The Federal Trade Commission (FTC) will be hosted an open meeting this week to vote on the potential expansion of the Business Opportunity Rule. This Advanced Notice of Proposed Rulemaking (ANPRM) will gather information and gauge whether or not the FTC will actively proceed with a Notice of Proposed Rulemaking on this topic.
In 2021, the FTC announced that it would be looking for ways to seek restitution and disgorgement from companies in the wake of the U.S. Supreme Court ruling that determined the Commission could no longer do so using Section 13(b) of the FTC Act. The FTC has relied on Section 13(b) for more than four decades as a means to enact injunctions and extract monetary damages from companies without the administrative and court processes required in Sections 5 and 19 of the FTC Act.
According to the FTC, the Business Opportunity Rule “requires business opportunity sellers to give prospective buyers specific information to help them evaluate a business opportunity,” but it has also been viewed by industry analysts as an alternative way for the FTC to seek civil penalties, damages and other relief against violators after the Supreme Court removed its ability to do so without due process by wielding Section 13(b). In a 2021 Statement of Commissioner Rohit Chopra, it was made clear that the FTC plans to codify prohibitions and “seek restitution and penalties against multilevel marketers, gig economy platforms, and others who cheat workers and entrepreneurs through false earnings claims, without imposing any new obligations on honest businesses.”
In response, the Direct Selling Association (DSA) has convened its FTC Engagement Task Force to plan the organization’s approach and strategy in response to the open meeting.