Business Opportunity Rule #522418-11540

Submission Number:
Joseph Pfening
Initiative Name:
Business Opportunity Rule
Thank you for your interest in legislation that will protect the public from fraudulent and damaging business scams cloaked as "opportunities". We are a husband and wife who have worked at nearly every type of business opportunity available from employment at a small business, employment at a huge corporate conglomerate, to owning several of our own businesses including a federally recognized franchise. We sold that franchise over a year ago and have concurrently run our own direct selling business since 1995. Our direct selling business has contributed thousands of dollars to our family finances over the years and provided us with the opportunity to grow our personal and public communication skills, people management skills and business growth skills. By simply sharing some exceptional products with friends, family and colleagues, before long we were able to build a small but profitable direct selling business that would continue generating sales even while we maintained our full-time employment elsewhere. Now, our three children are fed and clothed with the money we receive from our direct selling business. After carefully reviewing the proposed FTC Business Opportunity Rule, we feel that as it is constructed currently it will not actually prevent the fraudulent businesses from their unethical business practices, but will put an undue strain on the legitimate business opportunities like ours that currently benefit over 13.6 million people in the direct selling industry. The proposed seven-day waiting period is an impractical policy for businesses that don't require a large initial investment, will cause unnecessary delays in the recruiting process and will make prospective product buyers unduly suspicious about the product and/or business opportunity. While we experienced the waiting period and the offering circular provision when we purchased our franchise business, that seemed appropriate considering we were about to invest over $100,000 to purchase the franchise license and build our retail space. However, in our direct selling business having those policies and procedures apply to people who are investing less than $35 to own their own business seems completely inappropriate and unnecessary. The proposed Litigation Reporting portion of the rule is well-intended but not thought out in a practical sense. Yes, it would be wise to advise prospective business participants and customers of relevant lawsuits that have been won against the individual direct marketer or the corporation. However, so many fraudulent and frivolous lawsuits are brought against companies in this day and age, the purpose of the rule would be sabotaged by the very dishonest and manipulative people it attempts to eliminate from the process. The proposed Earnings Claim portion of the rule would be an excellent way to force business owners to be honest when making claims. However, it puts undue strain on those who will endeavor to provide honest earnings substantiation and allow the liars to lie about one more thing. Those who are conducting a dishonest business will provide false earnings claims substantiation so where is the solution? Finally, the proposed References portion of the rule is extremely impractical. Attempting to find and maintain accurate data on the "10 nearest existing sales people" would be a hardship at best and a data tracking nightmare at worst. It brings up privacy and safety issues, possible corporate liability for identity theft and complicates the recruitment process further by forcing new business owners to be available for consultation to anyone even considering the opportunity. It would make valuable prospect information available to anyone posing as an interested business prospect -- even if that "prospect" was actually someone from a competing business opportunity. We hope you will "go back to the drawing board" for a rule that accomplishes its purpose without devastating legitimate direct selling businesses.