| Comment Number: | 522418-02265 |
| Received: | 6/15/2006 8:57:40 AM |
| Organization: | Small Business Legislative Council |
| Commenter: | John Satagaj |
| State: | DC |
| Subject: | Business Opportunity Rule |
| Title: | Notice of Proposed Rulemaking |
| CFR Citation: | 16 CFR Part 437 |
| No Attachments |
Comments:
Federal Trade Commission/Office of the Secretary Room H-135 (Annex W), 600 Pennsylvania Avenue, NW Washington, DC 20580 Re: Business Opportunity Rule, R511993 June 15, 2006 To Whom It May Concern: I am submitting these comments on behalf of the Small Business Legislative Council, regarding the proposed Business Opportunity Rule R511993. We believe this proposed rule has some merits, and are glad to see the FTC address the issue of fraud in the business opportunity seller industry. As your rule states, the Franchise Rule, promulgated in 1970, contains loopholes that can be exploited by pyramid and work-at-home schemes. The abundance of these complaints over the past decade demonstrates the need for action. A clear, streamlined process is critical to ensuring that purchasers have some protections against fraud. However, we also want to be sure any new rule does not raise any unnecessary barriers to starting and owning a business. There are several provisions in the proposed rule that seem to be overly burdensome to sellers. One of the top concerns is with Section 437.3(a)6, which would require the seller to disclose the name, city, state, and phone number of each p of the 10 prior purchasers nearest the prospective purchaser's location. Any national organization would have to exert considerable manpower tailoring this list to every prospective buyer. While the rule does allow the seller to provide a national list of all purchases, this would run the risk of exposing the company's entire client list to a competitor. Also, during this time of increased identity theft, the purchaser will be understandably wary of the idea of having their personal information made readily available. Another concern is Section 437.3(a)5, which compels sellers to provide the number of purchases within the last two years along with the number of purchasers during the same period who asked to cancel or get a refund for their purchase, regardless of whether they have the contractual right to either. This will most likely have a chilling effect on prospective purchasers as they will not know how many cancellation/refund requests were legitimate and how many were merely attempts by purchasers to exploit the system. For the most part, we believe this rule represents a fine effort by the FTC to tackle a major problem. Specifically, the earnings claim requirement is a critical step in reining in the exaggerated claims in this area within the business opportunity seller community. Too often, sellers use loopholes within the current law to exploit unsuspecting purchasers. The proposed new rule systematically breaks down what constitute an earnings claim. However, noted earlier, there are several areas that can and should be improved before this rule is finalized. Thank you for taking the time to consider these comments. We would also like to be associated with the comments made by the Direct Sellers of America. Sincerely, John S. Satagaj President & General Counsel