On January 13, 2025, the Federal Trade Commission announced that it is seeking comment on proposed changes to the Business Opportunity Rule and a proposed new Earnings Claim Rule. According to the FTC, the two, taken together, “would strengthen the agency’s tools to curb deceptive earnings claims in industries where they are pervasive: multi-level marketing (MLM) programs and money-making opportunities.”

The proposed changes to the FTC’s Business Opportunity Rule and the new Earnings Claim Rule would permit the FTC to seek stronger relief – including money back for consumers and civil penalties – from covered companies making deceptive claims.

“Phony claims about likely earnings lure people looking for honest income into spending thousands, even tens of thousands, of dollars on multi-level marketing, business coaching and other schemes,” said FTC lawyer Sam Levine, Director of the Bureau of Consumer Protection. “The proposed rules would help the FTC deter illegal conduct with civil penalties and put money back in consumers’ pockets. We look forward to getting public comment.”

The FTC is seeking comment from the public on three proposals: two Notices of Proposed Rulemaking (NPRM) and one Advance Notice of Proposed Rulemaking (ANPRM).

What is the FTC Notice of Proposed Rulemaking on Business Opportunity Rule?

The proposal would expand the Business Opportunity Rule to cover money-making opportunities, such as business coaching and investment opportunities, which are marketed to assist consumers in building a business or otherwise earning income. According to the FTC, “such operations proliferate, using deceptive tactics—and in particular, deceptive earnings claims—to take consumers’ money. They cause significant financial and other harm to consumers.”

The NPRM define “business coaching opportunities” broadly to include any program, plan, or product that is represented to train or teach a person how to establish or operate a business.” The FTC is also considering whether to use the term “coaching opportunity” instead of “business coaching opportunity.”

Pursuant to the proposed amendments, sellers of these types of opportunities would be, among other things, prohibited from making material misrepresentations, including about earnings. Sellers also would be required to have written substantiation to back up any earnings claims and make that substantiation available to consumers if they request it – in the language they used to make the earnings claim.

What is the FTC Notice of Proposed Rulemaking on Rule Covering Deceptive Earnings Claims in the MLM Industry?

The proposal would create a new rule that would address false or misleading earnings claims in the MLM industry. “Deceptive earnings claims are a widespread problem in this industry, and they have caused significant financial and other harm to consumers,” according to the FTC.

Like the Business Opportunity Rule, the new rule, if adopted, would prohibit MLM sellers from making deceptive earnings and related claims. Similarly, the proposal would require MLM sellers to have written substantiation to back up any earnings claims and make that substantiation available to consumers if they request it – in the language they used to make the earnings claim.

Advance Notice of Proposed Rulemaking on Additional Components of the Proposed Earnings Claim Rule

In addition to the NPRMs, the FTC is issuing an ANPRM in connection with the proposed Earnings Claim Rule, seeking comment from the public on the need for additional rule requirements addressing deceptive earnings claims and related conduct.

These include:

• whether to require MLMs to provide earnings data to potential recruits and current MLM participants or to post such data on their websites;
• whether all MLM earnings claims should be accompanied by clear and conspicuous information about the earnings MLM participants can generally expect;
• whether there should be a waiting period before a recruit pays any money to the MLM or otherwise joins the MLM;
• whether to prohibit misrepresentations relating to expenses, benefits, or the compensation plan; and
• whether to prohibit MLMs from using non-disparagement or other “gag” clauses to prohibit participants from communicating truthful negative information to the Commission, potential recruits, or others.

The public comment period for all three proposals will last 60 days from when they are published in the Federal Register.

Republican FTC Commissioners Dissent

The Commission votes to approve the issuance of the proposals in the Federal Register were 3-2. Commissioner Ferguson issued a dissenting statement joined by Commissioner Holyoak, voting against all three proposals.

The dissent asks whether the proposed rules “are lawful, and whether they are prudent and sound policy choice … decisions that belong to the incoming Trump Administration.” It will be interesting to see whether President Trump instructs the Office of the Federal Register not to publish any pending rules, particularly those that seek to advance novel liability theories.

Takeaway: The FTC maintains an aggressive investigation and enforcement program relating to companies that lure in entrepreneurs, investors or participants with promises of significant earnings, and then fail to deliver. The proposed rulemakings are aimed at strengthening the agency’s tools to curb deceptive earnings claims in industries where reports indicate they are pervasive: money-making opportunities and MLM programs. The announcement involves three proposals that work together, a NPRM proposing amendments to the FTC’s Business Opportunity Rule to cover “money-making opportunities,” an NPRM proposing a new rule addressing deceptive earnings claims in the MLM industry, and an ANPR asking whether the FTC should propose additional rule requirements that would apply to the MLM industry.