[Federal Register Volume 87, Number 48 (Friday, March 11, 2022)]
[Proposed Rules]
[Pages 13951-13958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04679]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 87, No. 48 / Friday, March 11, 2022 / 
Proposed Rules

[[Page 13951]]



FEDERAL TRADE COMMISSION

16 CFR Part 462


Deceptive or Unfair Earnings Claims

AGENCY: Federal Trade Commission.

ACTION: Advance notice of proposed rulemaking; request for public 
comment.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is 
considering proposing a rule to address deceptive or unfair marketing 
using earnings claims. The Commission is soliciting written comment, 
data, and arguments concerning the need for such a rulemaking. In 
addition, the Commission solicits comment on how the Commission can 
ensure the broadest participation by affected interests in the 
rulemaking process.

DATES: Comments must be received on or before May 10, 2022.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Comment Submissions part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Earnings Claims ANPR, 
R111003'' on your comment, and file your comment online at https://www.regulations.gov. If you prefer to file your comment on paper, mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex B), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex B), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Melissa Dickey (202-326-2662), 
<a href="/cdn-cgi/l/email-protection#1d7079747e7678645d7b697e337a726b"><span class="__cf_email__" data-cfemail="d7bab3beb4bcb2ae97b1a3b4f9b0b8a1">[email protected]</span></a>, or Andrew Hudson (202-326-2213), <a href="/cdn-cgi/l/email-protection#1f7e776a7b6c70715f796b7c31787069"><span class="__cf_email__" data-cfemail="06676e73627569684660726528616970">[email protected]</span></a>, 
Division of Marketing Practices, Bureau of Consumer Protection, Federal 
Trade Commission, Mailstop CC-5201, 600 Pennsylvania Avenue NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: The Commission is publishing this notice 
pursuant to section 18 of the Federal Trade Commission Act (FTC Act), 
15 U.S.C. 57a, and the provisions of part 1, subpart B of the 
Commission's Rules of Practice, 16 CFR 1.7 through 1.20. The FTC Act 
authorizes the Commission to promulgate, modify, and repeal trade 
regulation rules that define with specificity acts or practices that 
are unfair or deceptive in or affecting commerce within the meaning of 
section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

