| Comment Number: | 522418-00075 |
| Received: | 5/23/2006 4:32:29 PM |
| Organization: | Emmet Enterprises |
| Commenter: | Joe Emmet |
| State: | CA |
| Subject: | Business Opportunity Rule |
| Title: | Notice of Proposed Rulemaking |
| CFR Citation: | 16 CFR Part 437 |
| Attachment: | 522418-00075.pdf Download Adobe Reader |
Comments:
RE: Business Opportunity Rule, R511993 (Copy this into the “subject” entry) Dear Commissioner, I am writing in response to the proposed New Business Opportunity Rule R511993. It is my humble opinion that, if not modified, it will be a significant impediment and burden to the network marketing industry. This new rule, although well intended, represents a significant burden to free market trade. The proposed rule would require a de facto seven-day waiting period to enroll new distributors. In essence, one would have to sell a person twice on the same business — even if the start-up fee is a mere $19.95. While I support some of the disclosures with modification, I am opposed to a seven-day waiting period because it is excessive burden to any company and distributor who would be required to document and follow-up on the process and an impediment to new business development. EARNINGS DISCLOSURE The rule requires that any earnings claim statement made by the distributor or company to a prospect, whether written or oral, general or specific, be validated with a detailed “Earnings Claims Statement Required By Law.” Additionally, the distributor would be required to provide written substantiation of any earnings claim made upon request. I support the disclosure of an average earnings income statement because it is good business practices to establish realistic expectations. However, I oppose being forced to provide written substantiation because it is an excessive burden, considering the investment of money to enter into the business is nominal. PREVIOUS LITIGATION The rule also calls for the release of any information regarding prior litigation and civil or criminal legal actions involving misrepresentation, or unfair or deceptive practices, even if you were found innocent. In our lawsuit-happy culture, anyone can be sued for anything almost with impunity. Regardless of the outcome, you would have to disclose it and explain it to a new business associate, which is patently unfair. I would only support the disclosure of previous litigation of companies, executives, affiliated companies and the like involving fraud and misrepresentation only if the party is found guilty. If the defendant is found not guilty or if the opposing parties agreed to settle without admission of guilt, then it should not be necessary to disclose this information. If the parties agreed to settle without admission of guilt, there usually is some public document available, particularly if it involves a government agency and further disclosure therefore would be unnecessary. REFERENCES Lastly, the rule requires the disclosure of a minimum of 10 purchasers closest to you. While it is a good practice to provide references of satisfied customers, this is a burden for small businesses and, as a requirement, is a violation of personal confidentiality. Unfortunately, requiring the release of this information can threaten the business relationship of the references who may be involved in other companies or businesses. In addition, it subjects these references to cross marketing by competitors. I am recommending that contact information for purchasers be available upon request, that their availability be published on company materials, and that due to Internet-marketing, they not be limited to geographic proximity. HISTORY FROM THE RECENT PAST In the early 1960's franchising was a revolutionary new technology in business, and it was also met with resistance. Newspapers and magazines wrote what a scam and rip-off franchising was. Stories of people who lost their life savings to some franchise were everywhere. There was a strong move to make franchising illegal. In fact, franchising actually came within 11 votes of being outlawed by Congress. Today this so-called scam is responsible for over 34 percent of all retail sales in North America. Franchises sell nearly 800 billion dollars worth of goods and services toda