| Comment Number: | 522418-09583 |
| Received: | 7/14/2006 7:12:50 PM |
| Organization: | Sunrider International |
| Commenter: | Robert Sencer |
| State: | CA |
| Subject: | Business Opportunity Rule |
| Title: | Notice of Proposed Rulemaking |
| CFR Citation: | 16 CFR Part 437 |
| No Attachments |
Comments:
While Sunrider International (“Sunrider”) appreciates the FTC’s consumer protection mission, we are concerned that the new Business Opportunity Rule R511993 will adversely impact direct selling companies and their independent distributors. Founded in 1982, Sunrider develops, manufactures and distributes herbal nutritional products, cosmetics and household products, with operations in 38 countries. Sunrider’s world headquarters is located in Torrance, California. Our products are distributed in the United States through a network of tens of thousands of independent distributors. In particular, Sunrider has the following concerns about the proposed rule: 1. Waiting period: The seven-day waiting period between the delivery of the required disclosure statement and the enrollment of the prospect is impractical, onerous and unnecessary. Like its fellow members of the Direct Selling Association, Sunrider has a buyback policy that requires the company to refund 90% of the purchase price of products bought in the previous twelve months. This policy prevents “inventory loading,” and thereby disposes of the need for a cooling off period to protect consumers from unscrupulous sellers. The record keeping provisions of the waiting period would force Sunrider to incur exorbitant administrative costs in tracking, categorizing and filing disclosures made to many thousands of prospective purchasers. 2. Litigation information: The provisions of the proposed rule regarding the disclosure of all civil or criminal legal actions involving misrepresentation, or unfair or deceptive practices, regardless of outcome, would result in the production of irrelevant and misleading information. In this litigious society, businesses are the victims of a seemingly unlimited stream of lawsuits. Many are frivolous, many are dismissed, and many settle for nominal “nuisance value.” Sunrider sees little value in disclosing these lawsuits unless Sunrider is found guilty. Otherwise, Sunrider is put at an unfair advantage even though we have done nothing wrong. The categories of disclosure are also overbroad because claims of misrepresentation are asserted almost as a matter of course in business lawsuits, and these claims would have nothing at all to do with a prospective distributor’s decision about whether to join a particular Direct Selling company. A more reasonable approach would be to include only litigation related to the actual earning opportunity in which the Direct Selling company was judged responsible (civil matters) or guilty (criminal matters). 3. Earnings claims: The record keeping requirements of the earnings claims disclosure rules are confusing, would be burdensome to interpret and follow, and would provide skewed results given that illegitimate direct sellers will not provide accurate data. 4. References: As drafted, the requirement of finding the “10 nearest existing sales people” is impractical and onerous, and would require complex data analysis and software programming. Further, compiling and distributing a long list of names and telephone numbers of direct selling distributors would infringe on those individuals’ expectations of privacy. Requiring distributors to agree in advance to disclosure of this information to third parties may lessen the risk of privacy claims, but would have the unintended effect of frightening away interested prospects who are rightfully concerned about their privacy and identity theft. A related concern is that Sunrider’s competitors would have access to detailed lists of Sunrider’s distributors all over the country, resulting in an unfair advantage to those competitors that might consider using this information to prospect our distributors. Sunrider appreciates the work of the FTC to protect consumers, but we believe this proposed new rule has many unintended consequences that would negatively impact our business and our bottom line. We also believe that there are less burdensome alternatives available in achieving the consumer protection goals stated in the proposed rule. Thank you for considering our comments. Sincerely, Robert D. Sencer, Deputy General Counsel