F.T.C. Public Comment 94

State compliance has become something of an oxymoron in the Business
Opportunity arena. State laws were adopted for the large part as an enforcement tool with little thought to those legitimate companies who must meet its requirements.

FTC.jpg

U.S. Federal Trade Commission
June 30, 1997

Public Comment
Andrew A. Caffey, Attorney

Request for public comment on possible revisions to The Franchise Rule.

Comment #94

Andrew A. Caffey

Suite 700
3 Bethesda Metro Center
Bethesda, Maryland 20814
Tel (301) 961-1996 Fax (301) 215-7384/652-6240
E-Mail moc.evreSupmoC|1642.32037#moc.evreSupmoC|1642.32037

June 30, 1997

Ms. Myra Howard
Division of Marketing Practices
Federal Trade Commission
Washington, DC 20580

Dear Ms. Howard:

I am writing to express my interest in participating in one or more roundtable sessions now being planned for the Business Opportunity sales portion of the FTC Franchise Rule. I am particularly interested in participating in the session planned for Chicago during August and perhaps Dallas during October.

My professional background is summarized in the enclosed professional biography. I was General Counsel to the International Franchise Association during the mid-1980's and currently represent a number of franchisors and Business Opportunity sellers. I have written extensively about the regulation of Business Opportunity sales for Entrepreneur Magazine and other publications, and enclose some recently published articles I have written on the subject.

I believe that Business Opportunity regulation is severely out of step with the sales activity and the capabilities of the companies it seeks to regulate. Many of those difficulties stem out of the impulse at the FTC and in the states to regulate Business Opportunity sales in the same manner as franchises when they are in fact markedly different transactions. I believe strongly that the FTC should differentiate the manner in which Business Opportunity sales are regulated. I also believe that differentiation will allow a higher degree of compliance than we now see in the marketplace.

I suggest that the Commission consider the follow areas of change:

Tailor the scope of disclosure content, creating a disclosure statement designed for compliance by a Business Opportunity seller. A number of sections of the FTC Rule disclosure have little relevance to a typical Business Opportunity sale. These include the business experience of executives of the seller, personal participation of the buyer in the operation of the business, termination/renewal information, statistical information, site selection, public figure involvement, financial information of the seller, the contract.

Many Business Opportunity programs, of course, have no continuing relationship between the buyer and the seller, but are one time purchases of packaged information.

Alter the timing of disclosure to accommodate the way in which Business Opportunity sales are conducted. Business Opportunity sales are not often made in a personal meeting, they are promoted by mail, by telephone, over the Internet. Although 10 business days makes sense in a large transaction like a franchise, it makes little sense for a typical Business Opportunity sale.

Consider the regulation of earnings claims in the context of current Business Opportunity
practices. If a sale takes place over the telephone, perhaps the seller could read a prescribed
statement to the buyer, advising him or her of the regulation of the transaction and the meaning
of an earnings claim.

Consider federal preemption of the hodge podge of 25 state laws in this area would allow
Business Opportunity sellers an opportunity to comply with a single set of disclosure
requirements. State compliance has become something of an oxymoron in the Business
Opportunity arena. State laws were adopted for the large part as an enforcement tool with little
thought to those legitimate companies who must meet its requirements.

I am more than willing to expand on these ideas during one of the planned roundtable sessions.
Please let me know if I can provide more information.

Very truly yours,

Andrew A. Caffey

For Review, see FTC “Table of Commenters”
http://www.ftc.gov/bcp/franchise/comments/tabcomm.htm


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Risks: F.T.C. Public Comments, United States, 1997, International Franchise Association, IFA, Chief Counsel, IFA, United States, 19970630 Comment 94

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