Misleading Advertising Law

Give your prospects a free lunch, and then pitch them for 6-8 hours on your product which doesn't work.

At least that is is what Office of the Illinois Attorney General who sued two Utah Companies for Misleading Promises is alleging. According to the press release,

"StoresOnline and Galaxy Mall both promise to provide everything consumers need to get an online business started, including software to set up a web page, access to online payment mechanisms, and training courses to pull it all together. But, according to Madigan's complaint, once consumers pay thousands of dollars for these services, the two businesses fail to fulfill their promises, leaving consumers with nothing.

Madigan's complaint specifically alleges that StoresOnline and Galaxy Mall, both based in Orem, Utah, lure Illinois consumers to a free lunch, where they encourage consumers to attend a "training session" to learn how to start a successful online business. However, the "training session", for which consumers pay a nominal fee, actually is a 6 to 8-hour sales presentation for the defendants' products. During the "training session", the defendants allegedly promise consumers:

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that the products are easy to use and consumers will not need computer experience;

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that the contracts for the products provide for a three-day period during which consumers can cancel the contract and obtain a refund; and

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that the defendants will provide any assistance the consumers may need to start their online businesses.

In contrast to the sales pitch, the complaint alleges that:

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the products are not easy to use, and even consumers with computer experience were not able to set up their online stores;

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the defendants refused to cancel contracts and provide refunds, even when consumers attempted to cancel within the first three days; and

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the defendants failed to provide the promised technical support for the products"

Apparently, 15 Illinois residents losts a total of around $90,000.

While I applaud the AG for brining this action quickly, I don't have the same applause for her preventive warning. "Consumers need to be very skeptical of any marketing efforts that promise easy access to the world of internet business," Madigan said. "If a sales pitch sounds too good to be true, it probably is. Consumers must be wary of unscrupulous businesses that prey on the desire to attain easy wealth through the internet."

These residents didn't find the sales pitch too good to be true, and in general scams do not self-announce themselves as too good to be true. So why didn't these individuals see through the deception? We don't know. We do know a couple of things, however.

First, it is unlikely that these individuals were very conversant with the internet. Had they googled "storesonline scam" they would have found the June 2005 warning from Australia, which raised serious doubts about the concept. Concluding, "Regrettably, instant wealth without effort is outside the reach of us mortals." In other words, at the free lunch, when you are promised something for nothing, having another helping of food, but leave quickly.

Second, we know that these individuals probably didn't pay for their online store with Visa or Mastercard, since they would have been able to charge back the purchase.

(Ironically, Ed Magedson of Ripoff Report fame, wrote a long piece explaining what a wonderful company Galaxy Mall was and how they had changed their spots.)

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