| Comment Number: | 522418-10051 |
| Received: | 7/15/2006 4:28:25 PM |
| Organization: | CONSUMER AWARENESS INSTITUTE - AND PYRAMID SCHEME ALERT |
| Commenter: | JON TAYLOR |
| State: | UT |
| Subject: | Business Opportunity Rule |
| Title: | Notice of Proposed Rulemaking |
| CFR Citation: | 16 CFR Part 437 |
| No Attachments |
Comments:
ATTN: FTC OFFICIALS – This submission has direct relevance to the proposed Business Opportunity Disclosure Rule R511993, as it furnishes a case study in compliance (or lack thereof) with past FTC efforts by FTC officials to enforce disclosure requirements for a “business opportunity” that falls in the category of a pyramid marketing (or chain selling) scheme. In 1994, the FTC issued an Order for Nu Skin International (now Nu Skin Enterprises) and its representatives to cease and desist misrepresenting earnings of distributors. Supposedly in compliance, in 1997 and 1998, Nu Skin published a disclosure statement entitled “Actual Average Incomes.” In the year 2000, I inspected this document and found approximately 20 deceptions on a single page! Through Pyramid Scheme Alert, an organization that seeks to expose and prevent pyramid scheme fraud, I filed a paper entitled REPORT OF VIOLATIONS of the 1994 Order and communicated with FTC officials for over two years in an effort to get them to enforce the Order. Nu Skin immediately stopped publishing the report, and when they finally resumed, it was not made available to the public, but was treated as confidential information for its distributors. Through an informant, I got a copy of the new 2004 Nu Skin “Distribution Compensation Summary.” A few of the misrepresentations were corrected, but some major misrepresentations remained. The full and updated 70-page report can be downloaded at – http://www.mlm-thetruth.com/Complaint-2FTC-7-15-6-NS-OneCol.pdf Attached is the 2004 Nu Skin “Distribution Compensation Summary,” followed by a revised report with the modifications I would recommend to provide meaningful disclosure. These modifications would be more in line with the type of disclosure required for other investments, such as securities or franchises – in which anything material to the likely performance of the investment must be disclosed. Though the initial signup fees are small for MLM and other chain selling programs, inducements are built into their compensation plans to either stock up or to subscribe to a minimum amount of products on an ongoing basis. Prospects as potential investors in their programs deserve as much honest and meaningful disclosure as investors in securities or franchises. Please read the suggested modifications carefully, along with the explanatory notes at the bottom of the page. One can see from these notes, which are honest and meaningful disclosure items similar to what would be required for other investments, why the DSA and its pyramid marketing (or chain selling) member firms are so strongly opposed to honest and genuinely helpful disclosure. Sincerely, - Jon M. Taylor, Ph.D., President, Consumer Awareness Institute and Advisor, Pyramid Scheme Alert E-mail: jonmtaylor@juno.com Web site for MLM research and guides – www.mlm-thetruth.com