Office of the Attorney General News Release Archive


Tuesday, March 27, 2001

BIGSMART SETTLES CASE WITH TEXAS, FTC, OTHER STATES

Agreement Expected to Return $1.7 Million to Texas Consumers

AUSTIN - Texas Attorney General John Cornyn, working with the Federal Trade Commission and other states, secured an agreement with online business BigSmart.com that is expected to return approximately $1.7 million to Texas consumers who bought retail web space from the business. Texas has the largest share of consumers whose claims are being addressed by this settlement, which totals $5 million nationwide.

"Texas consumers participated in this enterprise in good faith, looking to get a fair percentage of return on their investments," said Attorney General Cornyn. "This pyramid scheme misled consumers about the money they could make from participating in the online venture. The company's recognition of the concerns we raised in our lawsuit is reflected in its willingness to resolve the case."

The BigSmart lawsuit grew from one of the first investigations undertaken by Attorney General Cornyn's Texas Internet Bureau, which was launched last September as a way to combat violations of Texas consumer laws over the Internet.

BigSmart, based in Arizona, initially began selling Internet "shopping malls" to its customers for about $300 each, which were locations on the web that linked to other merchants and offered goods and services to sell to third-party customers. However, mall "owners" made little if any money from their mall product sales. Instead they mainly earned money by recruiting others to buy more malls, which continued to enrich the top echelon with little benefit to new recruits.

This settlement prohibits BigSmart from:

  • Requiring people who sign up for malls to buy products in order to be eligible for commissions;
  • Engaging in illegal pyramid schemes;
  • Making specific earnings claims.

BigSmart will be required to:

  • Review advertising created by others selling BigSmart;
  • Terminate business relationships with those making deceptive earnings claims;
  • Post requirements of this order on their web site for three years;
  • Notify all Texas mall owners of the prohibition against false advertising and their potential eligibility for refunds.

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Contact: Mark Heckmann, Tom Kelley or Jane Dees Shepperd at (512) 463-2050.
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