I. Background

    Misleading earnings claims have long been a significant problem for 
consumers.\1\ The use of such claims both deprives consumers of the 
ability to make informed decisions and unfairly advantages bad actors 
in the marketplace at the expense of honest businesses. The promise of 
significant earnings is a powerful inducement to purchase or invest 
time or money.
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    \1\ As discussed further below, consumers encounter such claims 
in many contexts, including in seeking work, business and other 
money-making opportunities, education, and more.
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    The Commission has extensive law enforcement experience challenging 
misleading earnings claims under section 5 of the FTC Act, 15 U.S.C. 
45,\2\ resulting in a long line of federal court opinions holding that 
the use of false, unsubstantiated, or otherwise misleading earnings 
claims violates Section 5.\3\ The Commission has also issued litigated 
rulings in a number of cases dealing with misleading earnings claims 
and has repeatedly determined that such claims violate Section 5.\4\
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    \2\ See, e.g., Press Release, Federal Trade Commission, 
Statement on the FTC's ``Operation Income Illusion'' sweep (2020), 
https://www.ftc.gov/news-events/press-releases/2020/12/scammers-leverage-pandemic-fears-ftc-law-enforcement-partners; Press Release, 
Federal Trade Commission, Statement on the FTC's ``Operation Lost 
Opportunity Sweep'' (2012), https://www.ftc.gov/news-events/press-releases/2012/11/ftc-expands-fight-against-deceptive-business-opportunity-schemes; Press Release, Federal Trade Commission, 
Statement on the FTC's ``Operation Bottom Dollar'' enforcement sweep 
(2010), https://www.ftc.gov/news-events/press-releases/2010/02/ftc-cracks-down-con-artists-who-target-jobless-americans; Press Release, 
Federal Trade Commission, Statement on the FTC's ``Operation Short 
Change'' enforcement sweep (2009), https://www.ftc.gov/news-events/press-releases/2009/07/ftc-cracks-down-scammers-trying-take-advantage-economic-downturn; Press Release, Federal Trade 
Commission, Statement on the FTC's ``Biz Opp Flop'' sweep (2005), 
https://www.ftc.gov/news-events/press-releases/2005/02/criminal-and-civil-enforcement-agencies-launch-major-assault.
    \3\ See, e.g., FTC v. John Beck Amazing Profits, 865 F. Supp. 2d 
1052 (C.D. Cal. 2012) (summary judgment); FTC v. Grant Connect, LLC, 
827 F. Supp. 2d 1199 (D. Nev. 2011) (summary judgment); FTC v. 
Holiday Enterprises, No. 1:06-cv-2939, 2008 WL 953358 (N.D. Ga. Feb. 
5, 2008) (summary judgment); FTC v. Stefanchik, No. 04-cv-1852, 2007 
WL 1058579 (W.D. Wash. Apr. 3, 2007) (summary judgment); FTC v. 
Transnet Wireless Corp., 506 F. Supp. 2d 1247 (S.D. Fla. 2007) 
(summary judgment); FTC v. Tashman, 318 F.3d 1273 (11th Cir. 2003) 
(vacating judgment and finding defendants liable on appeal); FTC v. 
Medicor LLC, 217 F. Supp. 2d 1048 (C.D. Cal. 2002) (summary 
judgment); FTC v. Five-Star Auto Club, Inc., 97 F. Supp. 2d 502 
(S.D.N.Y. 2000) (final judgment after trial); FTC v. Minuteman 
Press, Inc., 53 F. Supp. 2d 248 (E.D.N.Y. 1998) (judgment on 
liability after trial); FTC v. Wolf, No. 94-cv-8119, 1996 WL 812940 
(S.D. Fla. Jan. 31, 1996) (summary judgment); FTC v. Nat'l Bus. 
Consultants, Inc., No. 89-cv-1740, 1990 WL 32967 (E.D. La. Mar. 20, 
1990) (judgment after trial); FTC v. U.S. Oil and Gas Corp., No. 83-
cv-1702, 1987 U.S. Dist. LEXIS 16137 (S.D. Fl. 1987) (summary 
judgment); FTC v. Kitco, 612 F. Supp. 1282 (D. Minn. 1985) (final 
judgment after trial).
    \4\ See Notice of Penalty Offense Authority Concerning Money-
Making Opportunities, available at https://www.ftc.gov/MMO-notice.
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    The cases establish, among other things: (a) Earnings claims are 
material; \5\ (b) representations regarding possible earnings are not 
mere puffery,\6\ and will usually imply that such earnings are typical; 
\7\ (c) the representation that an amount or degree of earnings is 
likely can be implied, including through testimonials from successful 
participants and examples of

[[Page 13952]]

