Marketing Fraud

MARKETING RELATES to all those functions relating to the creation, promotion, distribution and sale of goods and services for which there is a demand [Page 514]and on which a profit can be made. As a result, a wide range of business functions have a marketing component, particularly in the current business environment in which the marketing component of the value of finished goods and services increasingly takes a higher proportion as production costs decrease, as techniques improve. As a result, a very wide range of fraudulent opportunities are provided by the marketing process. However, it is more commonly understood that marketing fraud relates specifically to the failure to keep promises with the consumer and the hiding of negative consequences of consuming a product.

This form of behavior has become proverbial with the selling of snake oil and has been practiced for thousands of years. More recently, new technology, including the internet, has been used to multiply the effectiveness of such marketing frauds. An example is the cross-border telephone frauds involving Canadian and U.S. firms and individuals. These involve approximately 500 to 1,000 telephone “boiler rooms” (fake or temporary offices) in Canada offering fraudulent deals on credit cards, loan offers, and lottery prizes.

This industry may be grossing around $1 billion daily. These types of fraud have become characterized by rapidly increasing sophistication of methods, high levels of security and advanced processes of money transfer and laundering. In response to the jurisdictional difficulties involved in cross-border crime, states are creating bilateral and multilateral agreements to find new ways to monitor and regulate these activities.

Some examples of fraud result from, in part at least, ideological or political differences. For example, the United Kingdom Vegan Society is strongly opposed to the use of animals in producing food, and has produced literature based on research in which they claim that such food is unnecessary for nourishment, and the process is cruel to the animals. Hence, those involved in the dairy foods market are committing frauds on the public to persuade them they need these products. These claims of course are denied by the dairy and beef industries. Similar issues bedevil sectors related to genetically modified organisms (GMOs), about a number of contested claims have been made without incontrovertible scientific proof either way.

Another area of growing fraud involves companies apparently specializing in complex business and legal operations, who obtain money from customers but do not provide the services specified either at all or else in a substandard manner. One particular example of this is in advice and consultancy relating to patents and the protection of intellectual property. As this is a complex and continually changing field, the hopeful inventors are often eager to receive what they believe to be impartial and professional advice to support what has often been many hours of unpaid work on their part.