Business Opportunity Rule #535221-00114

Submission Number:
Steven Rotolante
Initiative Name:
Business Opportunity Rule
Why bother having a “business opportunity rule” that exempts Multilevel Marking business opportunities? Giving special privileges to a multibillion dollar industry makes the rule useless. If MLM companies were forced to disclose distributor drop out rates and the percentage of distributors that lost money, then prospecting business seekers would be able to fairly judge whether or not the risk is worth the price. Instead, we have MLM companies making misleading disclosures such as the following from USANA Health Sciences, Inc. “$91,800 is the average yearly income for an established, full-time USANA Associate (Gold Director and above). $23,225 is the annual average of those who earned as little as one commission check each month. Surveys show that 83% of all Associates self-report they joined USANA to "improve their health." Of those remaining, 21% earned a check at least once a month even though 56% reported they were not joining to "replace their full-time income." Of those that were, 41% have been Associates for at least one year and 56% are considered full time with the title of Gold Director or above. These figures shown should not be considered as guarantees or projections of your actual earnings or profits. Success with USANA results only from successful sales efforts, which require hard work, diligence, and leadership. If you include all 126,146 with the title of Associate, which includes, Associates not actively building a business (acting as wholesale buyers), Associates who just joined (as little as one day), and those who are just beginning to build their customer base, the average yearly income is still $734.27, with more than one in three earning a check.” – USANA’s Income Disclaimer It should be noted that less than one half of one percent of USANA distributors are “full-time USANA Associate (Gold Director and above)”. Additionally, the average yearly income for a USANA distributor is $0.00 because 60% of distributors never earned a commission check! A prospecting individual would not be able to clearly understand from this disclaimer that close to 95% of current USANA distributors are losing money. Another point I want to make is the fact that most MLM companies “require” the distributor to make ongoing purchases in order to be considered “active” and be eligible for commission. An MLM example is USANA Health Sciences, Inc. If distributors do not purchase over $100 worth of products or services every 28 days, the distributor is removed from “active” status and stripped of all possible commission that was rightfully earned. Even the FTC stated in a letter to the Direct Selling Association in 2004 that MLM companies that require ongoing purchases to participate in the venture are considered an Illegal Pyramid Scheme. Please see the following FTC Document attached to this comment. The FTC does not have the manpower to go after all the fraudulent business opportunities, and by exempting MLMs from the “Business Opportunity Rule” would be a huge mistake. Americans cannot afford to be misled and deceived into profitless schemes. If people knew 99% of those that join MLM lose money, chances are they would never sign up. Some refuse to believe those statistics, but if MLMs are not exempt from the rule, then the additional required disclosures MLMs would have to make would support the claim. This is why the Direct Selling Association (which is run by the MLM industry) opposes the business opportunity rule. They know the rule would collapse the majority of MLM companies.