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FTC guns for online scams

The Federal Trade Commission is cracking down on get-rich-quick schemes on the Net, and 37 online ads already have vanished.

The Federal Trade Commission is cracking down on get-rich-quick schemes on the Net, and 37 online ads already have vanished.

The effort, announced today, is part of the FTC's campaign promote trust in e-commerce by targeting and shutting down proven online scams. Internet surfing has become a regular part of FTC enforcement. In the past, the FTC has filed cases to shut down companies running online pyramid schemes and "adult entertainment" sites that soaked unwitting consumers for millions.

The announcement today was the result of a "surf day" investigation organized last month by FTC and the North American Securities Administrators Association. This was the second such surf day. Last time officials sniffed out online pyramids.

In this case, regulators and attorney generals from 24 states surfed the Net to find "business opportunity" sites that promised huge returns on consumer investments. After identifying 215 suspicious sites, the FTC sent the marketers warning letters stating they must have solid evidence to back up their claims or face possible federal and state prosecution.

The agency made follow-up visits to the sites on April 21 to find that seven sites had revised their claims and 37 had disappeared. However, the FTC said it has no idea how much money the sites that disappeared made from online investors.

An additional 24 ads posted in online forums will soon be gone, the FTC said today. As a rule, old forum posts are automatically removed by system administrators after a period of time--so these ads could resurface.

"Sure, these sites could pop up again, but we think it's unlikely that they will. We think that the sites were taken down by both the site administrators and the advertisers--the majority were taken down by the advertiser," Eileen Harrington, the FTC's associate director for marketing said during today's announcement which was held in a forum on America Online.

"One thing the FTC is trying to do by sending messages to the sites is to educate entrepreneurs who might not know what the law requires in the way of substantiation for earnings promises," Harrington added. "We hope that this brand of 'community policing' on the Net will chase fraudulent operators off of the Internet."

The FTC will not confirm whether local or federal authorities are going to investigate the remaining sites or provide the names of the sites until legal action is taken. But if the businesses are making false earnings claims, the FTC could pull them into court.

"The other sites that we visited may or may not be violating the law, but the sites have been downloaded and preserved for possible future use by law enforcement," Harrington said.

Before surfers invest in any online opportunities, they can research potential scams on the FTC and NASAA Web sites.

Dale Cantone, who is the chair of NASAA Franchise and Business Opportunity committee and assistant attorney general for Maryland, warned surfers of what they should be looking for.

"Some of the current biz opportunity scams that we have seen are vending machines, pay telephones, display racks of greeting cards and CD-ROMS, and the ever popular amusement devices," he said. "Another type is a variation of several low-cost deals such as grocery coupons sold as a package at 'free' seminars in hotels."