The name of the case is FTC v. Fat Giraffe Marketing Group, but this lawsuit has nothing to do with obesity, giraffes, or obese giraffes. Well, maybe there are some similarities in the sense that the defendants made overreaching claims, telling stories of being as tall as tree-top ungulates, and using protective colors (in this case false endorsement) to disguise their intentions.
Fat Giraffe Marketing, four related Utah-based companies, Gregory W. Anderson and Garrett P. Robins marketed money-making opportunities, claiming people could earn cash from the comfort of their homes simply by posting advertising links on their websites. How much? According to the ad, there are many: “Mom makes $7,487 a month, you won’t believe how she does it!” and “If you can spare 60 minutes a day, we can offer you a certified, proven and guaranteed work-from-home job to earn up to $379 a day from home!” The names of these programs have changed over time—Excel Cash Flow, Online Cash Commission, Cash From Home, etc.—but they all resonate with the work-from-home craze.
Speaking of Cha Jing, the defendants paid millions of dollars to affiliate networks to drive traffic to their websites. When a hyperlink in one of these ads leads to a sale, the affiliate makes money and passes a portion to the individual affiliate marketer who placed the ad.
You’ll need to read the indictment for details on the different ways the defendants marketed their products, but one way is through online blogs or articles that appear to have the logos of news organizations like ABC, BBC, CNN, NBC, and USA Today. The signed “articles” claimed to “investigate online work-from-home projects” and told the story of “Theresa Andrews” who allegedly used the defendant’s “Cash From Home” course to earn between $6,000 and $6,000 a month simply by placing a link. $8,000. hours a day. In addition to warning about “get-rich-quick scams that are ubiquitous on the Internet,” the article also featured comments from “readers” who claimed to have used the same program to make money.
Consumers who click on the link are taken to another page that contains this call to action: “Urgent Update: This work-at-home opportunity has received significant national media attention recently. All positions in the program are being filled rapidly. To keep your spot, you must act now!” The pages told the success story of “single mother Cynthia Splinter,” who joined the defendants’ scheme and became a millionaire. It also promises consumers “free one-on-one consultation with Internet wealth experts!”
Consumers who pay $97 to join are then taken to a “members area” page, ostensibly to get access to the promised plans. Additionally, they are instructed to “call our office and connect with one of our entrepreneurship experts for an in-depth, personal assessment” so they “can get started and achieve results quickly with the help of a business coach.”
So, those big-money pledges, an independent “investigation” of Cash From Home courses, Theresa Andrews’ income statement, a chorus of enthusiastic reviewers and the success story of millionaire Cynthia Splinter So what? According to the Federal Trade Commission: Fake, fake, fake, fake, fake. Even the nature of the product was counterfeit, the FTC said. Instead of getting a lucrative job adding links to your website, buyers get an eCommerce 101 video on the basics of affiliate marketing or dropshipping.
When buyers requested a consultation, they were actually talking to a “telemarketing floor” of telemarketers who colluded with the defendants to try to upsell other companies, including the online teaching and training specialist that was sued by the FTC. Even higher priced business opportunities are for sale. (By the way, these telemarketing floors were more than just a side hustle. According to the indictment, the defendants made nearly twice as much money from telemarketing floor referrals as consumers would have earned if they signed up for the Cash at Home program.)
The settlement prohibits the defendants from promoting any business opportunities or business coaching services for life. The order also prohibits violations of telemarketing sales rules and many other illegal practices. Additionally, the order imposes a financial judgment in excess of $10 million due to the defendant’s financial condition, which judgment will be suspended once the defendant surrenders substantially all remaining assets.
What can others learn from this case?
There is no business like “knowing” the business. The complaint also alleges violations of the provisions of the Business Opportunity Rules regarding earnings declarations and required disclosures. Do any marketers in the know know to read Selling Work from Home or Other Business Opportunities? Revised rules may apply to your considerations.
Invest time in reviewing the TSR. Telemarketing sales rules are strict when it comes to “investment opportunities.” The rules define it as “any tangible or intangible item offered, sold, offered for sale or traded based in whole or in part on an express or implied representation as to past, present or future income, profits or appreciation.” If you sell products that fall within this broad definition, pay special attention to TSR compliance.
Does your ad assert independence? It is illegal under the Federal Trade Commission Act to falsely claim or imply that an endorsement reflects the independent opinion of an impartial reviewer. Don’t disguise marketing claims as editorial content, consumer testimonials, or user reviews.
