UK consumers are being warned to be on their guard against a new scam offering "free" electronic gadgets in return for buying low-value products over the web.

Described as "matrix schemes", shoppers are promised the chance of getting a valuable "free gift" - such as a mobile phone, ipod, or PDA - if they cough up, say, £20 for a mobile phone signal booster or a CD-ROM containing ringtones and games.

Said OFT chairman John Vickers: "These waiting-list schemes require many more people to join than will ever receive their 'free gift'. The schemes will ultimately collapse and the vast majority of people who have joined will lose out. Don't be misled into buying by the remote prospect of a 'free gift'."

The scams work like this: customers buy a low value item and are placed on a waiting list to receive their chosen "free gift". The matrix works by sending the person at the top of the list their "free gift" but only after a prescribed number of new recruits has shelled out for their £20 item. Once the freebie has been sent, the remaining people on the list move up one place and only move up again once enough people have been suckered into buying the £20 dud prize.

Someone who is hundredth in a list that requires 50 new recruits per gift would not reach the top and receive their prize until 5,000 people had joined and shelled out £20 each.

Said the OFT: "The nature of the schemes means that the number of members who are waiting for their 'free gift' will always far exceed the number of 'free gifts' actually awarded. The further down the waiting list you join, the less your chances of ever receiving your 'free gift'."

In August, UK company Liquorice Mix Ltd was "wound up in the public interest" for running a matrix scheme, after a DTI investigation. ®

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