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FTC Proposed Business Opportunity Rule:
DSWA Speaks Out

Jeffrey Babener, Babener and Associates

© 2006

The DSWA, Direct Selling Women’s Alliance, has urged members of the MLM, Direct Sales, Direct Selling, Network Marketing and Party Plan industry to oppose an initiative of the FTC in its draft of the FTC Proposed Business Opportunity Rule. The DSWA, www.dswa.org, supports the efforts of direct sellers, corporate and individuals. The DSWA mission statement notes, that although its efforts are focused on supporting women in the profession, it’s membership is open to all direct sellers regardless of gender. The DSWA provides industry education and training and promotes legislation and policies that support the industry.  It is a promoter of consumer rights and ethical practices of industry members.

In April 2006, the FTC released a sweeping proposed change in its FTC Business Opportunity Rule. The proposal was immediately and strongly criticized by representatives of and experts in the MLM, Direct Sales, Direct Selling, Network Marketing and Party Plan industry. The process to a completed Rule is expected to last 18 months to 3 years. For extensive analysis, text of the actual FTC Proposed Business Opportunity Rule and ongoing updates, please visit www.mlmlegal.com.

DSWA Position Statement on FTC Proposed Business Opportunity Rule

The DSWA has stated its support for the DSA and other trade organizations on this issue. Support was urged to address the tremendous hardship that would fall upon an industry with approximately 14 million earners in the U.S. alone. It has addressed its own call to action by way of a series of questions and answers the FTC Proposed Business Opportunity Rule, as well as providing information on the method of submitting formal comments on the proposed rule. Below is the actual text of the “call to action” statement issued by the DSWA on the FTC Proposed Business Opportunity Rule.

DSWA Call to Action Statement:

We're reaching out to network marketing and party plan professionals like you who need to be aware of the proposed New Business Opportunity Rule that could affect the future of the profession and your business.

This rule, proposed by the FTC, threatens the very nature of how you do business and will pace additional burdens on you in order to comply with the federal law.

If you care about your business and the direct selling profession, you will take a moment to read the Q&A's below and then let your voice be heard by submitting your concerns to the FTC on or before July 17th!

#1: What is the Business Opportunity Rule?

Following are just some of the potentially damaging requirements:

  • Create new definitions of "business opportunity," "business assistance" and "earnings claim," creating broad language to encompass many common business practices;
  • Require that a detailed "disclosure statement" be given at least seven days before any prospective purchaser signs a contract or makes payment to the business assistance provider;
  • Require that the business opportunity "disclosure statement" include information such as previous lawsuits, the number of previous purchasers who have canceled within two years and a list of "references" i.e., purchasers of the opportunity in the previous three years;
  • Require business opportunity sellers who make earnings claims to provide an additional "Earnings Claim Statement" to prospective purchasers, which would include extensive earnings disclosures that would need to be frequently updated.

#2: What does this proposed rule mean for distributors?

  • The required disclosure and earnings statements and the required list of all distributors who have cancelled their distributorship in the previous last two years may cause the sponsoring process to become cumbersome and difficult.
  • These requirements may create unnecessary alarm and concern about the legitimacy of the profession and your business opportunity to prospective distributors.
  • The proposed seven day waiting period between receiving the disclosures and enrollment would likely cause a potential distributor to lose their enthusiasm for joining your company.
  • The costs of complying with the requirements would increase expenses to the company which may be passed on through the selling price of goods or services we offer.

In fact, the very nature of this ruling is evidence that the FTC does not truly understand that the vast majority of distributors conduct business ethically and honestly every day and that such a ruling threatens the livelihood of these individuals.

Is it right that the more than 13 million independent distributors be wrongfully penalized because a very few people have caused the FTC to look negatively at our profession? No!

#3: Why should we speak out now?

We only have until July 17th to let the Federal Trade Commission hear the voice of the millions of direct sellers who have a stake in the future of this profession.

It is the voice of the distributors that will have the greatest impact as they learn how women and men with families are counting on the additional income their part or full-time businesses provide. The FTC must hear from you - the individuals putting their children through college, saving for retirement, reducing their consumer debt and providing a better quality of life for their families. They especially need to hear from those of you who are full-time direct sellers so they understand that this as the viable profession we all know it to be. Take a stand - July 17th is almost here!

