Wednesday, April 12, 2006 Part IV Federal Trade Commission 16 CFR Part 437 Business Opportunity Rule; Notice of Proposed Rulemaking VerDate Aug<31>2005 20:56 Apr 11, 2006 Jkt 208001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\12APP2.SGM 12APP2 cchase on PROD1PC60 with PROPOSALS2 19054 Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Proposed Rules FEDERAL TRADE COMMISSION Comments filed in electronic form submit data, views, and arguments on should be submitted by clicking on the the proposed Business Opportunity 16 CFR Part 437 following weblink: https:// Rule and, specifically, on the questions secure.commentworks.com/ftc- set forth in Section K of this notice. The Business Opportunity Rule bizopNPR/ and following the comment period will remain open until AGENCY: Federal Trade Commission. instructions on the web-based form. To June 16, 2006. To the extent practicable, ACTION: Notice of proposed rulemaking. ensure that the Commission considers all comments will be available on the an electronic comment, you must file it public record and placed on the SUMMARY: The Federal Trade on the web-based form at the https:// Commission’s Web site: http:// Commission (the ‘‘Commission’’ or secure.commentworks.com/ftc- www.ftc.gov/os/publiccomments.htm. ‘‘FTC’’) is commencing a rulemaking to bizopNPR/ weblink. If this notice After the close of the comment period, promulgate a trade regulation rule appears at http://www.regulations.gov, the record will remain open until July entitled ‘‘The Business Opportunity you may also file an electronic comment 7, 2006, for rebuttal comments. If Rule’’ (or ‘‘the Rule’’), based upon the through that Web site. The Commission necessary, the Commission also will comments received in response to an will consider all comments that Advance Notice of Proposed regulations.gov forwards to it. You may hold hearings with cross-examination Rulemaking (‘‘ANPR’’) and other also visit the FTC Web site at http:// and post-hearing rebuttal submissions, information discussed in this notice. www.ftc.gov/opa/2006/04/ as specified in section 18(c) of the FTC The proposed Business Opportunity newbizopprule.htm to read the Notice of Act, 15 U.S.C. 57a(c). Parties who Rule would prohibit business Proposed Rulemaking and the news request a hearing must file a comment opportunity sellers from failing to release describing this proposed Rule. in response to this notice and a furnish prospective purchasers with The FTC Act and other laws the statement explaining why they believe a material information needed to combat Commission administers permit the hearing is warranted, how they would fraud and would prohibit other acts or collection of public comments to participate in a hearing, and a summary practices that are unfair or deceptive consider and use in this proceeding as of their expected testimony, on or before within the meaning of section 5 of the appropriate. All timely and responsive June 16, 2006. Parties testifying at a Federal Trade Commission Act (‘‘FTC public comments, whether filed in hearing may be subject to cross- Act’’). paper or electronic form, will be examination. For cross-examination or considered by the Commission, and will rebuttal to be permitted, interested DATES: Written comments must be be available to the public on the FTC received on or before June 16, 2006. parties must also file a comment and Web site, to the extent practicable, at request to cross-examine or rebut a Rebuttal comments must be received on http://www.ftc.gov/os/ or before July 7, 2006. witness, designating specific facts in publiccomments.htm. As a matter of dispute and a summary of their ADDRESSES: Interested parties are discretion, the FTC makes every effort to expected testimony, on or before July 7, invited to submit written comments. remove home contact information for Comments should refer to ‘‘Business 2006. In lieu of a hearing, the individuals from the public comments it Commission will also consider requests Opportunity Rule, R511993’’ to facilitate receives before placing those comments the organization of comments. A to hold one or more informal public on the FTC Web site. More information, workshop conferences to discuss the comment filed in paper form should including routine uses permitted by the include this reference both in the text issues raised in this notice and Privacy Act, may be found in the FTC’s comments. and on the envelope, and should be privacy policy, at http://www.ftc.gov/ mailed or delivered, with two complete ftc/privacy.htm. Section A. Background copies, to the following address: Federal Comments on any proposed filing, Trade Commission/Office of the recordkeeping, or disclosure The Commission is publishing this Secretary, Room H–135 (Annex W), 600 requirements that are subject to Notice of Proposed Rulemaking (‘‘NPR’’) Pennsylvania Avenue, NW., paperwork burden review under the pursuant to section 18 of the FTC Act, Washington, DC 20580. The FTC is Paperwork Reduction Act should 15 U.S.C. 57a et seq., and part 1, subpart requesting that any comment filed in additionally be submitted to: Office of B, of the Commission’s Rules of paper form be sent by courier or Information and Regulatory Affairs, Practice. 