By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 5/15/2008 7:25:33 AM ET 2008-05-15T11:25:33

Let’s be honest. We all like to get something for nothing. Whether it’s a complimentary dessert or a hotel room upgrade – free is a darn good price.

But I’ve been around long enough to know that when I’m offered a big ticket item for free – a widescreen TV, portable music player, videogame machine, or $500 gift card – it’s a scam.

The Internet is filled with these bogus offers. Some appear as pop-up ads. Others show up in your e-mail. The sleazy companies doing this also run banner ads on legitimate websites.

“These are tried and true scams,” says Sally Greenberg, executive director of the National Consumers League. Her organization runs the National Fraud Center. “The fraudsters who perpetrate these scams are very, very good at what they do,” she explains. They know people like getting free stuff, so they use that to lure in their victims.

Three weeks ago, Washington State reached an out-of-court settlement with SubscriberBASE, a South Carolina company that offers expensive brand name products – laptops, digital cameras and TV sets – for free, as part of its “New Member Incentive Promotion.”

The Attorney General’s office charged SubscriberBASE with deceptive marketing practices. In its lawsuit, the state claimed the company’s ads were misleading because they did not tell consumers they must buy things to get the “free” item. The lawsuit alleged people had to spend more than the value of the “free gift” in order to receive it.

In settling this case, SubscriberBASE did not admit doing anything wrong. In a news release, the company insists its marketing practices “comply with all state and federal laws.” But SubsriberBASE agreed to stop its promotions to Washington residents and to refund money to any of the 35,000 people in the state who bought something in order to get the free item that wasn’t free. Note: SubscriberBASE is still able to target consumers in every state other than Washington.

The anatomy of a ‘free’ pitch
Assistant Attorney General Paula Selis handled the case and took me step by step through one of the promotions. This one started with a pop-up ad for a free 42-inch Samsung HDTV, supposedly worth $1,199. The ad also says “membership is FREE and you will never be required to pay for test products.”  But Selis says, “That’s not true at all.”

In order to “qualify” for the free TV you have to purchase four items. The choices are all products or services from third-party advertisers, including a Netflix membership, tooth whitener kit, DVDs from Columbia House, posters, and an Internet starter kit.

The cost for each purchase seems minimal, usually less than $10 for the shipping and handling. But in some cases, the lawsuit alleges, the consumer is automatically obligated to make future payments over and above shipping and handling unless he or she cancels service within a specified period of time.

For example, one of the offers is four posters for $2. It sounds like a great deal, because the $31 shipping fee isn’t mentioned. And by accepting this offer, the lawsuit says, you agree to automatically buy two more posters each month for $9.95 plus $23.10 shipping. Without knowing it, you’ve agreed to pay $44 a month until you cancel.

Make it this far and you land on the “Premium Offers” page where the purchases involve serious money.  At this level you must choose two of three offers. One set of premium offers cited in the lawsuit was a year’s worth of Web hosting for $840, a minimum $1,500 purchase of children’s furniture, and two Rail Europe passes for $1,798. To qualify for the “free” TV you’d have to spend at least $2,340 for the two least expensive premium offers.

In its news release, SubscriberBASE says, “The only money spent by consumers in our programs is the result of transactions between the consumer and third party merchants who advertise on the Company’s websites. When a consumer completes the necessary number of merchant transactions, he or she receives the advertised gift item completely free of charge.”  Can you say chutzpah?

But wait, there’s more!
If you fall for the hype and decide to claim your free TV, you must start with a page that asks for shipping information: name, address, email, phone number, and date of birth. Why ask for your birth date? That’s clearly not needed for shipping.

Because, as the lawsuit states, SubscriberBASE uses this promotion to collect personal information to add to its database of more than 32 million consumers. This information is sold to other companies that want to target their direct-marketing offers. In its marketing materials, SubscriberBASE brags that the consumers in its database are “highly-responsive individuals, which makes them ideal candidates for promotional offers, trial offers and subscriptions.”

Assistant Attorney General Selis says people who enter their personal information are “bombarded with spam.”

The bottom line
How do you avoid getting lured into something like this? You need turn down the greed and turn up the skepticism. Remember, there is no free lunch – laptop or HDTV, for that matter. No company could stay in business if they gave away such high-priced items.

“Whenever you get an offer that purports to be for something free, you should think about what they might want in return,” warns Nat Wood, a lawyer with the Federal Trade Commission. What they usually want is your money, your personal information, or both. 

Unfortunately, lots of people will supply their personal information to an unknown company in order to claim a prize or get a free gift. That’s a very risky thing to do. Are you giving this information to a company that will make money selling it? Or worse yet, are you providing it to an identity thief? There’s no way to be sure.

So don’t play this game. There are too many ways for you to lose.

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