FTC Staff Report Recommends Expanding Coverage of Business Opportunity Rule and Streamlining Required Disclosures

The Federal Trade Commission has released a staff report recommending that coverage of the FTC’s Business Opportunity Rule be expanded to include work-at-home opportunities such as envelope stuffing, medical billing, and product assembly, many of which have not been covered before.  FTC staff also recommends streamlining the disclosures required by the Business Opportunity Rule so that companies or individuals selling business opportunities make important disclosures to consumers on a simple, easy-to-read document.  If adopted, the changes will make it less burdensome for legitimate sellers to comply with the Rule, while still protecting consumers from “widespread and persistent” business opportunity fraud.  Public comments on the staff report will be accepted until January 18, 2011. To file a public comment electronically, please click here and follow the instructions.

The Rule that currently governs business opportunities is an interim rule that dates back to March 2007.  Up until then, the FTC had a single rule – known as the Franchise Rule – that covered both franchises and certain business opportunities.  Franchises typically are expensive, involve complex contractual relationships, and can include the right to use a trademark or other commercial symbol.  In contrast, business opportunities often are less costly, and involve simpler purchase agreements.

In 2006, the FTC proposed creating a Business Opportunity Rule separate from the Franchise Rule.  Since then, it has conducted a public workshop and collected public comments on both the workshop and the Revised Proposed Business Opportunity Rule.  The staff report announced today summarizes the rulemaking record to date, analyzes the various alternatives, and sets forth the staff’s recommendations for the proposed final Business Opportunity Rule and disclosure form. The report and disclosure forms in English and Spanish are available on the FTC’s website and as a link to this press release.

The Commission vote approving issuance of the Federal Register notice was 5-0.  (FTC File No. R511993; the staff contact is Kathleen Benway, Bureau of Consumer Protection, 202-326-2024.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  Call toll-free:  1-877-FTC-HELP.  The FTC’s Business Center website gives companies the tools they need to understand and comply with the law.  The materials in the Business Center are not under copyright, so businesses can share them with employees, colleagues, and the general public.  It offers practical guidance on advertising, credit, data security, and other need-to-know topics, as well as videos and a blog.

(FYI business opportunity rule staff report)