FTC Announces Operation Main Street Enforcement Initiative

On June 18, 2018, the Federal Trade Commission (FTC), along with a number of state Attorneys General, the New York Division of the U.S. Postal Inspection Service, two U.S. Attorneys’ Offices and the Better Business Bureau, announced the results of Operation Main Street, an enforcement initiative aimed at operations that seek to defraud small businesses.

The FTC and BB have also made available educational materials designed to help small business owners identify scams.  The materials identify various “scammer tactics,” including pretending to be someone you trust, creating a sense of urgency, the utilization of intimidation and requests for untraceable payment methods.  They also provide tops on how to protect your business and cite various examples of common scams, including government agency imposer scams, and business promotion and coaching scams.

“Millions of U.S. consumers either own or work at small businesses nationwide, and the FTC is happy to join with our law enforcement partners and the BBB to help stop scams and spread the word about how they can identify and avoid scams targeting their livelihood,” said Chairman Joe Simons.  “A top FTC priority is to stem the tide of fraud against small businesses.”

“Scams are a significant – and growing – problem for small businesses,” said Beverly Baskin, President and CEO, Council of Better Business Bureaus.  “Nearly two thirds of those we surveyed said their business had been targeted by a scammer in the past three years, and many said that their businesses suffered a loss of consumer trust as a result. BBB is pleased to partner with the FTC to help small businesses spot and avoid scams and fraud.”

“The role of the state attorney general is not to second guess lawful business decisions.  But when someone scams or defrauds a business, they should be held accountable. In doing so, we create an environment where all legitimate business owners can thrive,” said Arizona Attorney General Mark Brnovich.

As part of the announcement, the FTC announced a new enforcement matter where it charged nine individual and corporate defendants based in Canada and the United States with operating a common enterprise that, since at least 2013, has allegedly made unsolicited calls to small businesses and other organizations to induce them to pay for unordered Internet directory listings, search engine optimization services or website design and hosting services.  According to the FTC, the defendants claim to be calling to collect on a past-due invoice when, in reality, the consumers never ordered or agreed to purchase anything.  According to the Commission, the defendants’ telemarketers threaten that if the invoice is not paid, the consumers’ credit will be negatively impacted.

The FTC alleges that in some cases, even after a consumer has paid money they did not owe, the defendants call back weeks later, sometimes claiming to be a different company demanding payment for other “outstanding invoices,” or claiming that the consumer’s first payment was only the first installment. As a result, many consumers have paid hundreds or even thousands of dollars for services they never ordered and did not want.

As part of the announcement, the FTC and BBB specifically thanked the AGs from Arizona, Delaware, Florida, Indiana, Missouri, New York, Tennessee and Texas, as well as the U.S. Attorney’s Office for the District of Maryland, the U.S. Attorney’s Office for the Southern District of New York and the New York Division of the U.S. Postal Inspection Service.

Richard B. Newman is an FTC defense attorney at Hinch Newman LLP.

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