hypothetical or past profits; \8\ and (d) earnings claims must be 
substantiated--that is, the maker must have a reasonable basis for the 
claim before making it.\9\ The well-settled law on deception under 
section 5 of the FTC Act applies fully to deceptive earnings claims: 
(a) Liability turns on whether the net impression conveyed by 
representations--not merely their express terms--is unsubstantiated or 
otherwise misleading; \10\ (b) disclaimers do not bar liability, as 
they often fail to dispel a misleading impression created by other 
representations; \11\ (c) as a matter of law, good faith or a lack of 
intent to deceive is not a defense; \12\ (d) a company may be liable 
for bait-and-switch advertising or the use of ``misleading door 
openers,'' ``even if the truth is subsequently made known;'' \13\ (e) a 
principal may be liable for deceptive claims made by its 
representatives or other agents; \14\ and (f) a company may be liable 
for providing deceptive marketing materials for others to use on its 
behalf (sometimes called providing ``means and 
instrumentalities'').\15\
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    \5\ John Beck Amazing Profits, 865 F. Supp. 2d at 1067-76 
(claims of quick and easy substantial income were material); see 
also, e.g., FTC v. Noland, No. 2:20-cv-0047, 2020 WL 954958, *12-14 
(D. Ariz. Feb. 27, 2020); FTC v. World Patent Mktg., No. 17-cv-
20848, 2017 WL 3508639, *11-12 (S.D. Fla. Aug. 16, 2017); FTC v. 
Vemma Nutrition Co., No. 15-cv-01578, 2015 WL 11118111, *5 (D. Ariz. 
Sept. 18, 2015); Holiday Enterprises, No. 1:06-cv-2939, 2008 WL 
953358, *6-7; FTC v. Med. Billers Network, Inc., 543 F. Supp. 2d 
283, 306-08 (S.D.N.Y. 2008).
    \6\ Grant Connect, 827 F. Supp. 2d at 1225-26 (rejecting puffery 
defense and finding claims that ``[r]iches range from a few hundred 
dollars a month to $50,000 or more a year!'' were deceptive), 
affirmed in relevant part at 763 F.3d 1094 (9th Cir. 2014); see 
also, e.g., FTC v. Febre, No. 94-cv-3625, 1996 WL 396117, *2 (N.D. 
Ill. Jul. 3, 1996); Noland, No. 20-cv-00047, 2020 WL 954958, *12-13; 
World Patent, No. 17-cv-20848, 2017 WL 3508639, *12.
    \7\ Five-Star Auto Club, 97 F. Supp. 2d at 528 (``[I]t would 
have been reasonable for consumers to have assumed that the promised 
rewards were achieved by the typical [participant.]''); see also, 
e.g., Tashman, 318 F.3d at 1276; Febre, No. 94-cv-3625, 1996 WL 
396117, *2; National Dynamics Corp., 82 FTC 488, 512, 565 (1973) as 
modified at 85 FTC 1052 (1975).
    \8\ John Beck Amazing Profits, 865 F. Supp. 2d at 1072 (ads 
featuring testimonials created impression that ``a typical consumer 
can easily and quickly earn thousands of dollars per week''); see 
also, e.g., World Patent, No. 17-cv-20848, 2017 WL 3508639, *12; 
Macmillan, Inc., 96 FTC 208, 301 (1980); National Dynamics, 82 FTC 
at 511-13, 564 and as modified at 85 FTC at 1057; Universal Credit 
Acceptance Corp., 82 FTC 570, 669, 682-83 (1973); Von Schrader Mfg., 
33 FTC 58, 65 (1941).
    \9\ Grant Connect, 827 F. Supp. 2d at 1214, 1226 (``Examples of 
deceptive conduct violative of the Act include unsubstantiated 
claims that consumers can make a lot of money using the defendant's 
product . . . .''); see also, e.g., FTC v. Digital Altitude, LLC, 
No. 2:18-cv-0729, 2018 WL 1942392, *7-10 (C.D. Cal. Mar. 9, 2018); 
John Beck Amazing Profits, 865 F. Supp. 2d at 1067, 1071-72; Holiday 
Enterprises, No. 1:06-cv-2939, 2008 WL 953358, *6-7; Von Schrader, 
33 FTC at 64.
    \10\ Vemma, No. 2:15-cv-01578, 2015 WL 11118111, *6 (in 
