Reputation 2009 – There Will Be Blood

I believe our online reputation management business is going to get better in the future. The country is currently already inundated with CEO heads rolling, SEC investigations, banking irregularities and more investigations, ninja loans, sub-prime slime, government’s failure at properly regulating the GSE’s, mortgage fraud, medicare fraud, credit card fraud, credit card repair fraud, car dealership misrepresentations, and the list goes on. There are always the proverbial celebrities, business brands and sport’s figures being tarnished, fairly or unfairly, but I am predicting a new wave of FTC investigations into the business practices of certain Internet marketing gurus peddling what the government will call “get-rich-quick” schemes, their code for scamming the public.

I don’t know about you, but lately, some of these so-called “experts”, and yes, some of them are that indeed – which makes them even a more likely target because of their high profiles – have been filling the inboxes of hundreds of thousands of consumers daily with high-priced programs promising huge profits anywhere from minutes to 60 days from the purchase. All these emails and ‘squeeze pages’ are beginning to look and sound alike, almost mirroring each other in style and substance with some minor twists and power headlines: maybe the guy who was a drunk or drug addict two years ago before discovering his online secret to now banking millions of dollars, or the out-of-work employee who was desperate and losing his home and cars before getting into his or her online marketing program, or reincarnations of the old Yellowbook and local online mall concepts we saw years ago, info products and ebooks, and on and on.

First we link to a video, hear the backstory, then we see the Clickbank or PayPal accounts with hundreds of thousands of dollars in deposits, read all the testimonials, hear about the once-in-a-lifetime bonuses, and then we’re taken to the buy NOW button (that “may not be there again if we dare even refresh the page”). How about all those online teleseminars and videos recycling programs of years ago? I don’t know how these buyers have the time to keep up with all this. They can’t be holding full-time jobs, and I suppose that’s exactly what makes them so vulnerable.

Any idea how many failures this will produce causing frustrated buyers to point fingers at the sellers to rationalize why they failed and lost their investments, some of them quite substantial dollars. Yes, of course today, there are many more millions of people online globally than a decade ago, but my fear is that some of these gurus, who have done brilliant work and are to be truly congratulated for their successes, are letting hubris (and greed in some cases) set in and are dropping their guard in the over-the-top, grey-area ‘puffery’ being used to solicit these more vulnerable and desperate potential pool of buyers, mostly newbies, who are making quick emotional decisions before really doing their homework. Much like the mortgage and Wall Street peddlers that got us into today’s financial mess. These programs use psychological triggers driving the consumer to the purchase by appearing to limit the number of buyers and creating a certain exclusivity – actually a feature touted as a training technique being passed on to these buyers who are just not properly screened as to their ability to actually succeed with these programs.

How many times in the last 60 days have you heard the ‘teach the fish story’, or some version of that? Getting the picture?

Here’s the problem, and why ReputationDr will be looking forward to more online reputation management business. Many of these programs are really “business opportunities” in the true legal description of certain state law and the FTC Act relating to deceptive trade practices designed to protect consumers, but are operating under the radar screen of these state and federal business opportunity laws as if just “product sales”. This will not hold up if a complaint is brought by the government. Oh, by the way, in case you haven’t heard, the federal government is out of money. Agencies that will not receive any government cutbacks, I promise you, are agencies that have the ability to bring revenue into the treasury, such as the IRS, SEC, CFTC, and yes, the FTC.

The latter employs approximately 500 attorneys, a group of which just love to target the companies and individuals they believe they can roll over due to the high cost of litigation and, thereby, put a few success notches in their belt. There is no relationship between what the government will spend in relation to the final judgment they will secure. I have read many stories of them traveling in two’s to dozens of cities, after issuing subpoenas, to take depositions of all the buyers and spread fear into a seller’s customer base. Oh, and by the way Mr. Internet Guru, do not be surprised if some day in the future you find out that one of your purchasers is, in actuality, an FTC mole operating with an alias name, alias address, phone numbers and credit cards. You won’t know until you been served and read the transcripts of all the telephone calls that have been recorded, emails that have been exchanged, marketing materials that you have used, thousands of pages, really. No, sorry, the feds do not need to inform you that the telephone calls are being recorded when they are investigating you and preparing to identify you as a “target”. This could take them six months to a year, they are a patient bunch. To be forewarned is to be forearmed, as the expression says.

