| Comment Number: | 522418-08047 |
| Received: | 7/12/2006 10:49:33 AM |
| Organization: | None |
| Commenter: | Benno Rosenthal |
| State: | OH |
| Subject: | Business Opportunity Rule |
| Title: | Notice of Proposed Rulemaking |
| CFR Citation: | 16 CFR Part 437 |
| No Attachments |
Comments:
I appreciate the FTC's efforts to help prevent losses by victims of business opportunity scams. 1. I strongly support the FTC's proposed requirement of disclosing and documenting earnings claims. Every business opportunity lays out the potential for earnings in one way or another, and I feel strongly, therefore, that there should be no exemption from this requirement by any business opportunity claiming that it is not making any earnings claims. 2. If a prospect would be aware of what percentage of people drop out, he or she would have a better idea of whether or not the business opportunity would be suitable for them. I therefore suggest that the income disclosures of multi-level marketing companies be required to include the total number of ALL participanes who joined in the past year, and the number of such participants remaining at the end of the year, so that the percentage of dropouts can be calculated. By participants remaining, I am referring to participants still buying or selling products, not inactive participants. 3. The average NET payout (not gross payout) to participants in each level should be required to be disclosed. By net payout, I ma referring to the difference between all monies received by a participant and the monies paid to the company by the participant, including product purchases, license fees, training materials, shipping fees, whether used by participants, sold, stored or disposed of. 4. The referral list of ten prior purchasers referred to in the FTC rule should be split between current and ex-participants. This would prevent the possibility that the ten prior purchasers are mere shills for the company. Referrals to ex-participants are extremely important due to the high drop-out rate in MLM companies. 5. MLM companies should be required to disclose the average retail-based sales reported and documented by participants in each level of the hierarchy. This is because if sales are made primarily to new participants and not to a legitimate customer base, the venture may be nothing more than a pyramid scheme. 6. I strongly agree with the 7-day waiting period incorporated in the proposed FTC rule, and would like to see it increased to ten days. This is because of the fact that very little information is presented by the BBB, the FTC or state consumer protection agencies regarding specific companies and because information from company websites or the DSA may not contain unbiased information. 7. Ideally, I would like to see an end to the distinction the FTC rules and regulations make between traditional franchise opportunity disclosures and the disclosure requirements imposed by the FTC on all other business opportunities. I thank the FTC very much for considering my comments regarding the proposed business opportunity rule.