I’m usually awake late at night, and I’ve occasionally helped myself shut out distracting noise late at night by keeping the television audio on at a low volume. Invariably, the late night programming is centered around show-length commercials for a variety of products. Kitchen devices seem to be some of the most popular products sold late at night, but I’ll occasionally subject my fading consciousness to annoying money-making products. There are big promises, like making thousands of dollars in days or retiring a millionaire in just a few years.
Invariably, the commercials feature testimonials from people who have participated in the program, and show these participants surrounded by all the expected trappings of luxury, hoping to take advantage of the typical greed of the American consumer.
One of these companies has been sued by the Federal Trade Commission for making misleading claims about the amount of money one could be expected to earn by using their products. But wait; there’s more. The feds are also going after one of the company’s customers who appears in the commercial, a woman who lied about how much money she made participating in the program. This is the first time a testimonial has been targeted in an FTC suit.
Most of the money people earn with the product and company targeted in this suit — Russell Dalbey’s “Winning in the Cash Flow Business” — made money not by the techniques taught in the program but by selling the program to other customers. This is a typical multi-level marketing scheme, where the bulk of the income comes from the process, not the product. The product is irrelevant; the customers are the salespeople, and the product could be switched with any other product and the business plan wouldn’t change.
Regardless of the business plan, the FTC is only concerned with the misleading claims of profiting in minutes, without explaining that customers need to keep paying the company for marketing materials — products that allow customers to become salespeople and continue spreading the product while sending income up the side of the pyramid.
Products like this aren’t limited to late-night infomercials. Whenever you consider buying an “information product” from an online site, ask yourself a few questions:
- Is the information not available elsewhere for free?
- Are you being asked to make money for yourself and for the company by becoming a salesperson rather than just a customer?
- Are the company’s profits based on affiliate or downline sales?
- Do the customers’ testimonials sound too good to be true?
- What are the hidden costs, like products you’ll need to buy?
- Do you have to continue to “upgrade” in order to receive all the promised benefits?
Updated June 22, 2016 and originally published June 6, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.