FTC Approves Federal Register Notice Seeking Comments on Revised Proposed Business Opportunity Rule

Commission approval of Federal Register notice: The Commission has approved the publication of a Federal Register notice seeking comments on a revised proposal for a new trade regulation rule governing business opportunities. Dating from 1978, the FTC historically has had a single rule covering two distinct types of offerings: franchises and business opportunity ventures. Many of the very familiar national fast-food restaurants and hotels, for example, are franchises, business opportunity ventures include vending machine routes, rack display operations, and medical billing schemes ventures. These ventures, unlike franchises, typically do not involve the right to use a trademark or other commercial symbol. Nevertheless, they do call for the opportunity seller to provide purchasers with locations for machines, or with accounts, or clients, and have been covered by the Franchise Rule.

In April 2006, the Commission proposed a separate Business Opportunity Rule that would cover just business opportunities ventures. Part of the proposal was to expand coverage to business arrangements that were not formerly covered by the Franchise Rule and to streamline disclosure obligations. (Business opportunities formerly covered by the Franchise Rule remain covered under an interim Business Opportunity Rule.) The revised notice announced today modifies the April 2006 proposal for the Business Opportunity Rule. The revised notice of proposed rulemaking (RNPR) will be published soon and is available now on the FTC’s Web site and as a link to this press release.

After evaluating the comments received on the April 2006 notice, the Commission has decided to issue an RNPR that is more narrowly focused than the April 2006 proposal. As proposed now, the Business Opportunity Rule would still cover those schemes currently covered by the interim Business Opportunity Rule, and it would expand coverage to include work-at-home schemes. The revised proposal, however, would not reach multi-level marketing companies or certain companies that may have been swept inadvertently into scope of the April 2006 proposal. The revised proposed rule also streamlines the requirement to disclose material information by eliminating requirements to disclose the number of cancellations and refund requests that a business opportunity seller receives or the litigation history of sales personnel.

The Commission will be accepting comments on the RNPR until May 27, 2008. Thereafter, rebuttal comments can be made by June 16, 2008.

The Commission vote approving publication of the notice was 5-0. (FTC File No. R511993; the staff contact is Monica E. Vaca, Bureau of Consumer Protection, 202-326-2245; see related press release dated April 5, 2006.)

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.