| Comment Number: | 522418-08028 |
| Received: | 7/12/2006 10:32:31 AM |
| Organization: | |
| Commenter: | GLENN HINTZ |
| State: | MN |
| Subject: | Business Opportunity Rule |
| Title: | Notice of Proposed Rulemaking |
| CFR Citation: | 16 CFR Part 437 |
| No Attachments |
Comments:
Re: Business Opportunity Rule, R511993 Gentlemen: I have been reviewing the proposed New Business Opportunity Rule and I would like to make a few comments as someone who has been involved in the Multi Level Marketing Community for more than twenty years. Let me begin by saying that if there has been a volume of complaints concerning sales tactics sufficient to warrant a new approach to regulation, by all means changes should be made. However, such changes should be well conceived and perhaps separated into two areas: The Franchise Rule and the Home Based Business Opportunity Field. By eliminating the $500 minimum investment requirement from the Franchise Rule, it would imply that the new rule would apply to less expensive business opportunity offers, in many cases less than $50 for an annual administrative fee. The proposed rule would eliminate many of the disclosures that are now required of Franchise offers. I may be wrong but I would think that the great majority of complaints have occurred in the Franchise areas as opposed to the smaller business opportunity offers. The new rule would require a one page disclosure relating to five items. Before I comment on those five items I would like to know if the rule would apply only to the parent company or to the individual distributor trying to recruit new people. As an individual distributor I would have to problem with some of the disclosure items but I could see difficulties for larger distributor groups. I have not heard of any distributors with which I am currently affiliated making any overall earnings claims. Rather, we only indicate a commission range for each level of accomplishment. Likewise, I have not heard of any civic or legal actions against the parent company nor distributors. I would suggest, however, that only those actions which have been decided against the company or distributor should be required to be listed. I currently see a problem with the cancellation and refund item. For a large distributor organization to disclose the total number of new distributors and the number of cancellation requests in the last two years would be almost impossible. Nor does there seem to be any provision for indicating the reason for such a request. Even for someone who abhors deceptive sales tactics I can readily see at least a couple of ways to get around the seven day waiting period requirement. This requirement could, however, cool the enthusiasm and create an air of suspicion among prospective distributors. The waiting period suggests a level of risk that does not exist for many multi-level companies, especially those with minimal up-front financial investment. To comply with the references item could put the company or distributor in a questionable legal position with regard to privacy laws. This requirement can be extremely burdensome and, yet, easy for a fraudulent company to provide bogus “references”. Compliance would have to wait until the location of the prospective distributor has been established. Another delay before the agreement can be completed. Especially if the contract has been made away from the home of either the active distributor or the prospect. In conclusion, I would suggest that someone from the FTC visit with a representative group of Multi Level Marketers and report back to the Board before the new rule is put into effect. Sincerely, Glenn Hintz