The #1 topic of conversation the past two weeks on my web-conferences and forums has been the FTC, SEC, Zeek Rewards, and how to correctly evaluate business opportunity programs. I have made the comment several times that the Federal Government makes it all very clear in their rules and supporting documentation. In the end their intent is not to harm you as the entrepreneur, but rather to protect consumers and provide guidelines so that business owners remain compliant with the law.
I have previously posted articles concerning the FTC rules concerning website compliance and I certainly will continue to write on this topic in an effort to help you stay clear of the law. One of the keys to building a business that is sustainable is building it legally based on integrity within the rules and recruiting in an honest way.
I am not an attorney, so to share my opinions about the rules or offer my interpretation of the rules would provide little value for you. Therefore, I have decided to provide you with three crucial resources to help you better understand your obligations under the law.
1.) The Business Opportunity Rule Video
2.) The FTC Facts for Consumers PDF Document for immediate download
3.) A Summary of the Key Points (taken directly from the FTC)
Once you have watched the video, read both the PDF and the summary below… you will possess the knowledge to make better informed decisions about what program(s) to join and how to promote them with integrity.
Step 1. Watch the Video
The Business Opportunity Rule Overview and Key Provisions
Step 2. Download the PDF
Click on the link (no opt in required): FTC-FACTS-for-Consumers-PDF
Step 3. Understand the Following Facts
The disclosure document
Under the Rule, sellers have to give you a one-page disclosure document that offers five key pieces of information. Use the information in the disclosure document to fact-check what the seller tells you about the opportunity and what you find out from your own research.
The document has to:
- identify the seller;
- tell you about certain lawsuits or other legal actions involving the seller or its key personnel;
- tell you if the seller has a cancellation or refund policy. If so, what are the terms of that policy?
- say whether the seller is making an earnings claim. If so, the seller has to give you another document called an earnings claim statement; and
- give you a list of references.
The Rule says that a seller has to give you the disclosure document at least seven days before you sign a contract or pay them anything. Use that time to check out the information in the disclosure document, including contacting references. Be aware that some questionable bizopp promoters have been known to name “insiders” who give glowing – but bogus – recommendations. Don’t just talk to the few people they suggest. Choose whom to contact. What if what the seller is telling you is different from what’s on the disclosure document or what you hear from another buyer? Step on the brake. An inconsistency could be a tell-tale sign of a bizopp rip-off.
In addition, the disclosure document has to be in the language the seller used to offer you the bizopp. If you discussed the deal in a language other than English, the document has to be in that language. Also, the seller has to make it clear that if you buy a business opportunity from them, your contact information will be given to prospective buyers in the future.
The earnings claim statement
What if the seller makes a claim about how much money a person can earn? Under the Rule, they have to give you a separate document that says in big type across the top: EARNINGS CLAIM STATEMENT REQUIRED BY LAW.
This document has to include:
- the name of the person making the claim and the date;
- the specifics of the claim;
- the start and end date those earnings were achieved;
- the number and percentage of people who got those results or better;
- any information about those people that may differ from you – for example, the part of the country where they live; and
- a statement that you can get written proof of the seller’s earning claims if you ask for it.
Since the Rule gives you the right to see written proof for the seller’s earnings claims, savvy buyers exercise that right and study those materials carefully. Compare that information to what the seller has told you about how much money people make. If the dollar amounts don’t line up, your best bet is to walk away. Like the disclosure document, the earnings claim statement has to be in the same language that the seller used to communicate with you.
The revised Business Opportunity Rule spells out that certain practices are against the law. For example:
- It’s illegal for bizopp sellers to say anything that contradicts what’s in their disclosure document and earnings statement.
- Under the Rule, sellers can’t claim they’re offering you a job when they’re really promoting a business opportunity.
- The Rule makes it illegal for sellers to misrepresent the nature of the investment – for example, to claim they’ll help you line up locations, outlets, accounts, or customers or that you’ll have an exclusive territory if it’s not true.
The revised Rule puts new protections in place for prospective buyers. But for added protection, take the time to find out what the Rule requires of sellers. Did they give you the disclosure document with the five key pieces of information? If they made earnings claims, did they give you a separate statement with the specifics? If you spot a seller who isn’t complying with the law, it’s a red flag: You could be in the cross hairs of a bizopp scammer.
- What else can you do to add an extra layer of protection? Before you buy a business opportunity:
- Study the disclosure document, the earnings claim statement, and the proposed contract.
- Insist on seeing proof in writing for earnings claims, including statements like “Earn up to $10,000 a month!” Phrases like “up to” aren’t a way out for the seller. It’s an earning claim and it’s your right to demand proof.
- Interview current owners of the seller’s business opportunity. Ask the tough questions – like if the information in the disclosure document matches their experience with the company.
- Listen to sales presentations with a critical ear. They are – of course – trying to sell you something.
- If a seller doesn’t give you the information you know they have to provide, walk away.
- Consider getting professional advice. Ask a lawyer, accountant, or business advisor to read the paperwork before you sign.
- Check out the seller with your local consumer protection agency, state Attorney General’s Office, and the Better Business Bureau. Do a few internet searches by entering the company’s name and “complaint” or “scam.” You could get an eyeful. But be wary: No complaints doesn’t necessarily mean the company is legitimate. And scammers have been known to post phony testimonials online.
My Final Thoughts and Advice
In the end… it is your responsibility to understand the rules!
The network marketing, direct sales, and Internet Marketing professions all present a tremendous opportunity for anyone interested in creating a part-time or full-time income. In my experience, the legitimate programs require work and consistent application of daily disciplines to achieve results. There are no shortcuts, so make a commitment to yourself.
When evaluating any business opportunity engage in a disciplined approach to due diligence, make sure you know the program is compliant and set-up to provide you with a fair chance of accomplishing your goals.
Don’t be afraid to ask tough questions and require the person recruiting you to measure up to the standards you would require of any professional.
Please feel free to post a comment below and share your thoughts and questions about the FTC Business Opportunity Rules and the experiences you have had within our profession.
I am here to help you succeed, please let me know how I can make a difference and impact your life!!
(c) Copyright 2008-2012 and Beyond James A. Holmes All Rights Reserved
Contact James by phone at 303-523-9503 or email at james@AskJamesHolmes.com
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