Penalties handed down against operators of charity publications scam targeting small businesses
Added: March 2013
The operators behind a scam targeting small businesses with false claims about advertising services for publications with a philanthropic slant have been ordered to pay $750,000 in penalties following court action by the Australian Competition and Consumer Commission (ACCC).
The Federal Court in Sydney has ordered Adepto Publications Pty Ltd (Adepto), its sole owner and director, Craig Mitchell, and a former manager, Danielle McKay, to pay penalties totalling $750,000 after they admitted that they had made false and misleading representations in relation to advertising services that were never requested.
Representatives of Adepto made unsolicited phone calls to Australian businesses about advertising in its publications, including the National Emergency Relief Guide, Underprivileged Childrens Guide and Volunteer Organisations Guide.
After the call, even if the business did not agree to take out an ad, Adepto posted them a copy of the ad as published in the publication and an invoice seeking payment. If the business did not pay, Adepto representatives made follow-up calls demanding payment for the unwanted and unordered ad.
Adepto admitted that Adepto and its publications had no affiliation with any charitable or non-profit organisations. Adepto also admitted that while they represented that 2000 copies of the publications carrying the ad would be distributed to various organisations in the same postcode as the advertiser, actual distribution was significantly less.
Business directory scams are one of the most common types targeting small businesses. In 2011, following ACCC action, the Federal Court imposed penalties totalling $2.7 million against two overseas companies for targeting thousands of Australian businesses with a fake "Yellow Pages" directory scam.
Small businesses beware – don't let scammers slip under your radar with invoices for unwanted services.
How these scams work
- You receive a call out of the blue from someone claiming to represent a business directory or other publication you've never heard of. The caller offers to place an advertisement for your business in the publication for a fee.
- The caller may refer to a publication with a philanthropic purpose in the hopes of appealing to your charitable side. Alternatively, they may claim to have affiliation with government or a well-known business. They may even claim to represent a business through which you currently advertise.
- If you accept the offer, you find that when the ad is published, the actual distribution number and geographic reach is significantly less than what you signed up for.
- If you decline the offer, you subsequently receive an invoice in the mail along with a copy of the ad.
- If you do not pay, you receive follow-up calls or official-looking letters demanding payment.
- Beware of offers from out of the blue that you didn't ask for – scammers almost always approach businesses in this manner.
- Don't agree to offers or deals right away – always ask for an offer in writing and seek independent advice if the deal involves money, time or a long-term commitment.
- Always check offers are legitimate and offer a quality product or service before you sign up. Search the wording of the offer or the company name on the web as many scams can be identified this way.
- If you receive an invoice that you know nothing about, don't pay until you are sure it's the real deal. Many small business scams involve fake invoices for goods or services that haven't been requested or provided.
- Never give or clarify any information about your business unless you trust the other party and know what the information will be used for.
- Effective management procedures can go a long way towards preventing scams – have a clearly defined process for verifying and paying accounts and invoices.
You can report scams to the ACCC via the report a scam page on SCAMwatch or by calling 1300 795 995.
For more information on false billing scams and other scams targeting small businesses, visit the SCAMwatch small business scams section.
Stay one step ahead of scammers, follow @SCAMwatch_gov on Twitter or visit http://twitter.com/SCAMwatch_gov
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