A massive 400 per cent rise in the volume of complaints has spurred the ACCC to issue a warning about celebrity endorsement scams, with social media perpetuating their spread.
Endorsements by high-profile personalities are a common tactic for businesses to draw attention to their products and services. However, the competition regulator is warning about a dramatic spike in fake endorsements that are increasingly defrauding people.
According to the ACCC, these scams have used fake quotes or out-of-context images of high-profile people, including the presenters of Channel 10’s Shark Tank – which features the likes of Boost Juice founder Janine Allis and Red Balloon founder Naomi Simpson among others.
Ms Allis was recently the face of an advertising campaign with accounting software provider MYOB, suggesting the scam has been tailored to capitalise on this in order to create confusion.
The ACCC said it has received close to 200 reports of such scams so far this year, with losses exceeding $142,000. But that is just those that have been reported. People aged 45 plus and women make up the majority of the victims thus far.
“The growth in these scams is very concerning, particularly as over half the reports we received included a financial loss. Most people lost between $100 and $500,” ACCC deputy chair Delia Rickard said.
“[But] in one case, a victim lost more than $50,000 through fake celebrity endorsement of an investment scheme.”
Ms Rickard said the scams generally work by offering a “free trial” of a particular product, which requires the input of credit card details as security.
But the purported free trial is difficult to access, given users are required to return the product within an almost impossible time frame, and an automatic subscription renewal that is difficult to cancel. These terms and conditions are also generally only made available on the document that arrives with the product, rather than at the time of signing up.
“The groups behind these celebrity endorsement scams are organised and sophisticated fraudsters who are often involved in other scams. It’s easy for them to create fake ads and websites to give credibility to their con, so people need to be very careful and sceptical about ads they read on social media and websites,” Ms Rickard said.
“It is vital to research and read independent reviews of the company. Consumers should verify celebrity endorsement of products from the celebrity’s official website or social media account.”
Ms Rickard has called on social media giants Instagram and Facebook, as well as Google, to take a more proactive stance against fake ads such as these.
“Most of the reports to Scamwatch involve these scam advertisements running on Google ad banners or as ads in Facebook news feeds. These tech giants must do more to quickly suspend ads, as every time consumers click on a scam ad, they are at risk of losing money,” she said.
For anyone caught up in such scams, Ms Rickard has the following advice:
“Call your bank immediately to try and arrange a chargeback and to stop any further debits to your credit card.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.