Are E-Scams Giving E-Commerce A Black Eye?

While e-commerce is soaring and breaking all records this holiday season, it also appears that Internet scam artists are having a field day.

It is this dark side of e-commerce that was brought to light when federal and state regulators recently cracked down on 72 operators of allegedly fraudulent online marketing operations.

The regulatory dragnet, which took place on “Surf Day,” exposed schemes ranging from simple chain e-mail operations to sophisticated million dollar (US$) scams.

Warned Then Investigated

As a result of its online investigation, regulators found 600 Web sites that in their mind appeared to be promoting illegal pyramid schemes. Each of the operators was then notified via e-mail. The violators who continued their questionable e-commerce were subsequently placed under investigation.

Since then, the Federal Trade Commission and various state agencies, have filed suit against 72 companies to halt the operation of their alleged pyramid schemes promoted via the Internet. plan. 2Xtreme claims to have recruited more than 60,000 consumers, but the FTC’s suit against the company has asked the court to freeze 2Xtreme’s assets pending its trial, “so they will be available for consumers redress.”

Buyers Beware

While these cases probably only represent a small fraction of the scammers currently using the Internet as a haven, the FTC says the following guidelines can help protect a budding entrepreneur who is considering a business opportunity via the Internet:

Beware of plans that promise enormous earnings or claim to sell miracle products. Ask the plan’s promoter to back up the claims with hard evidence.

Do not be pressured into signing a contract without first discussing the opportunity with your spouse, accountant or lawyer.

Avoid any plan that offers commissions for recruiting additional distributors. Such commission programs are illegal.

Beware of shills — decoy references that promote the plan when they are contacted. Self-Policing Would Be Nice

It is good to know that the FTC is policing the Internet for online scams. But it would make me feel much more comfortable if those in the e-commerce industry took an aggressive role.

For example, self-policing against such scam artists by an association of e-commerce players would go far to slow the proliferation of such cyberswindlers. But aside from that, it is in the industry’s own best interest to get involved — because every time someone gets ripped off online, it gives e-commerce a black eye.

I would like to see such big players such as America Online and Microsoft join mom-and-pop e-tailers in a coalition to target and expose such Internet scam artists. This action could be the first step in purging this bad element from cyberspace.

Otherwise, unchecked, these outlaws will continue to give e-commerce a bad reputation.

What do you think? Let’s talk about it.