The Federal Trade Commission announced that it is seeking public comment on three proposals—two Notices of Proposed Rulemaking (NPRM) and one Advance Notice of Proposed Rulemaking (ANPRM)—that, collectively, would strengthen the agency’s tools to deter deceptive earnings claims in multi-level marketing (MLM) programs and money-making opportunities, two industries in which they are allegedly pervasive. 

While the FTC reminds us  that “deceptive earnings claims are already illegal,” the proposed changes to the FTC’s Business Opportunity Rule and its new Earnings Claim Rule would, significantly, allow the FTC to seek civil penalties, among other relief, for such claims. 

The three proposals include:

• An NPRM that would expand the Business Opportunity Rule to cover additional money-making opportunities, such as business coaching and investment opportunities.  Under the FTC’s proposed amendments, sellers of these opportunities would be prohibited from making material misrepresentations, including about earnings, and required to comply with the Rule’s recordkeeping and substantiation requirements.  Among other things, sellers would need written substantiation to back up any earnings claims and make it available to consumers who request it. 
• An NPRM that would create a new rule, the “the Earnings Claim Rule Regarding Multi-Level Marketing,” to address false and misleading earnings claims in the MLM industry.  The proposed Rule would prohibit the following conduct in connection with the offering of MLMs: (i) misleading earnings claims; (ii) making earnings claims without having substantiation (or a reasonable basis) for those claims; (iii) misrepresenting the opportunity to become an MLM participant as an employment opportunity; and (iv) making any misrepresentation or unsubstantiated claim to prevent consumers from benefiting from truthful information about earnings. Like the proposed expansion to the Business Opportunity Rule, this new Rule would require sellers to maintain records of substantiation and make it available to consumers who request it.
• An ANPRM in connection with the proposed Earnings Claim Rule, seeking public comment on whether the Rule should include additional requirements, such as an earnings disclosure or a waiting or cooling off period, and whether the Rule should address other unfair and deceptive practices in the MLM industry, like misrepresentations concerning benefits and expenses, deceptive refund claims, and non-disparagement clauses in contracts with MLM participants. 

As it stands, the public comment period for all three proposals will last 60 days from their publication in the Federal Register.  Significantly, however, the fate of all three proposals remains uncertain, as Commissioners Andrew Ferguson (who will serve as the next FTC Chair post-inauguration) and Melissa Holyoak voted “no” on the proposals and issued a dissenting statement arguing that “whether they are lawful, and whether they are prudent and sound policy choices, are decisions that belong to the incoming Trump Administration,” and that, “because these are notices of future rulemaking, the Trump Administration will decide whether they will ever become final rules.”