The Federal Trade Commission (FTC) has announced its intention to gather public feedback on proposed changes to the Business Opportunity Rule and a new Earnings Claim Rule. These proposals aim to enhance the FTC's ability to combat deceptive earnings claims prevalent in multi-level marketing (MLM) programs and money-making opportunities.
Currently, deceptive earnings claims are illegal. However, the proposed amendments would empower the FTC to seek significant relief from companies making such claims, including consumer refunds and civil penalties.
Sam Levine, Director of the Bureau of Consumer Protection, stated, "Phony claims about likely earnings lure people looking for honest income into spending thousands, even tens of thousands, of dollars on multi-level marketing, business coaching and other schemes. The proposed rules would help the FTC deter illegal conduct with civil penalties and put money back in consumers’ pockets. We look forward to getting public comment."
The FTC is soliciting input on three proposals: two Notices of Proposed Rulemaking (NPRM) and one Advance Notice of Proposed Rulemaking (ANPRM).
The NPRM concerning the Business Opportunity Rule seeks to broaden its scope to include money-making opportunities like business coaching and investment ventures that promise income generation or business building assistance. Under this proposal, sellers must avoid material misrepresentations about earnings and provide written substantiation for any earnings claims upon consumer request.
A separate NPRM addresses deceptive earnings claims within the MLM industry specifically. This proposal would establish a rule prohibiting MLM sellers from making false or misleading earnings statements. Similar to the Business Opportunity Rule amendment, it requires written substantiation for any earnings claims made by MLM sellers.
Additionally, an ANPRM related to the proposed Earnings Claim Rule invites public commentary on potential further requirements addressing deceptive practices. These considerations include whether MLMs should disclose earnings data publicly or provide it directly to recruits and participants; if all MLM earnings claims should be accompanied by clear information about typical participant earnings; whether there should be a waiting period before joining an MLM; if misrepresentations regarding expenses or benefits should be banned; and whether non-disparagement clauses preventing negative communication should be prohibited.
The public comment period for these proposals will last 60 days following their publication in the Federal Register. Instructions for submitting comments can be found in both the Federal Register notice and on relevant FTC websites.
The Commission's decision to issue these proposals was approved by a 3-2 vote, with Commissioners Andrew Ferguson and Melissa Holyoak dissenting. Commissioner Ferguson provided a dissenting statement supported by Commissioner Holyoak.
The FTC continues its mission to promote competition while protecting consumers through education and advocacy against fraud and scams.
