Alticor Balks At FTC Changes

December 1, 2006
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ADA — One product that Alticor does not make or sell is snake oil, and the Ada-based direct marketer is hoping to keep the Federal Trade Commission from slapping it with rules aimed at those who do.

Quixtar Chief Counsel Sharon Grider said the company filed comments and rebuttals this year regarding the FTC’s proposed rule changes, which she said are aimed at “snake oil salesmen.”

In April, the FTC issued proposals that would require representatives presenting “business opportunities” to meet new guidelines aimed at combating hundreds of enforcement actions against work-at-home and multilevel marketing companies, according to an FTC press release.

The proposals would require sales representatives of multilevel markers to provide recruits with a one-page disclosure addressing five items, according to the FTC: whether sellers make earnings claims; a list of legal actions against the seller that involve fraud, misrepresentations, securities or deceptive or unfair trade practices; whether the seller has cancellation or refund policies and such policies’ terms; total number of purchasers in the past two years and the number of them seeking a refund or cancellation; and a list of references. If earnings claims are made, the sales representative must present the recruits with a separate statement.

While current regulations cover companies that offer start-up costs under $500, the proposal would do away with that limit, applying the new rules to all multilevel marketers.

The FTC said that the proposal also prohibits: “misrepresentations about the material terms of the business relationship; the use of shills; misrepresentations of endorsements or testimonials; failure to honor territorial product guarantees; and failure to honor refunds.”

Grider said Quixtar and Alticor support the FTC’s effort to rein in fraud.

“We believe this can be accomplished in a way that will not penalize legitimate opportunities such as Quixtar or impose undue burdens on the hundreds of thousands of Quixtar Independent Business Owners who rely on Quixtar for some or all of their income,” Grider stated.

“We have proposed a ‘safe harbor’ approach to the FTC that would offer reasonable disclosure requirements to any opportunity that offers new participants a 90 percent refund of initial payment, plus a 90 percent refund of any unsold inventory. Such business opportunities would be required to make simple and standardized disclosures, including information about how to claim a refund, how to get comprehensive information about the business opportunity, and some meaningful indication of the average income of active participants.”

That would let Quixtar off the hook for providing a list of litigation allegations and the number of cancellations or refund requests from participants, she said.

“We have confidence that the FTC and Quixtar share the goal of protecting consumers while allowing legitimate business opportunities to operate,” Grider said.

It’s likely to be several years before any rules go into effect, she added. Steven Toporoff of the FTC’s Bureau of Consumer Protection said the next step in the process has yet to be determined.

“The rule-making process is long and there are any number of opportunities for the public to have input,” Toporoff said. “We received about 17,000 comments. We need to analyze those to see where people’s concerns rest, and we will take it from there.”    

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