Jan 31 2009
Business Opportunity Shills and Proposed Rules to Prevent Fraud
It has been observed that often business opportunity sellers use shills to promote their products or business opportunities in advertising. Perhaps you seen this before when someone on TV was obviously a very skilled actor will swear by certain product or business opportunity in an infomercial. They claim that they’ve made all kinds of money in this new investment and business opportunity, yet often this is totally fraudulent.
You see, often the person stating what a great business it is; is only an actor they are not in the business nor have a meeting the money doing anything for the business other than being an actor for the video.
You see, the Federal Trade Commission is now onto this and they have proposed a new set of rules to prevent this type of fraud, as it is disreputable and misleading advertising and misrepresents the truth. Below is an excerpt from the Federal Trade Commission’s report on their new proposed set of rules for business opportunity disclosures;
Proposed section 437.5(q): Shills
“Proposed section 437.5(q) would address one of the most pernicious practices common in fraudulent business opportunity sales – the use of shill references to lure unsuspecting consumers to invest. The Commission has brought many actions against business opportunity sellers who provided prospects with the names of individuals they falsely claimed were independent prior purchasers or independent third parties, but who in fact were paid by the seller to give favorable false reports confirming the seller’s claims, especially their earnings claims. The use of paid shills to give false reports induces prospective purchasers into believing that the opportunity is a safe and lucrative investment.
To address this deceptive practice, proposed section 437.5(q) contains two related prohibitions. First, it would prohibit any seller from misrepresenting, directly or through a third party, that any person “has purchased a business opportunity from the seller.” This would prevent a seller, for example, from claiming that a company employee, locator, or other third party is a prior purchaser of the opportunity, when that is not the case. Second, the provision would prohibit a seller from misrepresenting that any person – such as a locator, broker, or organization that purports to be an independent trade association – “can provide an independent or reliable report about the business opportunity or the experiences of any current or former purchaser.” Providing a prospect with a list of brokers who are paid to give favorable reports, for example, would violate this provision because any statement a person on such a list makes would fail the “independence and reliability” test.”
Now then, you can obviously see how this problem can do totally out of hand and perhaps you are wise enough to know a shill when you see one, however there are a lot of snakeskin oil, fast talking, fraudulent business opportunity sellers out there in the use trying to get rid of them sold out the ethical practitioners of business opportunities can run their honest businesses with out all these negative in dishonest people in the marketplace. Consider this in 2006.
Lance Winslow