7.03.2006

A Picture Is Worth $1000 Fine?


Pictured below are items that the proposed Business Opportunity Rule - FTC R511993 consider to be an income claim. Here is a link to the pending action - https://secure.commentworks.com/ftc-bizopNPR/notice.pdf
see page 13 for the following,
Proposed section 437.1(h) would define the term ‘‘earnings claim’’ as ‘‘any oral, written, or visual representation to a prospective purchaser that conveys, expressly or by implication, a specific level or range of actual or potential sales, or gross or net income or profits.’’120 It is intended to cover all variations of earnings representations that the Commission’s law enforcement experience shows are associated with business opportunity fraud.
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Continuing -
The definition also provides examples of communications that constitute earnings claims. The first of these examples is taken from the UFOC Guidelines’ description of common types of potentially fraudulent earnings claims: ‘‘a chart, table, or mathematical calculation that demonstrates possible results based upon a combination of variables.’’ UFOC Guidelines, Item 19, at i.121 This is intended to clarify that sales matrixes that purport to show income from an array of ‘‘vends’’ per day from a vending machine, for example, would constitute an ‘‘earnings claim’’ under the proposed Rule.122
The second example incorporates the principle, as expressed in the Interpretive Guides to the Franchise Rule, that ‘‘any statements from which a prospective purchaser can reasonably infer that he or she will earn a minimum level of income’’ constitutes an earnings claims. Such implied claims are at least as likely to mislead prospective purchasers as express claims. The proposed definition includes three specific examples illustrative of this type of earnings claim, as follows: ‘‘earn enough to buy a Porsche,’’ ‘‘earn a six-figure income,’’ and ‘‘earn your investment back within one year.’’ 123 Each of these three illustrative examples imply a minimum value—the cost of the lowest priced Porsche in the first example, at least $100,000 in the second, and an amount equal to the purchaser’s initial investment in the third.124 Accordingly, the proposed language makes it clear that these types of representations are indistinguishable from direct, express earnings claims.





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