In December, I wrote about the FTC’s announcement that it would be considering potential changes to its controversial "Business Opportunity Rule" and asking for public comments on a set list of questions regarding “work at home” business opportunities. As a reminder:
The “Biz Opp Rule,” or BOR, is designed to protect consumers by requiring sellers to disclose key information about the business opportunity, including the nature of the business, the potential risks and challenges, the financial requirements, and any legal or regulatory requirements. The rule also requires sellers to provide a written statement disclosing any litigation or bankruptcy that the seller has been involved in and any judgments or settlements that have been entered against the seller. Applicable prospecting businesses must comply with the Business Opportunity Rule to avoid legal consequences and to ensure that they are treating their prospects fairly and transparently.
[…] The Business Opportunity Rule applies to a shockingly small number of business opportunities, including work-from-home medical billing and even vending machine sales—but not multilevel marketing.
The last part is what we want to change. The Business Opportunity Rule was designed with MLMs in mind, but they were ultimately left out of the final rule, and this needs to be corrected for the good of almost all. Activists within the #anti-MLM movement have been coming together for the past two months to spread the word to as many victims of predatory MLMs as possible that they have this unique opportunity to speak on their experience directly to the “powers that be”.
Last Tuesday (January 31st) wrapped up the public comments phase, and I thought I’d highlight some of the excellent comments that have been posted publicly so far, and offer my opinion on the comments submitted by the opposition.
Some awesome excerpts from comments worth reading in full:
(Comment data and attachment links are all available directly on the Federal Register here, or click here to view them on Google Drive, but know this document is maintained by me and not the FTC and may be incomplete.)
Moving and insightful comments made on this proposal span the range from personal, painful experiences:
Reconciling that I intentionally and purposefully emotionally manipulated people into my MLM business has been devastating. There is a looming mental health crisis as more and more Rank Makers and people within the MLM industry exit and begin healing. Because, when we leave we are shunned, we are told we have a victim mindset, that we are losers, quitters, haters, inconsistent, and live in scarcity. We also lose friends and a community that we thought we would have forever.
- Julie Anderson, Fucking Badass Activist
To analytical, troubleshooting-centered expert advice:
The current disclosure requirement does not mandate the provision of earnings information, as the seller is not compelled to provide an “earnings statement” to the consumer if they indicate that no earnings claims were made to the consumer. As described in my comment regarding the Earnings Claims ANPR, earnings claims are pervasive in MLM recruitment. As a result, the Business Opportunity Rule – if applied to MLM – must compel disclosure of earnings information to all consumers, regardless of whether they indicate that an earnings claim has been made or not. Furthermore, sellers must be required to provide the earnings information in a consistent, prescribed format. Please see my comment regarding the Earnings Claims ANPR for a detailed discussion of earnings disclosure research in MLM and corresponding recommendations for disclosure content and design.
- Stacie Bosley, Associate Professor and Kahlert Chair of Economics at Hamline University
And most were a combination of both:
This waiting period is essential. Part of any get-rich-quick scheme that may disguise itself as a business opportunity often presents itself as a very limited opportunity for sign-up. In order to remove this component from the marketplace this is needed. Alternatively, a cooling-off period is often proposed, however, within these schemes, there is a lot invested in providing a “fast-start” track for consumers of the business opportunity product. This gives individuals a false sense of security in their investment, and the cooling-off period only sets a period for which these schemes create this environment that is colloquially referred to as “love-bombing.” The rule should not be modified.
Historically MLMs have argued this would be very costly for their business and would make recruits highly skeptical of the opportunity. If these are legitimate enterprises and they are looking to find strong sellers of products, as opposed to making quick money off of deceiving prospects with product kits and quick start guides to success, then having a recruit who carefully considers the opportunity and is retained is more beneficial that the rapid turnover cycles witnessed in these opportunities.
- Dave Vaughan, G.O.A.T.
Side note - I’ve also compiled all of the comments from last year’s ANPR in this public Google Drive doc, and I encourage anyone who is curious to mine the data there because it’s fascinating to look at those comments, which the FTC cited as a factor in their consideration of changes to the Business Opportunity Rule, and index them by keywords, which is a lot more difficult on the clunky Federal Register.
Some interesting comments from those opposed to changes:
Something that really surprised me about this latest round of public comments was how lackluster the comments from those in (and in support of) the Direct Selling industry proved to be. Somehow, I expected more (and louder) pushback from the folks who, seventeen years ago, managed to round up 17,000 public comments in their favor on the initial proposition of this very same rule. Perhaps the industry is cocky in its confidence that a corrupted system will continue to protect them over their victims—and perhaps that cockiness is warranted—but somehow I don’t think that refusing to actually address the questions asked in this proposal and instead arguing about the timing of it looks good for them.
As the Commission said they will consider any comments previously submitted in the Earnings Claims ANPR, we are re-attaching DSA’s comments submitted to that rulemaking (Appendix A) for your reference.
While the Commission recognizes there is overlap between these rules and believes moving forward with parallel rulemakings will give the agency flexibility in considering a rule, this is untenable for millions of small businesses that could potentially be covered by both rulemakings. Staying compliant with the earnings claims provisions of the BOR would be extremely difficult as the Earnings Claims Rule is being considered. Standards and compliance could shift until action is finalized on the rule.
For the FTC, knowing what to include in the BOR regarding earnings claims would also be difficult until consideration of the earnings claims rule has been finalized. Since the regulations would be overlapping, standards could change. The FTC should not only consider efficiency in their consideration of these rulemakings, but also those small businesses that would potentially be regulated and the confusion of difficulty to achieve compliance that would ensure for such small businesses.
- DSA, Big Pyramid
And:
Less than a year ago, the FTC initiated a new rulemaking on the use of false earnings claims, which contains a great deal of overlap with the BOR’s standards and earning claims disclosures made to potential business participants. The Commission has acknowledged the potential for overlapping requirements so much so that the BOR’s ANPR explicitly states that comments submitted in response to the earnings claims ANPR need not be submitted again.
We urge the FTC to recognize that duplicative rulemakings create an untenable compliance situation for the millions of small businesses under the proposed regulations. To ease compliance and legal certainty, the Commission should wait to finalize action on the earnings claims rule prior to proceeding with a review of the BOR.
But if the FTC nonetheless proceeds with consideration of whether to expand the scope of the BOR, the Commission should, consistent with your written statement on the BOR’s ANPR, focus its consideration on newer business models and practices that have emerged or become more widespread since the rule was last amended in 2011.
Specifically, the Commission determined in 2011 that the BOR would be unworkable with respect to direct sellers more than any other type of business opportunity seller without countervailing benefits to consumers. We see no change with respect to this carefully considered determination.
- Senators Mike Lee, Mitt Romney, and Marsha Blackburn, The Enablers
Finally, I just want to sincerely thank every person who helped bring public awareness to this proposed rule change, and who has worked so hard to get as far as we have in this fight. We must remember how young this movement is. The change we have seen in the last 10-12 years may not feel groundbreaking, but the fact that we currently have the DSA shaking in their bootstraps is the only speedometer I need to know that momentum is on our side.
P.S. Click here for an (unrelated) Open Letter I published last night on my blog.
And just for fun…
Please enjoy this poem I wrote, inspired by this tweet, about this quote by Robert Fitzpatrick:
“Disclaimer” by Michelle Carpenter