So today’s Federal Trade Commission (FTC or Commission) meeting was a bit of a narrowly focused affair – all about the Business Opportunity Rule (Rule), which is a long-standing FTC rule that generally requires “business opportunities” to provide buyers with a one-page Disclosure Document as well as an Earnings Claims Statement if the opportunity makes earnings claims.
An FTC staffer provided a helpful overview of the Rule, described it as a “pre-sale disclosure rule” and noted that there are many concerns raised by consumers in this area. The staffer then described the proposed Advance Notice of Proposed Rulemaking (ANPR), which was pretty standard fare. There were the usual questions, such as whether the Rule should be retained or modified, and also questions about whether the Rule should be expanded to cover other earnings opportunities, such as coaching services, e-commerce opportunities or investment opportunities. The staffer also noted that because there is some overlap here with the FTC ANPR on earnings claims, those comments will automatically be considered here and do not need to be resubmitted.
As for the commissioners, well, we would diplomatically say that the discussion was muted and non-confrontational or perhaps even low-energy. Chair Khan seemed to support eventually broadening the Rule. Commissioner Slaughter was on board too. Commissioner Wilson noted that the Rule adds value by addressing information asymmetries in this area. And Commissioner Bedoya flagged a few of the questions he is particularly focused on.
As for the consumer portion, for us, the high point was when a consumer started speaking and all of a sudden, the transcriber (we believe) broke in and asked a speaker to slow down; that caught us off guard, and we are clearly easily entertained. As for the substance, lots of talk about pharma, labor and competition, and multi-level marketing, and lots of discussion about the recent competition policy statement discussed below.
But we must ask one question about these meetings and their goal. One week before this meeting, the Commission issued (with one dissenting vote) a Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act. Now, this is primarily an advertising blog, so we didn’t cover this policy statement, but in the competition world, this statement is a very big deal. (Although there is overlap we will discuss in the future, including the prohibition on using false or deceptive advertising or marketing that tends to create or maintain market power). Our question is this: Why wasn’t this policy statement on the agenda for discussion at one of these meetings? We have seen countless other policy statements discussed at these meetings, and indeed, we have previously wondered about the large volume of such policy statements. But this very significant policy statement somehow didn’t make the cut. Perhaps there is a reason for this, but if the goal of these meetings is transparency, visibility and dialogue, we remain puzzled about such an approach for such an important document and issue.
And finally, we return to the beginning. At the outset of the meeting, Chair Khan noted the recent passing of Michael Pertschuk, the former FTC chairman, who had been named to the position in 1977 by President Carter. His obituary can be found here.
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