By: Linda L. Goodman
With the new Biz Opp rule from the FTC, many Biz Opp marketers were advised to turn their Biz Opps into an educational product and coaching products. For those marketers, FTC v. IVY should be reviewed carefully. The people who spent more than $100 million on “coaching” services sold by Ivy Capital and related companies thought that’s what they were buying a home-based business combined with a personal coaching platform. But according to the FTC lawsuit, that’s not what Ivy Capital delivered.
The FTC alleged that Ivy Capital’s telemarketers called people who had responded to email or ads for work-at-home or web-based business opportunities. But the “ads” originated from shell companies Ivy Capital set up to generate leads. From the ad or website, consumers would receive a call from telemarketers promising that people could make thousands of dollars by working just 5-10 hours a week from home. Once consumers signed up, the defendants sold the consumer data which resulted in consumers receiving sales calls from affiliated companies offering access to credit, expert tax advice, and yet additional “coaching” — all at a premium price.
According to the FTC, the defendant’s consumers were “coached” to max out their credit cards on services that either didn’t exist or didn’t meet the earning expectations set out by the defendants. The FTC alleged the individuals identified as “coaches” didn’t have expertise or experience setting up businesses as the consumers were told and didn’t have any relevant education or training. Furthermore, the FTC alleged “the all in one website-building program” presented by Ivy Capital didn’t work. Despite Ivy’s claim that lawyers and accountants were ready and willing to assist the consumer, it turns out they didn’t exist.
Refunds were another problem for Ivy and it is the single biggest issue that landed Ivy across the desk from the FTC. The FTC claimed that the defendants gave 100% guaranteed refunds which turned out to be misleading or failed to disclose any refund policies. According to the FTC, Ivy further compounded the complaint by demanding that consumers not say anything negative about the company as a condition of receiving a refund.
The settlement with the FTC banned Ivy and the other defendants from selling or otherwise benefitting from customer information. The orders also imposed a $130 million judgment against multiple corporate defendants and individuals, but much of it will be suspended due to their inability to pay. To satisfy as much of the judgment as possible, the defendants will have to turn over assets, including bank accounts, real estate, and cars.
There are two things to be taken from this case and its settlement. First, be sure you can substantiate claims you make about the product you’re selling, and substantiation means that the average purchaser can build, run and profit from the product as it is represented in your marketing material. Second, if someone wants a refund – give it to them. Make the refund process simple, easy, and immediate. Remember, most FTC actions are brought only after consumers in large numbers bring complaints against a company. If there are no complaints, then you are doing a good marketing job!
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This article is a publication of The Goodman Law Firm and is intended to provide information on recent legal developments. This article does not create an attorney-client relationship, nor should it be construed as legal advice or an opinion on specific situations. This may constitute “Attorney Advertising” under the Rules of Professional Conduct and under the law of other jurisdictions.
© 2013 TGLF, A.P.C.