Counselor William Blumenthal Office of the General Counsel Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, DC 20580
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DEMAND LETTER TO: ,,-cbER': ........ Counselor William Blumenthal Office of the General Counsel Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, DC 20580 DEMAND LETTER FROM: The MLM Distributor Rights Association (DRA) From: Cheryl Gonzalez, President DRA, & Rod Cook, Chairman of the Board DRA 407 Prinz Drive San Antonio, TX 78213; 2410 Cinco Woods San Antonio, TX 78259 ~f::v.: o: SUBJECT: Re:FTC Proposed Business Opportunity Rule, R511993 ~ " Dear Madam Majoras: WHAT IS THE MLM DISTRIBUTOR RIGHTS ASSOCIATION? The Distributor Rights Association is the only non-profit organization in the MLM- Network Marketing category of the Direct Sales Industry. The DRA represents approximately 1.2 million MLM Distributors through the "downlines" represented. It consists of work-from-home distributors in the Network Marketing Industry. This distributor force is comprised of single morns who get to stay at home with their children, retirees, disabled people who find it difficult to leave the house, entrepreneurs with big dreams to take their lives to the next level and others who simply need an easy way to supplement their income in order to support their families. It was founded because of injustices to MLM distributors by immoral MLM companies who put profits in front of their promises of residual income to distributors. These companies however are in the minority as most are legitimate businesses that offer fair and just entrepreneurial ways for their distributors to make extra money. The DRA promotes communication between MLM Distributors and the companies, which is our way of policing the industry and giving the distributors a place where they feel their voice can be heard and they will have people in their corner. A strong part of the Distributor Rights Association's Charter (Copy attached or see :,::," ~j ~;!!: i:!.i;/ii ) is to fight scams and pyramid schemes that hurt good, innocent prospects for MLM opportunities. We consistently see crooks lure innocent prospects away from good (money back guarantee) opportunities offered by the distributors we represent. See Enclosure 1, DRA Charter 522418-70055 The DRA also was founded to protect the Independent Contractor status. A major issue is protecting MLM Distributors from Contract Violations (by bad MLM Companies) regarding termination and taking money promised in the form of long term income from MLM Distributors. Our MLM Distributor membership is made aware of scams daily. The DRA membership is "down on the ground" where the daily battle between good MLM distributors and dishonest crooks are fighting it out for prospects. When the proposed R511993 for Business Opportunity Rule came out, our membership went up in arms. The supposed good guys (The FTC) "Shot us in the Back!" Our end goal is to accomplish consumer protection in order to protect the little guy, we are all on the same page here. However this new proposed Rule does not protect the little guy, and puts millions out of business. PURPOSE ONE OF THIS DEMAND LETTER TO FTC COMMISSIONER Is to demand that the FTC drop this flawed proposal in its entirety, thus eliminating the psychological, financial, physical and non-productive elements that will destroy the livelihoods of our distributor members that belong to hundreds of good companies. This is also to establish Constitutional issues; violations of Federal laws passed by Congress and establish the stage for legal action by our organization in Federal District Courts of Appeal. PURPOSE TWO OF THIS DEMAND LETTER TO FTC COMMISSIONER If the proposed Business Opportunity Rule, R511993 is totally dropped the DRA will work (with other industry groups) to come up with a new proposal that is effective without being damaging and will help our membership by eliminating the FEW but very damaging unethical companies, which is mandated as one of our organizational objectives through our DRA Charter. PURPOSE THREE OF THIS DEMAND LETTER TO FTC COMMISSIONER If the proposed Business Opportunity Rule, R511993 is NOT dropped, the DRA demands FORMAL HEARINGS on the proposed Business Opportunity Rule, and will consider an informal conference a violation of our Constitutional rights. PURPOSE FOUR OF THIS DEMAND LETTER TO FTC COMMISSIONERS To present our formal comments to the FTC so that they may be validated for future use if legal proceedings are necessary as a result of mishandling of the ill conceived and injurious proposed Business Opportunity Rule, R511993. 