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Abbie's Column : Laws and Regulations

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Is this the end for biz opps?

By Abbie Drew
Jan 25, 2007

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If the FTC (Federal Trade Commission) Business Opportunity Rule from 2006 stands it could be the end for a lot of business opportunities.

Here's the situation. The new FTC ruling, in an effort to
curtail fraudulent business opportunities, has gone over
board. The FTC would like to apply rules and regulations
which apply to franchise opportunities to all business
opportunities. Under the plan all network marketing programs, Internet business opportunities and even some affiliate programs could be subject to the same standards as a franchise business.

If you offer an opportunity or affiliate program with any
start-up cost, and you make an earnings claim or promises
to provide business assistance (track or pay commissions
is considered assistance) then you will need to follow
the new FTC rules.

At first glance the new rules may seem a good idea. In
theory they might help stop business opportunity fraud.
But when you evaluate the details more closely the
requirements are problematic.

The FTC mandates that a business opportunity provide a
disclosure agreement covering these five points:

1. whether or not the seller makes earnings claims;
2. the existence of criminal or civil legal actions;
3. an explanation of any cancellation or refund policy;
4. cancellation or refund request history for a rolling
two-year period; and
5. reference lists.

The first 3 points can be covered without issue and simple
explanation documents can be provided to answer

But what about point # 4. This requires keeping extensive
records. Most small businesses, particularly smaller
businesses who may be offering an affiliate program
component to their product / service will now have to keep
ongoing records of all cancellation and refund requests. A
hassle at the very least, at worst a marketing nightmare,
not to mention an added expense. Revealing only cancelled
orders, with no explanations or positive sales statistics
would make any business look bad.

And point # 5 causes huge privacy issues, increased
expense and logistical problems. To comply your business
can provide a reference list with one of these 2 options.
Give out the names of the 10 people who joined the
business who are nearest to the new prospect
geographically, or provide the prospect with a national list
of all those in the business opportunity. The reference's
name, city and state, and telephone number must be

Anyone thinking of joining an opportunity or affiliate
program would know of the requirement for their name,
city, state and phone number to be made available for
every potential opportunity seeker.

Do you think this privacy issue might suppress business
opportunity sales!

How many people will be willing to sign-up for a business
and agree to reveal all that personal information?

So if you're a small business who wants to offer a business
opportunity or affiliate program, it is going to become a lot
harder to get new sign-ups as well as sales.

Give me a break!

Small businesses simply do not have the resources to meet
these requirements.

And, fortunately, for the moment you do not have to.

Congressman Ron Paul has written to the Comptroller
General requesting that the Government Accountability
Office (GAO) investigate the Federal Trade Commission.
The investigation is to see if the FTC has sound basis for
the business opportunity rule.

I would encourage you to also write to your congressman
asking him/her to write to the GAO to investigate the FTC
Business Opportunity Rule. The more voices who oppose
the ruling, the more likely it will fail.

As I was preparing to share the above FTC news with you,
I learned of another even more disturbing possible
government restriction. There is a new law if enacted could
essentially outlaw me from sharing the above information
and requesting that you - "Write to your congressman".

Yes, you read that correctly. The Senate has proposed a
new bill, Senate Bill S1, which could make it illegal for
unregistered organizations to persuade members of "the
general public" to contact members of Congress.

If I were to break the law I could be hauled into court by an
Executive agency and fined $100,000.

The only way to avoid breaking the law would be to
register with the government as a "special-interest group"
and complete numerous Federal forms. Then with any
email I send that persuades "the general public" to contact
Congress, I would again have to complete more Federal

As you can see the law is designed to make it difficult if
not impossible for organizations to send out simple emails
to encourage others to contact members of Congress. But
what's even worse is just presenting the information about
an issue could be problematic. If my presentation was
interpreted as a persuasive letter to encourage others to
contact Congress, even if I did not explicitly ask you to
write, I could be fined.

Senate Bill S1 would essentially prevent me from
notifying you about the FTC Business Opportunity Rule as
I did today. It would also prevent me from writing you
about Internet Tax issues, Spam laws and more. It
basically forces me to keep my mouth shut!

The Senate it would seem does not want to hear from its

Yes, Senate Bill S1 is outrageous. And before it becomes
law, I strongly encourage you to write to Congress, this
time contact both your Senators. Tell them you oppose
Senate Bill S1. And if you can, send a postal letter as it
will have more impact.

Senator XXX YYYY
Senate Office Building
Washington, D.C. 20510

If you have comments you'd like to share please feel free
to contact me - http://www.demc.com/contact.shtml

Thanks in advance for taking action!

Abbie Drew
DEMC Editor

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