Concerned about deceptive earnings claims? So’s the FTC, and we want your feedback

It’s a persistent problem the FTC’s aggressive enforcement program’s been fighting for decades: we’re talking about companies and programs that lure in entrepreneurs, investors, or participants with promises of significant earnings, and then fail to deliver. Today the FTC announced proposed rulemakings to strengthen the agency’s tools to curb deceptive earnings claims in industries where reports indicate they are pervasive: money-making opportunities and multi-level marketing (MLM) programs. If finalized, the proposals would allow the FTC to seek stronger relief – like money back for consumers or civil penalties – from covered companies making deceptive claims.

Today’s announcement involves three proposals that work together. Each proposal includes a set of questions to consider, but, in general, we want to know: Will the proposals help us protect consumers and businesses? Will they deter harmful conduct? Should we make changes? Do you have any data or ideas we should consider? Here’s what’s on the table.

• A Notice of Proposed Rulemaking (NPRM) proposing amendments to the FTC’s Business Opportunity Rule. The amendments – which, as proposed, wouldn’t cover franchises or MLMs – would expand the Business Opportunity Rule’s existing prohibitions on deceptive or unsubstantiated earnings claims to “money-making opportunities,” defined as business coaching or investment opportunities. That means any covered seller would be required to have substantiation for claims about likely earnings. And, if someone requested that substantiation, the proposed amendments would also clarify that the seller must provide it in the same language they used to make the earnings claims.
• An NPRM proposing a new rule addressing deceptive earnings claims in the multi-level marketing industry. This proposed new Earnings Claim Rule would borrow language from the Business Opportunity Rule to prohibit sellers of MLMs from making deceptive earnings and related claims. Like the Business Opportunity Rule, this proposal would require covered businesses to tell the truth about how much people are likely to earn and be ready to provide information about what those claims are based on – in writing – upon request. Like the proposed changes to the Business Opportunity Rule, it would require sellers of MLMs who give out substantiation for earnings claims to do so in the same language they used to make the earnings claims. The FTC has offered several proposed definitions and alternative provisions in the NPRM. Check them out and let us know which ones you think work best.
• An Advance Notice of Proposed Rulemaking (ANPR) asking whether the FTC should propose additional rule requirements that would apply to the MLM industry. The FTC has reason to believe deceptive earnings claims are prevalent in the MLM industry, and we want to know if more rule provisions – beyond what’s being proposed in the NPRM discussed above – are needed. Check out the Notice for details, but the big questions include whether MLM sellers should be required to: (1) provide earnings data to participants and potential recruits or post that information on their websites; (2) provide clear information about typical earnings whenever they make any earnings claims; or (3) impose a waiting period before recruits can join or pay any money to the MLM.

You’ll have 60 days to review and comment on each proposal on Regulations.gov. That 60-day period starts from the date the proposals are published in the Federal Register. We hope you’ll weigh in.