The FTC's Proposed New Business Opportunities Rule and How it Might Work: Bioperformance Analysis
The FTC's proposed Business Opportunities Rule will expand the reach of the FTC to explicitly cover fraudulant multi-level marketing scams such as Bioperformance. By eliminating the condition in the Franchise Rule that the investor had to purchase $500 in order to be covered by the Rule, receive the appropriate disclosure document, the new Business Opportunities Rule will cover those cases in which the initial purchase was less than $500. But would the new rule have stopped the Bioperformance scam, faster than the AG of Texas?
One of the main hooks in the Bioperformance was not the use of the internet, but rather the travelling show or what I called pep rallies. How many of these shouting, happy people, were actually shills? The proposed Business Opportunities Rules, 437.5(q) addresses the problems of shill, paid testimonials. The seller would not be allowed to represent that someone, a locator, employee, or some other third party, owned one of the bizops. Second, the seller would not be allowed to represent that some independent third party, such as a broker, could provide them with a list of "satisfied customers."
Although this is a good start, it would have been better to attach the liability to both the seller and the shill - the shills as a group enable the fraud and should be also be liable for their misrepresentations.
Technorati Tags: pep rallies, business opportunities, franchise rule, multi level marketing, ftc, disclosure document, new business, initial purchase, happy people, shill, scams, hooks, travelling
Technorati Tags: pep rallies, business opportunities, franchise rule, multi level marketing, ftc, disclosure document, new business, initial purchase, happy people, shill, scams, hooks, travelling
