When running a home business opportunity, there are always a few legal issues to be aware of. That’s just part of business. But recently, some "new" issues have come about, issues that can have a great impact on the MLM industry… so it’s important to be aware of what’s going on.

As I posted on back in April (Know What’s Legal… and What’s Not!), the FTC has very strict regulations regarding earnings claims, earnings representations, testimonials, etc.

So what’s the update?

Well, in case you haven’t yet heard, the FTC has recently released some newly-proposed rules that can greatly impact you and your home business opportunity.

The newly-proposed Business Opportunity Rule – FTC File No. R511993 (if passed) further tightens  (like a noose) the restrictions on home business opportunities and how they’re marketed and advertised.

Parts of it are not only ridiculous, but downright dangerous, as they could possibly expose people (women and children especially) to sexual harassment, as well as sexual predators (MLMWatchDog, D.R.A.).

But aside from those overlooked factors…

How can this effect you?

Well, to save you the time and headache of deciphering all of the legal jargon, here’s are some of the FAQ’s and their answers regarding the FTC’s proposed Business Opportunity Rule Number: R511993.

Direct Selling Association:

Q: What is the proposed rule?
A: The proposed rule is a set of suggested regulations drafted by the Federal Trade Commission (FTC) that may place certain limits on the way you do business. Like some current state laws, this rule proposes to place limits and/or additional requirements concerning earnings statements and the dissemination of information to potential sellers, among other things. This proposed rule, however, adds additional requirements on direct sellers that exceed any current state or federal law.

Q: How will the proposed rule impact my business?
A: If enacted as currently drafted, the proposed rule will do several things:

1. Require all prospective sellers to be provided with a disclosure document. This document must include information including (but not limited to):
a. The distributor’s identification information
b. Legal actions involving deceptive practices or other matters filed against the seller and/or the company in the last 10 years
c. Whether or not earnings claims are made (see section 3 for more on earnings claims);
d. The number of all direct sellers who have canceled within two years; and
e. A list of the 10 closest current or past distributors to the prospective purchaser, with personal information so that prospective purchasers may contact these references

2. Require that the disclosure document discussed above be given at least seven days before any potential seller signs a contract or makes any form of payment;

3. Under the proposed rule, an earnings claim can be considered anything from a picture of a boat or car purchased with earnings from direct sales activities, to actual dollar amounts. If earnings claims are made, additional information must be provided, including:
a. The beginning and ending dates when the earnings were achieved;
b. The number and percentage of all sellers represented by the claim; and
c. All “special characteristics” of those who made such earnings that may distinguish those sellers from others, such as geographic location.

Full List: Proposed Business Opportunity Rule FAQ’s

If you’d like to view the full 44-page document (PDF) in the National Archives and Records Archive Administration’s Federal Register, just go here.

Posted by Aaron Cook