7.01.2006

DSA Summary - R511993


From the web site of the Direct Selling Association (DSA), here is a clip from a FAQ section pertaining to the proposed Federal Trade Commission Business Opportunity Rule (R511993).

Direct Selling Association -
Frequently Asked Questions: Proposed Business Opportunity Rule

Q: What is the proposed rule?
A: The proposed rule is a set of suggested regulations drafted by the Federal Trade Commission (FTC) that may place certain limits on the way you do business. Like some current state laws, this rule proposes to place limits and/or additional requirements concerning earnings statements and the dissemination of information to potential sellers, among other things. This proposed rule, however, adds additional requirements on direct sellers that exceed any current state or federal law.

Q: How will the proposed rule impact my business?
A: If enacted as currently drafted, the proposed rule will do several things:

1. Require all prospective sellers to be provided with a disclosure document. This document must include information including (but not limited to):
a. The distributor’s identification information
b. Legal actions involving deceptive practices or other matters filed against the seller and/or the company in the last 10 years
c. Whether or not earnings claims are made (see section 3 for more on earnings claims);
d. The number of all direct sellers who have canceled within two years; and
e. A list of the 10 closest current or past distributors to the prospective purchaser, with personal information so that prospective purchasers may contact these references

2. Require that the disclosure document discussed above be given at least seven days before any potential seller signs a contract or makes any form of payment;

3. Under the proposed rule, an earnings claim can be considered anything from a picture of a boat or car purchased with earnings from direct sales activities, to actual dollar amounts. If earnings claims are made, additional information must be provided, including:
a. The beginning and ending dates when the earnings were achieved;
b. The number and percentage of all sellers represented by the claim; and
c. All “special characteristics” of those who made such earnings that may distinguish those sellers from others, such as geographic location. Read other questions and answers here.


About DSA -
The Direct Selling Association (DSA) is the national trade association of the leading firms that manufacture and distribute goods and services sold directly to consumers. More than 200 companies are members of the association, including many well-known brand names.

The Association's mission is "To protect, serve and promote the effectiveness of member companies and the independent business people they represent. To ensure that the marketing by member companies of products and/or the direct sales opportunity is conducted with the highest level of business ethics and service to consumers."

The cornerstone of the Association's commitment to ethical business practices and consumer service is its Code of Ethics. Every member company pledges to abide by the Code's standards and procedures as a condition of admission and continuing membership in the Association.


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