|Received:||7/7/2006 12:20:54 AM|
|Subject:||Business Opportunity Rule|
|Title:||Notice of Proposed Rulemaking|
|CFR Citation:||16 CFR Part 437|
Comments:Because the promise of high income is the cornerstone of MLM recruiting, all MLMs should be required to comply with the earnings-claim disclosure rules and no MLM company should be permitted to make "no earnings claims." Second, great care should be taken in constructing the details of the rule so that MLM disclosures are clear, meaningful, and conspicuous. All MLMs should be required to disclose in a clear and understandable format (such as easily interpreted percentile columns), and separate from all other materials furnished to prospective distributors: Total company revenue from distributors based in the United States The total number of distributors in the United States involved in the company for at least three years or since the company's founding if the company is less than three years old. The number of terminations and the number of new recruits for each of the past three years in the United States. The net increase (new ones less those who drop out) in the number of distributors in the various ranks of the upline as a percent of all who have been distributors for three years The percentile incomes of all who have signed up for a distributorship in the United States. (In other words,"the top 10% averaged $_____, the next 10% averaged $_____, etc.") Percentile income is is far more meaningful than "average" income (total company income divided by the number of distributors) because including the income of top distributors would make the "average" higher than most distributors make. Income data should not be limited to those a company would describe as "active distributors." S Income as described above should be defined as money the company pays to distributors minus all money the distributors pay to the company. However, it should be disclosed that this does not take into account distributor expenses such as advertising, exhibiting, travel, purchase of sales aids from non-company sources, or other overhead. The percentage of U.S.-based distributor income derived from sales outside of the United States To ensure that the rules are conspicuous and to help the FTC monitor compliance, copies of all disclosures should be given to each distributor and posted on each company Web site. In addition, all distributor Web sites that solicit new distributors should either post the earings claim statement or link to it on the company Web site. To facilitate comparison and futher consumer education, the FTC should maintain a separate Web site that contains the final Business Opportunity Rule, the individual company disclosures, and other information that would assist prospective busines opportunity investors.