Tuesday, March 4, 2008

Predatory Practices on the Internet

Net News Publisher ran a story this morning, which, while not explicitly discussing Internet practices, is applicable to an emerging form of predation taking place on the Internet:

A group of business opportunity marketers who told consumers they could make substantial income processing medical claims from home have agreed to settle Federal Trade Commission charges that they misled consumers in violation of federal law.

The settlement is a result of Project Fal$e Hope$, an FTC-led effort that targeted bogus business opportunities and work-at-home scams in 2006, producing more than 100 law enforcement actions by the FTC, the Department of Justice, the U.S. Postal Inspection Service, and law enforcement agencies in 11 states.

According to the FTC, in mass mailings to consumers throughout the nation, the defendants offered a business opportunity – electronically processing health care providers’ medical claims for insurance reimbursement – and that they would help consumers find their first medical billing client and provide them with lists of providers in their area. Consumers were told that they could earn $1,200 per month with one client, and they were promised software training and upgrades, review of all claims processed, and marketing and technical support.

As stated in the complaint, consumers were provided with names and telephone numbers of references represented as current licensees, some of whom were the defendants’ officers and directors. After consumers paid a “licensing fee” of $4,985 to $5,985, the defendants never provided a franchise disclosure statement, an earnings claim document, or any other information substantiating their earnings claims. At their own expense, the complaint notes, consumers attended a training session where they learned that the representations were false, and that they would have to make cold calls and personal visits in order to get clients. Once back home, they learned that obtaining clients was extremely difficult, if not impossible, because the market was saturated, most processors already functioned electronically, and the few who processed manually had little interest in entrusting their billing to inexperienced or unknown persons.

Presumably, the grounds for prosecution in this case involved (at least) mail fraud. On the Internet, however, the situation is more insidious, because it takes the form of employment opportunities listed on such sites as CareerBuilder and Yahoo! HotJobs. These scams all take the same form: The job-seeker is presented with what looks like the perfect employment opportunity; but once "hooked" that person discovers that this opportunity is only available to those who fork out some initial payment, which usually seems to involve four figures. The lucky ones get the pitch at an introductory seminar that offers some free food, but the food inevitably comes with a higher price tag.

None of this is new. Barbara Ehrenreich devoted an entire chapter ("In Which I Am Offered a 'Job'") to it in her book, Bait and Switch. However, that book does not say very much about the role that the Internet has come to play in taking the bad situation of victims of unemployment and making it far worse. Needless to say, Internet evangelists don't talk about this thing very much, just as they do not talk about the predators lurking on MySpace or death threats issued through the blogosphere. Nevertheless, it is important to recognize that caveat lector is as important in reading the "Help Wanted Ads" as it is in reading Wikipedia.

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