1. THIS PROPOSED RULE WILL DO NOTHING TO STOP CROOKS The existing Business Opportunity Rule in its current form has not been used effectively, there has been little enforcement, and crooks run rampant, attacking and stealing our DRA member's potential prospects, this is a case of a few very bad apples ruining what otherwise is a good, ethical and worthy industry. There is nothing wron.q with the current rule; it lust has never been enforced to any effective de.qree. With the current rule, the FTC has failed to protect good, honest people. The new rule will not stop crooks. Crooks continually violate the current rules and laws all the time because they have no morals. Our good and honest MLM distributors & companies (with money back guarantees) are constantiy having prospects stolen from them by these renegade companies. a. Example One From Draft Proposal: World Class Network. This was listed in the FTC draft proposal for some reason, yet the current Business Opportunity Law is not listed as a cause of action in the case. Why was it listed in the proposal? The World Class Network sold training packages for over $1200 dollars yet most sales were for four or more = $4800. b. Example Two from FTC Draft Proposal: Equinox. Some of our members helped the distributors that were harmed by Equinox. Those distributors complained that they had spent $20-30,000 for inventory. We have members who will swear (under oath) that complaints were being sent in to the FTC and AG's. After waiting a year, one of our members decided the only way to get the attention of Federal and State Regulators was to get a TV investigative report and embarrass regulators into action. ABC's 20/20 featured Equinox on a show and then it still took almost a year for action. In the causes of the Equinox court case, the FTC Business Opportunity Law was not used, despite the $500 limit being exceeded by thousands of dollars. See Enclosure 2 Equinox. c. Example Three from FTC Draft Proposal: 2Extreme Performance. Some of our members helped elderly consumers, some of whom had spent $20,000. We have members who will give sworn testimony that complaints were sent in to the FTC regional Office in Dallas and the Texas AG's in certified packages (with full detail). It took over two years (about 2.5) before the company was hit by the FTC. That delay allowed John Polk, owner of 2Extreme, to loot the Company and then sold it to fools. The end result left no redress fund for the harmed consumers. The Current Business Opportunity Law was not used in that case law in Federal Court either. d. Summary of These Comments to the FTC Draft Proposal and DRA Action: The FTC has failed to protect our members, as it should by law. It has failed to apply the current Business Opportunity Rule to any measurable degree. The proposed rule would be injurious to our members, and there are Constitutional issues at stake for them. Other action besides injunctive relief, if the proposed rule is passed, we WILL go to the media. Currently, the rage among crooks is Aussie One Ups and Two Ups. They hit consumers with a $1500 sale for junk tapes and/or books. Then the gullible are sold a $5000 conference, then a $15,000 conference, and then for the very gullible a $50,000 international tax seam. The first $11,500 is taken in the first 3 months. DRA members providing leads and data worked with Nightline producers to do a show on Global Prosperity, the model for these current scares. The Department of Justice has already shut them (Global Prosperity) down. They are BACK, just with different names now! We are now working with a TV producer for an investigativeshow on these seams. We just had a DRA leader's conference call discussing how we would address the FTC and failure to protect consumers with the current Business Opportunity Law on the TV show. e. Summary: a Cost Effective Measure: The DRA had suggested last spring in a letter to the FTC Consumer Affairs (this same address), that the FTC form a volunteer Observer Corps for bad actors. This would be similar to the 3 Ground Observer Corps formed in the late 1950's to watch for Russian bombers trying to sneak in under radar. Observers were given an eight-hour training course regionally, and used binoculars to identify aircraft. A special telephone number was provided for reports. For many years, the Army Corps of Engineers held annual training regionally for volunteers (many retired military). These volunteers would get new maps that the Corps issued and drive around map areas making sure buildings, bridges and other items were still there or the same as on the map. In neither of these governmental volunteer operations, were any costs or liability assumed by the government except for printed material. The DRA maintains that a scam observer corps could be maintained at a very low cost of training, to watch for scams, so action could be taken faster. Volunteers would be observers and just report information in a prescribed format. Any false information to gain some sort of business advantage would be considered perjury. f. Cost effective Dual Federal Approach: A totally different approach to the issue of stopping crooks is for the FTC to pair up with the IRS.