5 Tips from the FTC on Avoiding Office Supply Scams

As a small business owner, there are a number of scams you need to be aware of designed to steal your money and harm your company. The Federal Trade Commission is bringing you a series highlighting these scams and what to do to protect your business. We’re kicking off this series with a focus on a scam involving unordered office supplies.

The Federal Trade Commission (FTC) is the nation’s consumer protection agency. The FTC investigates and sues companies and people for unfair or deceptive acts or practices that target individual consumers or small businesses like yours. With its headquarters in Washington, D.C., and eight regional offices, including in Cleveland, the agency is well-positioned throughout the country to learn about scams and deceptive advertising affecting the local community. The FTC also has a database of more than 13 million complaints filed by consumers that it uses to determine trends in scams and which scams are affecting the most consumers. This information helps prioritize who the FTC should be investigating and can then be used to educate consumers on how to avoid the trending scams.

In addition to preventing scams and deceptive advertising, the FTC also works to keep consumers’ data safe. The FTC ensures that companies that collect information from consumers only use the information in ways that consumers expect and that the companies take appropriate precautions to keep consumer information safe from hackers.

The FTC also spearheads National Consumer Protection Week, a time to help people understand their consumer rights and make well-informed decisions about money, which is running now until March 10 this year.

In conjunction with National Consumer Protection Week, staff from the FTC’s East Central Region will discuss, in this and future articles in this series, some of the scams and deceptive practices affecting businesses. Some of these tactics have been around forever but continue to make millions for scammers, while others are cutting-edge and the full impact hasn’t yet been seen. We will also talk about how to keep data secure and what to do in the event of a breach. Stick with us and your customers and your bottom-line will be grateful.

Scam: Unordered Merchandise

The first scam to tackle is what we call the “unordered merchandise” scam.  It typically starts with a schmoozy call to an unsuspecting small business or nonprofit. Sometimes the caller claims to be “confirming” an existing order, “verifying” an address, or offering a “free” catalog or sample. Then comes the supplies surprise—unordered merchandise arriving at the company’s doorstep followed by high-pressure demands to pay up. When business owners refuse to pay, the scammers may claim to have audio recordings that prove the order was placed, but never come forward with the purported “proof.” The scammers may also have the birthdate of one of the employees as “proof” that the employee agreed to the merchandise, when, in reality, the employee was conned into giving their birthdate during the initial call. Sometimes the scammer will insist on payment, but offer a “discount” of less than the invoice amount.

In one recent case, FTC attorneys in Cleveland successfully sued a group of businesses and individuals for sending and billing for unordered merchandise. The defendants’ telemarketers called organizations and used deceptive tactics to get employee names—usually someone in the maintenance department—and delivery addresses. The next step: a seemingly innocuous conversation in which the defendants’ telemarketers offered to send a catalog, a small promotional gift (like a knife or gift card), and sometimes a sample of products. The defendants then shipped light bulbs and cleaning supplies to the business or organization, following up with high-priced invoices for those supplies, listing the employee’s name on the invoice as having ordered them.

If a business or nonprofit paid an invoice, the defendants would send more merchandise and more invoices, often using different company names (although they were all part of the same organization). When challenged, the defendants would try to bluff or trick victims into paying for the goods anyway. For example, they would argue that the fact that an employee had accepted the promotional gift showed that the employee also must have ordered the supplies. The defendants took more than $58 million from businesses and nonprofits just between 2010 and 2014.

Here are five tips for your company or nonprofit group when it comes to protecting yourself against an office supply scam:

Tip No. 1: Keep unordered merchandise but don’t pay for it. If your business receives merchandise no one on your staff ordered, the law says you don’t have to return it and the vendor can’t legally collect on it. You don’t have to pay for it, even if you used the item before you realized it was unordered.

Tip No. 2: Your best defense is a trained staff. Spend five minutes at a staff meeting educating your team about the signs of a supply scam. Caution them about fake friendly callers who worm their way in by claiming to have done business with you before or who say they have an “urgent” need to speak to someone in your maintenance department. If more than one person answers the main phone at your business, post a warning nearby about supply scams. For nonprofits, let volunteers know that fraudsters target charities, churches and community groups, too.

Tip No. 3: Consolidate contacts. Supply scammers try to exploit the fact that small businesses aren’t likely to have purchasing departments. But you can still designate one person to respond to all inquiries about office supplies, “free” offers or “existing” orders. Putting one person in charge—especially a staffer with a well-calibrated baloney detector—can help protect your company from con artists.

Tip No. 4: Investigate every invoice. Don’t pay a penny unless you know the bill is for items you or your staff actually authorized. If someone tries to pressure you into paying for unordered merchandise, complain to the FTC and Ohio’s Attorney General and let the pushy caller know you’re on to them.

Tip No. 5: Bookmark the FTC’s site on protecting small businesses. The FTC’s website features resources to help protect your company. For example, Small Business Scams clues you into typical tactics of business-to-business cons.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. You can file a complaint online at www.ftc.gov/complaint or by telephone at 1-877-FTC-HELP (1-877-382-4357).  


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    Kevin Soucek is an attorney at Walter | Haverfield who focuses his practice on intellectual property. He can be reached at ksoucek@walterhav.com or at 216-619-7885.

    James Pingor is an attorney at Walter | Haverfield who focuses his practice on intellectual property. He can be reached at jpingor@walterhav.com or at 216-928-2984.
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