| Comment Number: | 522418-05979 |
| Received: | 7/4/2006 6:17:03 PM |
| Organization: | Valdosta State University |
| Commenter: | James Muncy |
| State: | GA |
| Subject: | Business Opportunity Rule |
| Title: | Notice of Proposed Rulemaking |
| CFR Citation: | 16 CFR Part 437 |
| Attachment: | 522418-05979.pdf Download Adobe Reader |
Comments:
Dear Sirs and Madams, It is with great interest that I note your proposal to impose greater strings on the direct selling industry. I have a Ph.D. in Marketing, have taught marketing at the University of Oklahoma, Texas Tech, Clemson, an now Valdosta State University. I also served for five years as Executive Director of the Association for Consumer Research which is the largest association of its type in the world. As one who takes the study of marketing seriously, I have enjoyed very much enjoyed studying MLMs and coming up with a cohesive way to help people differentiate the good ones from the bad. In fact, I have even written an article that recently appeared in the Marketing Education Review that provided professors with guidelines to give to their students that will help them differentiate good business opportunities from MLM schemes. It is education such as this and not government imposed regulations that will help people deal with shady business deals (see attached PDF), Let me mention a few concerns I have. First there is the seven day waiting period. Using Quixtar as an example, you are saying that a person has to wait seven days before they can get started with a business that only costs $50 and is fully refundable. Does that seem like a bit of excessive regulation? Another interesting part of the requirement is to provide references. Step down for the ivory tower and look at what people do. When exposed to an opportunity, the first thing they do is go to the net, Google the opportunities name. There are tons of references--good, bad, and ugly. Obviously, if I am going to provide references, I am only going to provide the good ones which may cause them to not Google and get the full story. This is again an unintended consequence of having less informed rather greater informed people. I guess the one part that really upsets me the most is the litigation list. Talk about giving people a tool to slam competitors. As we know from stories like Tom Delay and Scooter Libby, people can bring others into the legal system not because a crime has been committed but because of some other agenda. This component will only encourage frivolous lawsuits. Finally, there are greater disclosures required under the new rule. Can you point to one shred of empirical evidence that shows that the fine print and lawyer speed-talk has ever in the history of the human race actually improved the quality of a consumer's decision? If you have, please send it to me for I am very knowledgeable in this area and I know of no published study that has show such to be so. I am quite aware of many research studies that have pointed to greater disclosures doing the opposite through information overload and the like. From an information processing perspective, here is something any knowledgeable consumer researcher will tell you: the simpler the better. If it can be adequately disclosed in one sentence, to use two sentences will just add to the consumer's confusion. How much do consumers need protection? If a MLM or franchise is being built on fraudulent claims, then use existing laws to protect consumers. But to impose excessive regulations that will burden legitimate companies would be a crime. We need these legitimate companies because my experience tells me that this is where many of our entrepreneurs get started. I cannot tell you how many entrepreneurs I run into who tell me that they learned how to build a successful company, not from business schools like the ones I have taught in but from the school of Amway, Mary Kay... If you have any further questions, you can contact me at