16 CFR 1.7, and 5 U.S.C. 551 overnight service, if possible, because Office of Management and Budget, et seq. This authority permits the U.S. postal mail in the Washington area Attention: Desk Officer for the Federal Commission to promulgate, modify, and and at the Commission is subject to Trade Commission. Comments should repeal trade regulation rules that define delay due to heightened security be submitted via facsimile to (202) 395– with specificity acts or practices that are precautions. Moreover, because paper 6974 because U.S. Postal Mail is subject unfair or deceptive in or affecting mail in the Washington area and at the to lengthy delays due to heightened commerce within the meaning of Agency is subject to delay, please security precautions. section (5)(a)(1) of the FTC Act. 15 consider submitting your comments in FOR FURTHER INFORMATION CONTACT: U.S.C. 45(a)(1). electronic form, as prescribed below. Steven Toporoff (202) 326–3135, or Comments containing confidential Craig Tregillus (202) 326–2970, Division 1. FTC Regulation of Franchising and material, however, must be filed in of Marketing Practices, Room 238, Business Opportunity Ventures paper form, must be clearly labeled Bureau of Consumer Protection, Federal In the 1970s, the Commission ‘‘Confidential,’’ and must comply with Trade Commission, 600 Pennsylvania Commission Rule 4.9(c).1 promulgated a trade regulation rule Avenue, NW., Washington, DC 20580. entitled ‘‘Disclosure Requirements and SUPPLEMENTARY INFORMATION: The 1 The comment must be accompanied by an Prohibitions Concerning Franchising explicit request for confidential treatment, Commission invites interested parties to and Business Opportunity Ventures’ including the factual and legal basis for the request, (the ‘‘Franchise Rule’’) to address and must identify the specific portions of the Commission’s General Counsel, consistent with deceptive and unfair practices in the comment to be withheld from the public record. applicable law and the public interest. See The request will be granted or denied by the Commission Rule 4.9(c), 16 CFR 4.9(c). sale of franchises and business VerDate Aug<31>2005 20:56 Apr 11, 2006 Jkt 208001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 E:\FR\FM\12APP2.SGM 12APP2 cchase on PROD1PC60 with PROPOSALS2 Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Proposed Rules 19055 opportunity ventures.2 Based upon the prospective purchaser may incur high locations or accounts.14 Thus, the original rulemaking record, the financial losses if the seller withholds Commission incorporated this Commission found that franchise and material information, the benefit for characteristic into the Rule’s business opportunity fraud was purchasers of the Rule’s pre-sale definitional elements to ensure coverage widespread, causing serious economic disclosure requirements outweighs the of demonstrably injurious schemes. harm to consumers. To prevent cost to sellers of making those Other forms of assistance that business fraudulent practices in the sale of disclosures. By contrast, when the opportunity sellers frequently offer— franchises and business opportunities, required investment to purchase a such as training 15 and the buy-back and the Commission adopted a pre-sale business opportunity is comparatively resale of goods assembled by the disclosure rule. small, prospective purchasers face a purchaser (an element of many craft The Franchise Rule does not purport relatively small financial risk. In such assembly opportunities) 16—do not to regulate the substantive terms of a circumstances, compliance costs may bring a business opportunity within the franchise or business opportunity outweigh the benefits of pre-sale scope of the Franchise Rule’s coverage. contract. Rather, it is designed to disclosure. Therefore, the Franchise In addition to these limits on the prevent fraud by prohibiting sellers Rule does not reach opportunities that scope of the Franchise Rule’s coverage— from failing to disclose material charge lower fees.11 driven by balancing prospective information to prospective buyers. The Second, the ‘‘inventory exemption’’ purchasers’ need for pre-sale disclosure Franchise Rule is posited on the notion excludes certain types of payments from against the burden imposed on business that a fully informed consumer can the