FTC FACTSfor Business

BUSINESS

1-877-FTC-HELP

FEDERAL TRADE COMMISSION FOR THE CONSUMER

www.ftc.gov

C

Avoiding

Office

Supply

Scams

ould your organization be a victim of an office supply scam? If

you donít have adequate purchasing controls, probably so. Businesses, churches, and fraternal and charitable organizations are

being bilked out of millions of dollars by bogus office supply

firms. You can protect yourself by learning to recognize the scams and understanding your rights.

The typical office supply scam involves goods or services that you routinely

order: copier paper, toner and maintenance supplies, equipment maintenance

contracts or classified advertising. When fraudulent telemarketers call, they

often lie to get you to pay for items you didnít order, or to get you to pay more

than you agreed to. How? The caller may falsely claim to be your ìregular

supplierî or to tell you that the offer is ìspecialî or ìgood for a limited time

only.î Con artists take advantage of holes in your organizationís purchasing

procedures or of unsuspecting employees who may not be aware of office

practices. Whatís worse, the office supplies peddled by these bogus firms often

are overpriced and of poor quality; the services usually are worthless.

The Scams

Office supply scam artists generally use three ways to take your money ó the

phony-invoice, the pretender, and the gift-horse.

Phony-invoice Scams

The goal of the phony-invoice scam is to get the name and address of an employee so your organization can be shipped and billed for unordered goods or

services. The invoice includes the employeeís name as the ìauthorizedî buyer.

Scam operators use various ploys to get an employeeís name: They may call

asking for help completing an order, claiming that ìthe accounting department

lost the name of the person we should send these supplies to,î or they may ask

for the name of the person in charge of your Yellow Pages advertising.
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Once the con artist has an employeeís name

and address, heíll ship the unordered merchandise. The phony invoice arrives a week or so

after ó for two reasons: First, the inflated

price ó as much as 10 times what youíd pay

for the same goods from a legitimate supplier

ó is less obvious if the invoice arrives after the

merchandise has been received and stocked.

Second, the chances are good that youíve used

the merchandise before the invoice arrives.

Many organizations mistakenly believe that

they must return unordered merchandise or pay

for unordered merchandise if theyíve used it.

A twist on this approach may have the fraudulent seller timing a phony invoice to match

your purchase of legitimate services from

another vendor. For example, the seller sends

you a bill for unordered classified advertising

soon after your ad runs in a legitimate publication. The scam operator hopes youíll be confused and pay his bill instead of, or in addition

to, the one from the legitimate company.

The Pretender Scam

In the pretender scam, the caller may pretend to

be your regular or previous supplier, a replacement, or an ìauthorizedî supplier. By convincing you that the goods or services and prices

offered are the same as before, the caller hopes

you wonít bring up prices, quantities, and

brands. Even if you do, the seller may try to

brush you off by saying, ìWeíve supplied you

in the past, but itís been a while,î or ìThe

price is the same as last time.î If you insist on

a price quote, the seller may give a price that

sounds reasonable for one carton but is actually

for a single unit, such as ì$19.95 in a carton of

10.î Translation: the carton price is 10 times

$19.95 ó or $199.50.

In one variation on this scam, the caller misrepresents the quality, quantity, type, price, or

brand name. For example, the ribbons for your

IBM typewriters may not be IBM brand ribbons, or the toner for your Xerox copier may

not be Xerox brand toner. Some scam artists

try to duplicate brand name packaging; others

sell half a carton of merchandise at the fullcarton price. Similarly, sellers of Yellow Pages

advertising may actually represent fly-by-night

outfits that distribute few, if any, telephone

directories.

In another twist, the caller uses high pressure

tactics to rush your purchase decision and

dodge questions about price, quantity and brand

names. The seller may falsely claim that prices

are going up soon, someone was forced out of

business, a warehouse is overstocked, or a

limited inventory of government surplus is

available. Or that a computer glitch delayed

notification of a price increase, but, as a courtesy, an order has been reserved for you at the

ìregularî or ìoldî price.

Or, the seller may misrepresent the purpose of

the call, saying that heís calling to send you a

promotional item such as a cordless screwdriver, free samples, or a catalog so youíll

ìthink of him next time you order.î Or the

seller may claim that heís conducting a survey

of office equipment or updating company

records, leading you to believe that heís the

regular or previous supplier. Before hanging

up, the caller may mention ó in passing ó

actual merchandise. ìIíll send that screwdriver

to you right away ... and while Iím at it, Iíll

throw in a few deodorant blocks.î Soon, a

shipment arrives, followed by the bill.

The Gift-Horse Scam

The gift-horse scam tries to create mistrust

within an organization. The scheme starts when

the caller tricks an employee into accepting a

gift ó a free promotional item ó with a passing reference to merchandise or services. You

receive overpriced unordered merchandise,

followed by an invoice with the employeeís

name. When the organization questions the

employee, the fraudulent seller is betting that

the employee will be nervous about the gift
Facts for Business

when he denies placing the order. The hope is

that the organization will doubt the employee.

When this scheme works, the organization

believes that the employee blundered into

ordering something that must be paid for.

After the Invoice Arrives

Scam artists spend significant time and energy

on collection efforts. They send as many

invoices as it takes to get your money. Invoices

often are stamped ìPast Due.î In extreme

cases, theyíll resort to real or bogus collection

agencies and threats of legal action.

