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FTC | RIN: 3084-AB04 | Publication ID: 2012 |
Title: Business Opportunity Rule | |
Abstract: As part of its ongoing systematic review of all Federal Trade Commission rules, on April 7, 1995, the Commission initiated its periodic review of the Franchise Rule (16 CFR 436) by publishing a notice seeking public comments on the effectiveness and impact of the Rule. 60 FR 17656. During that review (RIN 3084-AA63), staff recommended that the Rule be split into two parts: One part addressing franchise issues and the second addressing business opportunity issues. On April 6, 2006, the Commission announced publication of a Notice of Proposed Rulemaking (NPRM) seeking comment on this proposed Business Opportunity Rule. The proposed rule addressed fraud in the offer and sale of business opportunity ventures by requiring business opportunity sellers to furnish specific presale disclosures to prospective purchasers. The proposed rule also prohibited specific conduct that the rulemaking record and the Commission's law enforcement experience show are prevalent problems. The extended comment period closed on July 17, 2006. A subsequent extended rebuttal comment period closed on September 29, 2006. After reviewing the comments, the Commission published a revised NPRM on March 26, 2008, that would require business opportunity sellers to furnish prospective purchasers with specific information that is material to the consumer's decision as to whether to purchase a business opportunity and which should help the purchaser identify fraudulent offerings. The revised NPRM also would prohibit other acts or practices that are unfair or deceptive within the meaning of section 5 of the Federal Trade Commission Act (the FTC Act). The comment period closed on May 27, 2008. The extended period for rebuttal comments closed on July 1, 2008 (73 FR 34895). The Commission held a day-long workshop on June 1, 2009, to explore proposed changes to the rule, including the effectiveness of the proposed one-page Business Opportunity Disclosure Form that sellers of business opportunities would be required to provide to prospective purchasers. The comment period closed on June 30, 2009. On October 28, 2010, the Commission released a staff report (the report can be found at http://www.ftc.gov/os/fedreg/2010/october/101028businessopportunitiesstaffreport.pdf)recommending that coverage of the Business Opportunity Rule be expanded to include work-at-home opportunities such as envelope stuffing, medical billing, and product assembly, many of which have not been covered before. FTC staff also recommended streamlining the disclosures required by the Business Opportunity Rule so that companies or individuals selling business opportunities make important disclosures to consumers on a simple, easy-to-read document. The changes would make it less burdensome for legitimate sellers to comply with the Rule, while still protecting consumers from "widespread and persistent" business opportunity fraud. Public comments on the staff report were accepted until January 18, 2011. The Commission published a final rule on December 8, 2011. 76 FR 76816. The final rule replaced the interim Business Opportunity Rule, which the Commission created in 2007 when it separated the Original Franchise Rule,16 CFR part 436, into two parts; one covering the sale of franchises and one covering the sale of business opportunities. The interim Business Opportunity Rule contained no new substantive disclosure requirements or prohibitions, and in all material respects was substantially identical to the Original Franchise Rule; with all definitional elements and references regarding franchises deleted. The final rule amends the interim rule to broaden its scope to cover business opportunity sellers not covered by the interim Business Opportunity Rule, such as sellers of work-at-home opportunities, and to streamline and simplify the disclosures that sellers must provide to prospective purchasers. The final rule became effective on March 1, 2012. | |
Agency: Federal Trade Commission(FTC) | Priority: Substantive, Nonsignificant |
RIN Status: Previously published in the Unified Agenda | Agenda Stage of Rulemaking: Completed Actions |
Major: No | Unfunded Mandates: No |
CFR Citation: 16 CFR 437 | |
Legal Authority: 15 USC 41 to 58 |
Legal Deadline:
None |
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Timetable:
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Regulatory Flexibility Analysis Required: No | Government Levels Affected: State |
Small Entities Affected: Businesses | Federalism: No |
Included in the Regulatory Plan: No | |
International Impacts: This regulatory action will be likely to have international trade and investment effects, or otherwise be of international interest. | |
RIN Data Printed in the FR: No | |
Related RINs: Split from 3084-AA63 | |
Agency Contact: Christine Todaro Attorney Federal Trade Commission 600 Pennsylvania Avenue NW, Washington, DC 20580 Phone:202 326-3711 Email: ctodaro@ftc.gov |