New FTC Rule on Business Opportunities

Filed in Gather Business News Channel by on April 17, 2012 0 Comments

The Federal Trade Commission or FTC, is about the business of protecting consumers from shady business deals. In order to better do their job, the FTC now requires all businesses to provide information to potential investors to aid them in making an educated decision. Similar to a real estate disclosure form, the new FTC rule requires sellers to validate claims about earnings as well as share information about potential problems (such as pending litigation).

Most in business are very positive about this new rule. Nonetheless, many believe it to be unfair because it excludes direct sells and multi-level marketing companies. The big question is why? Some believe they are excluded because of strong lobbying and cozy relationships with leaders of the FTC, while others feel the rule does not really fit the direct sells business format.

No matter the reason for the exemption, clearly stronger governing of this industry is needed, and has been needed for some time. True, direct sells companies operate very differently than traditional businesses; but how difficult would it be to simply adjust, or change the form and tailor it to that industry? Lastly, the risk involved in investing in mlm companies may be regarded as less than that of storefronts and other businesses. But, this is not true. In fact, some invest as much as a few thousand dollars in direct sells opportunities including the purchase of product, forms and other supplies. Even more, consumers should be protected from losing even as a little as a dollar in a pyramid scheme.

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