determining whether marketing made deceptive income claims, ``[t]he 
`common-sense net impression' of representations controls''); see 
also, e.g., World Patent, No. 17-cv-20848, 2017 WL 3508639, *11-12; 
John Beck Amazing Profits, 865 F. Supp. 2d at 1073; Med. Billers 
Network, 543 F. Supp. 2d at 306-07; Tashman, 318 F.3d at 1276; 
Febre, No. 94-cv-3625, 1996 WL 396117, *4.
    \11\ World Patent, No. 17-cv-20848, 2017 WL 3508639, *13-14 
(rejecting disclaimer defense as they ``failed to change the net 
impression created by Defendants' salespeople who verbally promised 
financial gain''); see also, e.g., Vemma, No. 2:15-cv-01578, 2015 WL 
11118111, *6; John Beck Amazing Profits, 865 F. Supp. 2d at 1072; 
Stefanchik, No. 04-cv-1852, 2007 WL 1058579, *6; Minuteman Press, 53 
F. Supp. 2d at 262-63.
    \12\ Five-Star Auto Club, 97 F. Supp. 2d at 526 (liability for 
misleading earnings claims under Section 5 did not turn on ``intent 
to defraud or deceive,'' or ``bad faith''); see also, e.g., Holiday 
Enterprises, No. 1:06-cv-2939, 2008 WL 953358, *6-7; Med. Billers 
Network, 543 F. Supp. 2d at 304; Nat'l Bus. Consultants, No. 89-cv-
1740, 1990 WL 32967, *9; Wolf, No. 94-cv-8119, 1996 WL 812940, *5.
    \13\ FTC Policy Statement on Deception (October 23, 1984) 
(appended to Cliffdale Assocs. Inc., 103 FTC 110, 180 & n.37 (1984); 
see also, e.g., Exposition Press, Inc. v. FTC, 295 F.2d 869, 873 (2d 
Cir. 1961); Med. Billers Network, 543 F. Supp. 2d at 307.
    \14\ Med. Billers Network, 543 F. Supp. 2d at 319-20 (holding 
seller liable for telemarketer agent's earnings misrepresentations 
regardless of telemarketer's purported independent contractor 
status); see also, e.g., Stefanchik, No. 04-cv-1852, 2007 WL 
1058579, *6; FTC v. Skybiz.com, Inc., No. 01-cv-396, 2001 WL 
1673645, *9 (N.D. Okla. Aug. 31, 2001), aff'd, 57 F. App'x 374 (10th 
Cir. 2003); Five-Star Auto Club, 97 F. Supp. 2d at 527; U.S. Oil and 
Gas, No. 83-cv-1702, 1987 U.S. Dist. LEXIS 16137, *48-49; Goodman v. 
FTC, 244 F.2d 584, 592-593 (9th Cir. 1957).
    \15\ Five-Star Auto Club, 97 F. Supp. 2d at 530 (``[Defendants] 
violated [the] FTC Act by providing participants with deceptive 
means and instrumentalities,'' specifically, marketing materials 
that included deceptive earnings claims, explaining that ``[a]s a 
matter of law, `those who put into the hands of others the means by 
which they may mislead the public, are themselves guilty of a 
violation of Section 5 of the Federal Trade Commission Act.' ''); 
see also, e.g., Vemma, No. 2:15-cv-01578, 2015 WL 11118111, *7.
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    Despite the Commission's aggressive enforcement program,\16\ 
deceptive earning claims continue to proliferate in the marketplace. 
The FTC continues to receive widespread reports from consumers and 
informants of misleading earnings claims. In AMG Capital Mgmt., LLC v. 
FTC \17\ the Supreme Court ruled that the Commission may not seek 
equitable monetary relief under section 13(b) of the FTC Act for 
violations of the FTC Act or other statutes enforced by the 
Commission.\18\ While the Commission recently issued a Notice of 
Penalty Offenses concerning earnings claims,\19\ which will permit the 
Commission to seek civil penalties for misleading earnings claims in 
some cases, this authority does not provide a basis for the Commission 
to recover funds to return to injured consumers.
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    \16\ See, e.g., FTC v. BINT Operations LLC, No. 4:21-cv-518 
