From Vermont to California and Oregon to Florida, the Federal Trade Commission (FTC) has wasted no time enforcing its beefed up Business Opportunity (“Biz-Op”) Rule. Last month, it filed its first six cases across the country (three are the author’s) to enforce the rule, which took effect last March. Some of the companies had been operating for years without a peep from the FTC, even though they’re charged with violating not only the Biz-Op Rule but also the FTC’s basic statute against “unfair and deceptive” practices.
Once confined to the realm of vending machine businesses and the like, and limited to biz-ops costing $500 or more, the Rule now covers “work-at-home” offers carrying no purchase minimum. It requires detailed written disclosure, in a prescribed form, of several items of information, including the basis of earnings claims – the sine qua non of biz-op offers. The seller must disclose, at least seven days prior to sale: a) who it is; b) whether it’s making an earnings claim; c) whether it, its affiliates, or key personnel have been involved in any legal actions; d) whether it has a cancellation or refund policy; and e) a list of purchasers within the past three years. If the seller makes earnings claims, has been sued, or has a cancellation/refund policy, it must provide supplementary information substantiating the claims, identifying the suits, and stating the key cancellation/refund terms. The disclosure document must be provided even if the seller is not making earnings claims.