 Listed below are some general criteria that, if not adhered to by the sellers, may put up a red flag for them AND the buyers:

  1. A “business opportunity” involves the sale or lease of any product, service, equipment and so on that will enable the purchaser-licensee to begin a business.
  2. The licenser or seller of a “business opportunity” declares that it will secure or assist the buyer in finding a suitable location or provide the product to the purchaser-licensee.
  3. The licenser-seller guarantees an income greater than or equal to the price the licensee-buyer pays for the product when it’s resold and that there’s a market present for the product or service.
  4. The initial fee paid to the seller to start the business opportunity is more than $500.
  5. The licenser-seller promises to buy back any product purchased by the licensee-buyer in the event it can’t be sold to prospective customers of the business.
  6. Any products or services developed by the seller-licenser will be purchased by the licensee-buyer.
  7. The licenser-seller of the business opportunity will supply a sales or marketing program for the licensee-buyer that many times will include the use of a trade name or trademark.
  8. Any reference to “earnings projections” for the buyer, either orally, in emails, or in marketing materials.  

This is a short list, and any one of these points is enough for the government to make its allegations, let alone just one strong consumer complaint. I’m not even going to get into compensation and mark-up issues here, but these, too, are favorite FTC arguments as they make for very lively pleadings stripping away empathy for multi-millionaire defendants when presented to a jury of your “peers”.

Our research seems to indicate that when they do bring a case, not only will one’s reputation be irreparably damaged, but they should be prepared to disgorge to a redress fund, and the treasury, anywhere from five to thirty percent of their revenue in a final settlement IF one goes all the way through the legal process by deciding to vigorously defend themselves and go to trial in order to reach a final court ordered verdict. Most small businesses cannot afford the time – typically two years from filing – the distraction, the stress, and most importantly, the financial resources to prove the FTC targeted the wrong defendant(s). You could be talking a Million Dollars in legal fees and costs. The government knows this, so once they have the seller somewhat convinced that their chances of a complete victory are rather slim – remember, they are patient, so they will “pile on” first and take their time, maybe start by filing an exparte TRO freezing one’s assets before taking depositions and interrogatories – the sellers may not be offered a pre-trial settlement right away. It will come — the government victory is important to the assigned attorneys – but it will come at a very high cost in dollars and reputation.

So, to the point of my original thesis of this blog message: the online reputation management business is likely to grow dramatically because of the daily over-saturation of these online marketing pitches from those who need to pay closer attention to their trade practices and not let their past successes go to their heads, especially in the vulnerable times in which we find ourselves today.

So, how to always maintain a good online reputation?

First, of course, the obvious. Always treat the consumer fairly and ethically. This goes beyond offering money-back guarantees if not satisfied with the purchase. It means ongoing support and answering questions in a timely manner. Being transparent and truthful at all times. Know the difference between “shills” and references or recommendations.

Next, if you are a seller of a “kit”, “business-in-a-box”, training program, etc., costing more than $500, and you are maintaining an ongoing relationship with the buyer, I would strongly urge that ALL your marketing messages and materials be first reviewed by an attorney who is familiar with federal and state business opportunity laws. You may not be a “franchise”, although I have heard the words “business opportunity” and “licensing” used very loosely, but if you happen to fall within the ambit of FTC franchise and business opportunity rules, you could potentially have a problem if your advertising documents or legal structure has not already taken this into account. Also, if you don’t know, ask your lawyer if he or she knows what a state AIN is. If they don’t, you need another attorney.

Above all, your good name and integrity is truly your most valuable asset. Protect it, value it, and don’t allow a misstep in judgment, or, worse, a competitor or complainant, destroy it because you failed to implement sound preventative measures. If not, we’ll be hearing from you!

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One Response to Reputation 2009 – There Will Be Blood

  1. Tom Stanley says:

    I was on Yahoo and found your blog. Read a few of your other posts. Good work. I am looking forward to reading more from you in the future.

    Tom Stanley

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