FTC Business Opportunity Rule
The FTC's new business opportunity rule is intended to deal with illegal pyramid schemes, such as the late, and possibly lamented, Bioperformance, recently shut down by the Texas AG. (For some excellent court video, see the following stories and accompanying video.)
According to the FTC, one of the problems with an illegal pyramid scheme is that the scheme does not clearly disclose to the individual at the beginning how many people have dropped out and therefore earned no money. While this seems laudable, will it work in practice? The MLM has to update its disclosure document every 4 months, but surely there will be reporting lags. In the case of Bioperformance, we learned that the company's owners made $5 million in approximately 5 months, leaving only 10% in earnings to be shared with the rest of the other "lucky" distributors. Thus, the proposed disclosure might not protect anyone until it is too late.
What might be a better requirement, or use of the disclosure document?
Technorati Tags: illegal pyramid scheme, illegal pyramid schemes, disclosure document, ftc, texas ag, lags, business opportunity, new business, disclose, mlm, earnings, lucky
Looking at the I-Team Video, "Cult of the Little Green Pills", we see Lowell Mimms lording his product over a crowd of potential distributors. No doubt this hotel scene played itself out numerous times. Was the hotel, or banquet hall innocently facilitating fraud? Perhaps if Lowell was required to check in with his FTC approved disclosure document prior to booking the event, we might have seen fewer revivals, and fewer unhappy green pill distributors. Unfortunately, the new FTC business opportunity rule does not place any liability directly or indirectly on the facilitators of fraud.
Technorati Tags: illegal pyramid scheme, illegal pyramid schemes, disclosure document, ftc, texas ag, lags, business opportunity, new business, disclose, mlm, earnings, lucky
