter
telling you to place the same
"envelope-stuffing" ad in newspapers or
magazines, or to send the ad to friends and relatives.
The only way you'll earn money is if people respond to
your work-at-home ad.
Assembly or Craft Work. These programs often require you to invest hundreds of dollars in equipment or supplies. You also may be required to spend many hours producing goods for a company that has promised to buy them. For example, you might have to buy a sewing or sign-making machine from the company, or materials to make items such as aprons, baby shoes, or plastic signs. However, after you've purchased the supplies or equipment and performed the work, fraudulent operators don't pay you. In fact, many consumers have had companies refuse to pay for their work because it didn't meet "quality standards." Unfortunately, no work is ever "up to standard," leaving workers with relatively expensive equipment and supplies, and no income. To sell their goods, these workers must find their own customers.
Scam artists selling fraudulent Internet-related business opportunities are trying to cash in on the Internet’s potential. Don’t let them fool you. Although the Internet has vast commercial possibilities, every entrepreneur who buys into an Internet "opportunity" doesn’t automatically find a pot of gold at the end of the rainbow.
You’ll see fraudulent Internet-related business opportunities promoted on Web sites and through e-mail solicitations. But these frauds are also marketed through more traditional methods, including infomercials, classified ads and "advertorials" in major newspapers and magazines, telemarketing, trade show presentations, seminars, and direct mail solicitations. Many of the scams are targeted to individuals who are not technologically savvy. Indeed, many pitches even seem designed to take advantage of an entrepreneur’s "Internet innocence."
The Federal Trade Commission has found that scam artists use many different methods to pitch a variety of business opportunities. Here are a few examples:
Company A promises that consumers can earn thousands of dollars a month if they join its multi-level marketing plan.
The Pitch: Recruit people to sell devices that enable television access to the Internet.
The Problem: Everyone pays to join the program. The program compensates participants based on how many people they recruit into the program, not on their retail sales of products to consumers. That makes it an illegal pyramid scheme, not a bona-fide multi-level marketing plan. Pyramiding generally is regarded as illegal because by mathematical necessity, nearly everyone who participates will lose their money. Compensation is based on recruiting, not on product sales. When there are no new recruits, the pyramid collapses.
Company B says consumers can earn big money by providing access to the Internet.
The Pitch: Sell machines or kiosks that provide walk-up access to the Internet, for a fee, in public places like airports, upscale hotels, and shopping malls. Consumers spend thousands of dollars for the machines, which the company promises will generate "amazing" earnings. What’s more, the company promises plenty of profitable locations to place the machines.
The Problem: Rather than the high-traffic locations the scam artists promise, the machines are placed in bars and pizza joints. Consumers can’t possibly make the earnings they were guaranteed.
Company C advertises that consumers can earn more than $150,000 as "Internet consultants."
The Pitch: Free seminars to teach consumers how to "make money on the Internet."
The Problem: The seminar really is a high-pressure sales pitch for Company C’s Internet yellow pages or Internet mall advertising business opportunities. The company promises to deliver Internet and sales training for a fee of several thousand dollars. Consumers hoping to launch a lucrative enterprise never get the promised training and frankly, never earn the promised amounts.
Do business with companies you know and trust. Be sure you know who the company is and where it is physically located. Businesses operating in cyberspace may be in another part of the country or in another part of the world. Resolving problems with companies that are unfamiliar can be more complicated in long-distance or cross-border transactions.
Check out the company's track record. Ask your state or local consumer protection agency if the company has to be licensed or registered, and with whom, and check to see if it is. You can also ask consumer agencies and the Better Business Bureau in your area about the company's complaint record. But keep in mind that fraudulent companies can appear and disappear quickly, especially in cyberspace, so lack of a complaint record is no guarantee that a company is legitimate.
Investigate all earnings claims. Talk to others who have purchased the opportunity to see if their experience verifies the claims. Visit them in person.
Realize that seminar "trainers" or "consultants" often are there to sell you a business opportunity, not teach you Internet basics. In fact, they may be counting on your lack of experience with computers or the Internet.
Keep your eyes and ears open for "shills" or phony references. Don’t accept a list of references selected by the company that offers the business opportunity as a substitute for a complete list of franchise or business opportunity owners.
Ask for a disclosure document if you are interested in a franchise. This document is required by law. It should provide detailed information to help you compare one business to another. Be skeptical of companies that do not have disclosure documents.
