From Vermont to California and Oregon to Florida, the Federal Trade Commission (FTC) has wasted no time enforcing its beefed up Business Opportunity (â€œBiz-Opâ€) Rule. Last month, it filed its first six cases across the country (three are the authorâ€™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 theyâ€™re charged with violating not only the Biz-Op Rule but also the FTCâ€™s basic statute against â€œunfair and deceptiveâ€ 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 â€œwork-at-homeâ€ 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 â€“ 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 itâ€™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.