We don’t know why people still fall prey to infomercials promising easy paths to riches. And yet, the Federal Trade Commission says a trio of popular get-rich-quick programs — all backed by the same two people — took consumers for a total of $450 million by misleading them into believing they could quickly earn piles of cash in real estate or Internet marketing.
The three infomercials — see examples below — are for “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.”
Last week, a U.S. District Court in California issued a summary judgment against the makers and stars of the ads, finding that the John Beck system falsely represented that consumers could purchase homes at tax sales in their own area for pennies on the dollar and that they could make money easily with little financial investment; that the earnings claims in the John Alexander infomercial were false; and that the Jeff Paul ads misled consumers by claiming that “a typical consumer can easily, quickly, and ‘magically’ earn thousands of dollars per week simply by purchasing and using” Paul’s system.
In reality, the FTC alleged that less than 1% of consumers who purchased the systems made a profit.
In addition to the misleading claims, the court sided with the FTC in finding that the defendants failed to adequately disclose that consumers who purchased the systems would be enrolled in a $39.95/month subscription plan. Oh — and customers’ payment information was used without their express informed consent, in violation of the FTC Act and the Telemarketing Sales Rule.
Then there were the “personal coaching services” sold to consumers for as much as $14,995, with the promise that those who enrolled in the coaching program would quickly and easily earn back that cost and that the program would substantially enhance their earning potential. Alas, the court found that almost everyone who purchased coaching programs lost money.
Now the defendants and the FTC have a few weeks to submit briefs arguing for how much the infomercial folks should be penalized. The FTC wants penalties in excess of the $450 million it says the marketers earned. The defendants argue that the court should at least subtract the money earned by those customers who did earn a profit after purchasing one of the products.