January 22, 2023

U.S. Federal Trade Commission

Office of the Secretary
600 Pennsylvania Avenue NW
Suite CC-5610 (Annex B)
Washington, DC 20580

Comment Regarding the Federal Trade Commission’s Business Opportunity Rule

ANPR, Project No. R511993
I am writing in response to the Commission’s request for public comment on the Business
Opportunity Rule ANPR. I also submitted a comment in response to the Earnings Claims
ANPR on May 10, 2022, which provides information regarding my background and experience.1
In brief, I am an Associate Professor and Kahlert Chair of Economics at Hamline University
where I study multi-level marketing (MLM), direct selling, and pyramid scheme fraud.
Based on my academic background, experience, and research, I have served as an expert
witness for the Federal Trade Commission, the Securities and Exchange Commission, the
Washington State Attorney General’s Office, and other clients. These cases often involve
MLM firms and their business practices.
Given my areas of expertise, my comment will focus on the Business Opportunity Rule
ANPR as it relates to the MLM industry. Specifically, this comment addresses the
Commission’s questions regarding rule coverage and potential changes to disclosure
requirements.

Rule Coverage: Should the Commission broaden the Rule to include business or money-
making opportunities not currently covered?

In my comment regarding the Earnings Claims ANPR, I discussed the nature, prevalence,
and impact of earnings claims in the MLM industry. I then provided recommendations for
an effective rule, which included suggestions for disclosure design and a pre-sale waiting
period. These recommendations could inform an Earnings Claims Rule that governs MLM
firms and their conduct or, alternatively, could inform the Business Opportunity Rule if the
Rule is extended to cover the MLM industry. Either approach could significantly improve
consumer welfare if the applicable Rule and its provisions reflect the evidence of past and
present conduct in the MLM industry.

1My comment in response to the Earnings Claims ANPR, dated May 10, 2022, can be found at
https://www.regulations.gov/comment/FTC-2022-0020-1551.

1
Possible Recommended Changes: What modifications, if any, should the Commission
make to the Rule to increase its benefits or reduce its costs?

If the Business Opportunity Rule is extended to cover MLM firms, I recommend that the
disclosure requirements be adjusted to reflect the nature and incentives of MLM
recruitment.

▪ References: The current Business Opportunity Rule requires a disclosure that

includes a “references” section, where this section includes the names and contact
information for other consumers who have purchased the proffered business
opportunity within the past three years. Given that MLM participants are
incentivized to recruit new members, it is not clear that this type of contact
information would enhance consumer protection. On the contrary, this requirement
could backfire in an MLM context if the disclosure recipient is encouraged to contact
current MLM participants instead of seeking information from external, objective
sources.

▪ Earnings Claims: The current disclosure requirement does not mandate the
provision of earnings information, as the seller is not compelled to provide an
“earnings statement” to the consumer if they indicate that no earnings claims were
made to the consumer. As described in my comment regarding the Earnings Claims
ANPR, earnings claims are pervasive in MLM recruitment.2 As a result, the
Business Opportunity Rule – if applied to MLM – must compel disclosure of
earnings information to all consumers, regardless of whether they indicate that an
earnings claim has been made or not. Furthermore, sellers must be required to
provide the earnings information in a consistent, prescribed format. Please see my
comment regarding the Earnings Claims ANPR for a detailed discussion of earnings
disclosure research in MLM and corresponding recommendations for disclosure
content and design.3

I am happy to discuss these recommendations further at the Commission's request.

Sincerely,

Stacie A. Bosley, PhD

2 Ibid, 2-6.
3 Ibid, 12-26.