Check out the company with your state securities agency, attorney general, local consumer protection agency, and the Better Business Bureau where you live and where the company is located. A check with the BBB may not be foolproof, but it is prudent nonetheless.
Be careful to whom you give your financial or other personal information. Don't provide your bank account numbers, credit card numbers, social security number or other personal information unless you know the company is legitimate and the information is necessary for the transaction. Even with partial information, con artists can make unauthorized charges, deduct money from your account, and impersonate you to get credit in your name.
Take your time to decide. While there may be time limits for special offers, high-pressure sales tactics are often danger signs of fraud.
Be aware that there are differences between private sales and sales by a business. All sorts of goods and services are sold or traded by individuals through unsolicited e-mails, newsgroups postings, chat room discussions, web auctions and online classified advertisements. While most people are honest, your legal rights against the seller may not be the same as with a business, and you could have difficulty pursuing your complaint if the merchandise is misrepresented, defective or never delivered.
You may be better off paying by credit card than with a check, cash or money order, as long as you know with whom you're doing business. When you use your credit card for a purchase and there is a problem, you have the right to notify your card issuer that you are disputing the charge, and you don't have to pay it while your dispute is being investigated. It's easier to resolve a problem if you haven't already paid. Also, unless you are purchasing through a secured site (preferably using the new Secured Encryption Technology), it may be safer to provide your payment information by phone or mail rather than online.
Don't judge reliability by how nice or flashy a website may seem. Anyone can create, register and promote a website; it's relatively easy and inexpensive. And just like any other forms of advertising, you can't assume that someone has screened and approved it.
Know that people in cyberspace may not always be what they seem. Someone who is sharing a "friendly" tip about a money-making scheme or great bargain in a chat room or on a bulletin board may have an ulterior motive: to make money. And sometimes those friendly people turn out to be crooks!
The FTC urges you to investigate Internet-related business opportunities as carefully as you would check out any business opportunity. Before you invest or buy into any business opportunity:
Exercise
Caution
Legitimate work-at-home program sponsors should tell you
-- in writing and for free -- what's involved. Here are some
questions you might ask a potential employer:
What tasks will I be required to perform?
(Ask the program sponsor to list every step of the job.)
Will I be paid a salary or on commission?
Who will pay me?
When will I get my first paycheck?
What is the total cost of the work-at-home program, including supplies, equipment, and membership fees? What will I get for my money?
The answers to these questions may help you determine whether a work-at-home program is legitimate and guard against financial loss.
You also might want to check out the company with the consumer protection agency and the Better Business Bureau in your own area and again where the company is located. These organizations can tell you if they have received complaints about the work-at-home program that interests you.
Where
To Complain
If you have spent money and time in a work-at-home program
and you now believe it may not be legitimate, contact the company
and ask for a refund. Let the company know you plan to notify
officials about your experience. If you can't resolve the dispute
with the company, here are some organizations that may be able to
help you:
The Attorney General's office in your
state or the state where the company is located. The
office will be able to tell you if you're protected by
any state law that may regulate work-at-home programs.
The National
Fraud Information Center (NFIC) at 1-800-876-7060, 9
a.m. - 5:30 p.m. EST, Monday - Friday. The NFIC is a
private nonprofit organization that operates a consumer
hotline to provide service and assistance in filing
complaints. NFIC helps the FTC and the state Attorneys
General by entering complaints into a computerized
database to help track and identify fraud operators.
Your local consumer protection offices.
Your local Better Business Bureau.
Your local Postmaster. The U.S. Postal
Service investigates fraudulent mail practices.
The advertising manager of the
publication that ran the ad. The manager may be
interested to learn about the problems you 've had with
the company.
The Federal Trade Commission. While the
FTC cannot resolve individual disputes, the information
you provide may indicate a pattern of law violations
requiring action by the Commission. To register a
complaint, write to:
Consumer Response Center
Federal Trade Commission
Washington, D.C. 20580
For More Information
For a free copy of Best Sellers, a complete list of FTC publications, contact:
Consumer Response Center
Federal Trade Commission
Washington, D.C. 20580
(202) 326-2225
(202) 326-2502
For more information about franchises, business opportunities, multi-level marketing plans or pyramid schemes, write to the Correspondence Branch, Federal Trade Commission, Washington, D.C. 20580; 202-326-2222; TDD: 202-326-2502.