An organization that pays for unordered goods

or services also may be targeted for additional

scams. This practice is called ìreloading.î For

example, the seller may send a second shipment

of ìback orderedî merchandise and another

bill, or bills for service upgrades. Additional

invoices follow as long as you continue to pay.

The con artist also may sell your organizationís

name to other scam operators, or move to

another bogus operation and target you with a

new scheme.

The Brush-Off

When organizations complain that they didnít

order the merchandise or services or that the

price is too high, the scam seller reacts in some

predictable ways:

✏Bullying. The seller argues if you express

any uncertainty about whether the supplies

or services were ever ordered: ìThey were

ordered. We have a recording of Mr. Jones.

If you donít pay, we can take you to

court.î

✏Negotiating. Here, the seller agrees to

accept a lower price. After all, the goods

and services are so grossly overpriced that

almost anything the seller gets is profit. If

you complain about price, the seller may

say, ìYou were charged what? They must

not have given you the discount for ....î

The seller then tries to negotiate ìa better

deal.î Sometimes, the seller appeals for

sympathy: ìWe really need the business.

Iíll let you have it for....î

✏Charging for returned merchandise. The

seller claims you can return merchandise if

you pay a ìrestocking fee.î In fact, the fee

is often more than the goods are worth.

Similarly, the seller may try to get you to

pay shipping charges to return the items.

Protect Your Organization

You can protect your organization from paying

for unordered goods and services. Hereís how:

1. Know your rights. If you receive supplies

or bills for services you didnít order, donít

pay, and donít return the unordered merchandise. You may treat unordered merchandise as a gift. By law, itís illegal for a

seller to send you bills or dunning notices

for unordered merchandise, or ask you to

return it ó even if the seller offers to pay

for shipping. Further, if the seller sends

you items that differ from your order in

brand name, type, quantity, size, or quality

ó without your prior express agreement ó

you may treat the substitutions as unordered

merchandise. Unordered services are treated

the same way. However, first consider the

possibility that the seller made an honest

mistake.

The Federal Trade Commissionís (FTC)

Telemarketing Sales Rule offers additional

protections in business-to-business sales of

non-durable office or cleaning supplies and

most sales of goods or services to individuals, groups, or associations. The Rule

requires telemarketers to tell you itís a sales

call ó and whoís doing the selling ó

before they make their pitch. They must tell

you the total cost of the products or services

theyíre offering, any restrictions on getting

or using them, and that a sale is final or

non-refundable before you pay. Itís illegal
March 2000

F C EDERAL RADE OMMISSION T FTC OR HE ONSUMER

1-877-FTC-HELP www.ftc.gov

Facts for Business

or unsolicited calls and feel comfortable saying

ìnoî to high pressure sales tactics. Legitimate

companies donít pressure you to make a snap

decision. Finally, consider asking new suppliers

to send a catalog first.

Where to Complain

Report office supply scams to the FTC, your

state Attorney General, local consumer protection office, or Better Business Bureau. In

addition, you may want to share your experiences with other businesses to help them avoid

a rip-off.

The FTC works for the consumer to prevent

fraudulent, deceptive and unfair business

practices in the marketplace and to provide

information to help consumers spot, stop and

avoid them. To file a complaint or to get free

information on consumer issues, visit

www.ftc.gov or call toll-free, 1-877-FTCHELP (1-877-382-4357); TTY: 1-866-653-

4261. The FTC enters Internet, telemarketing,

identity theft and other fraud-related complaints

into Consumer Sentinel, a secure, online

database available to hundreds of civil and

criminal law enforcement agencies in the U.S.

and abroad.

Your Opportunity to Comment

The National Small Business Ombudsman and

10 Regional Fairness Boards collect comments

from small businesses about federal compliance

and enforcement activities. Each year, the

Ombudsman evaluates the conduct of these

activities and rates each agencyís responsiveness to small businesses. Small businesses can

comment to the Ombudsman without fear of

reprisal. To comment, call toll-free 1-888-

REGFAIR (1-888-734-3247) or go to

www.sba.gov/ombudsman.

for telemarketers to misrepresent any

information, including facts about the goods

or services being offered.

2. Assign designated buyers and document

your purchases. For each order, the designated employee should issue a purchase

order ó electronic or written ó to the

supplier with an authorized signature and a

purchase order number. The order form

should instruct the supplier to note the

purchase order number on the invoice and

bill of lading. The buyer should send a copy

of every purchase order to your accounts

payable department. Keep blank order

forms secure.

3. Check your documentation before paying

bills. When merchandise arrives, the receiving employee should verify that it

matches the shipperís bill of lading ó

paying special attention to brands and

quantity ó and your purchase order. Refuse

merchandise that doesnít. If everythingís in

order, the employee should send a copy of

the bill of lading to your accounts payable

department. Bills for services should be

reconciled the same way. A supplier should

not be paid unless the invoice has the

correct purchase order number and the

information on the invoice, the purchase

order and the bill of lading match.

4. Train your staff. Train everyone in how to

respond to telemarketers. Advise employees

who are not authorized to order supplies

and services to say, ìIím not authorized to

place orders. If you want to sell us something, you must speak to __________ and

get a purchase order.î

Buy from people you know and trust. Authorized employees should be skeptical of ìcoldî