#4: How can I have my voice be heard?

Don't wait and hope that someone else will speak out for you!

This is your opportunity to show the strength and unity of direct selling professionals by sharing this information with everyone you know whose life will be affected. Next…write a personal letter to the FTC.

Two ways to submit your comments and let your voice be heard:

  1. Mail a compelling and heartfelt letter to the FTC today! TWO copies must be sent when submitting you comments by mail. (See the downloadable sample letter on the upper right column.) Send your letter to:
    Federal Trade Commission/Office of the Secretary, Room H-135 (Annex W)
    Re: Business Opportunity Rule, R511993
    600 Pennsylvania Avenue, NW
    Washington, DC 20580
    RE: Business Opportunity Rule, R511993

    Because all mail to this Washington based office is subject to delay due to heightened security precautions we encourage you to overnight your letter if you are sending it close to the July 17th deadline.
     
  2. You may also submit your letter electronically directly to the Federal Trade Commission web site. Here is the link: https://secure.commentworks.com/ftc-bizopNPR/.

    While you can block and copy your letter of 4000 characters or less into their submission form, we strongly urge you to create your letter in a separate document and then submit it as an attachment using the browse button at the bottom of the form.

    Note: Be sure that your direct selling company receives a copy of the letter that you submit so they are aware of your initiative and dedication to the profession.

All comments should refer to "Business Opportunity Rule, Matter No. R511993" to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope.

### End of DSWA Call to Action Statement ###

Please click here to download and read the complete text in PDF format of the FTC Proposed Business Opportunity Rule

Look for ongoing updates on the status of the FTC Proposed Business Opportunity Rule at MLMLegal.com Copyright Jeffrey Babener Jeffrey Babener

On any given day you can catch Jeffrey Babener, editor of www.mlmlegal.com, lecturing on Network Marketing at the University of Texas or the University of Illinois, addressing thousands of distributors in Los Angeles, Bangkok, Tokyo and Russia, or writing a new book on Network Marketing, an article for Entrepreneur Magazine or a chapter for a University textbook. Over two decades he has served as marketing and legal advisor to some of the world's largest direct selling companies, the likes of Avon, Nikken, Shaklee, Tupperware, Prepaid Legal, Longaberger, Melaleuca, Discovery Toys, Usana, Amazon Herb, NuSkin, Cell Tech, Sunrider…. and he has provided counsel to the most successful telecom network marketing companies...Excel, ACN, World Connect, ITI, Acceris, AOL Select and Network 2000. An active spokesperson for the industry, he has assisted in new legislation and served on the Lawyer's Council, Government Relations Committee and Internet Task Force of the Direct Selling Association (DSA) as well as serving as General Counsel for the Multilevel Marketing International Association. He is an MLM attorney supplier member of the DSA and has served as legal counsel and MLM consultant on MLM law issues for many DSA companies. He is author of multiple books, including, Network Marketing: What You Should Know, Network Marketer's Guide To Success, Tax Guide for MLM/Direct Sellers, Starting and Running the Successful MLM Company, The MLM Corporate Handbook and Window of Opportunity. He is author of countless articles on network marketing, many of which can be found at www.mlmlegal.com where he is the editor. You will see his articles and interviews in such publications as Money, Atlantic Monthly, Success, Entrepreneur, Business Startups, Home Office Computing, Inc., Money Makers Monthly, etc. He has been chairman of numerous industry conference series, including, Starting and Running the Successful MLM Company, The MLM Entrepreneur Series and The MLM Masters series. He has served as the close advisor to scores of MLM Companies and their distributors, comprising millions of distributors and billions of dollars in sales. Mr. Babener is a graduate of the University of Southern California Law School, where he served as editor of the USC Law Review. After an appointment to be an advisor law clerk to a U.S. Federal Judge, he went on to become a member of the California and Oregon State Bar, where he has also served as chairman of the Oregon State Bar Committee on Judicial Administration. He has exclusively practiced in the area of direct selling for over 20 years. A Regulatory Update for MLM,Direct Selling, Network Marketing, Direct Sales, Party Plan Independent Distributors and Companies

Jeffrey A. Babener
Babener & Associates
121 SW Morrison, Suite 1020
Portland, OR 97204
Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad.

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