On November 15, the Federal Trade Commission (FTC) announced an enforcement sweep including more than 70 enforcement actions. The sweep targeted companies marketing business opportunities to consumers that the enforcement agencies allege are fraudulent.
During the press conference David Vladeck, Director of the FTC’s Bureau of Consumer Protection, mentioned that six of the cases alleged that marketers violated the FTC’s new Business Opportunity Rule. The Rule, which became effective in March 2012, requires that companies marketing business opportunities to consumers make certain disclosures in a one-page document provided to consumers. Those disclosures include:
- The seller’s identifying information;
- Whether the seller, its affiliates or key personnel have been involved in any civil or criminal action, including any FTC action, involving misrepresentation, fraud, securities law violations, or unfair or deceptive practices during the past 10 years;
- Whether the seller makes claims about the purchaser’s likely earnings;
- Whether the seller has a cancellation or refund policy, and
- Names and contact information for 10 people who bought the business opportunity within the previous three years.
If the marketer makes earnings claims, has a refund policy or has staff who have been involved in legal actions requiring disclosure on the form, the marketer must provide separate disclosures detailing the conditions of its cancelation or refund policy, substantiating its earnings claims, and/or detailing the legal actions in which its staff were involved.
Click here to read the press release about the enforcement sweep and view the related complaints.