(filed E.D. Ark. 2021); FTC v. Moda Latina BZ Inc., No. 2:20-cv-
10832 (filed C.D. Cal. 2020); FTC v. Digital Income System, Inc., 
No. 1:20-cv-24721 (filed S.D. Fla. 2020); FTC v. OTA Franchise 
Corp., No. 8:20-cv-287 (filed C.D. Cal. 2020); FTC v. 
Ragingbull.com, LLC, No. 1:20-cv-3538 (filed D. Md. 2020); FTC v. 
National Web Design, LLC, No. 2:20-cv-846 (filed D. Utah 2020); FTC 
v. Noland, No. 2:20-cv-0047 (filed D. Ariz. 2020); FTC v. Position 
Gurus, LLC, No. 2:20-cv-710 (filed W.D. Wash. 2020); FTC v. 8 Figure 
Dream Lifestyle LLC, No. 8:19-cv-1165 (filed C.D. Cal. 2019); FTC v. 
Zurixx LLC, No. 2:19-cv-713 (filed D. Utah 2019); FTC v. Advocare, 
Int'l, L.P., No. 4:19-cv-715 (filed E.D. Tex. 2019); FTC v. Neora, 
LLC, No. 3:20-cv-1979 (filed D.N.J. 2019, transferred N.D. Tex.); 
FTC v. Fat Giraffe Mktg. Group LLC, No. 2:19-cv-63 (filed D. Utah 
2019); FTC v. AWS, LLC, No. 2:18-cv-442 (filed D. Nev. 2018); FTC v. 
Sellers Playbook, Inc., No. 18-cv-2207 (filed D. Minn. 2018); FTC v. 
Dluca, No. 0:18-cv-60379 (filed S.D. Fla. 2018); FTC v. Mobe Ltd., 
No. 6:18-cv-862 (filed M.D. Fla. 2018); FTC v. Vision Solution 
Marketing LLC, No. 2:18-cv-356 (filed D. Utah 2018); FTC v. Jason 
Cardiff, No. 5:18-cv-2104 (filed C.D. Cal. 2018).
    \17\ AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
    \18\ 15 U.S.C. 53(b).
    \19\ Penalty Offenses Concerning Multi-Making Opportunities 
(issued October 2021), available at https://www.ftc.gov/enforcement/penalty-offenses/money-making-opportunities.
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    The Commission anticipates that a rule prohibiting the use of 
misleading earnings claims would enhance deterrence and help the 
Commission move quickly to stop illegal conduct. Such a rule also may 
further clarify for businesses what constitutes a deceptive earnings 
claim and what it means to have substantiation for an earnings claim.
    In addition, a rule would enable the Commission to seek monetary 
relief for consumers harmed by deceptive earnings claims, as well as 
civil penalties against those who make the deceptive claims. 
Specifically, section 19 of the FTC Act, 15 U.S.C. 57b, authorizes the 
Commission to seek ``rescission or reformation of contracts, the refund 
of money or return of property, [and] the payment of damages,'' among 
other things, to redress harm caused by violations of FTC rules, such 
as one prohibiting deceptive earnings claims. And section 5 of the FTC 
Act, 15 U.S.C. 45(m), allows the Commission to ``recover civil 
penalties'' against those who violate such a rule.
    The Commission has previously promulgated rules regulating the use 
of earnings claims in certain industry settings: The Franchise 
Rule,\20\ the Business Opportunity Rule,\21\ and the Telemarketing 
Sales Rule.\22\ However, the scope of coverage of these rules is 
limited. Numerous different types of enterprises that do not clearly 
fall under the scope of these existing rules continue to use misleading 
earnings claims to deceive consumers in violation of section 5. The 
financial consequences of this deception for consumers are 
significant.\23\
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    \20\ Disclosure Requirements and Prohibitions Concerning 
Franchising, 16 CFR part 436 (2007).
    \21\ Business Opportunity Rule, 16 CFR part 437 (2012).
    \22\ Telemarketing Sales Rule, 16 CFR part 310.
    \23\ See, e.g., FTC v. OTA Franchise Corp., No. 8:20-cv-287 
(filed C.D. Cal. 2020) (alleging consumer harm of over $370 
million); FTC v. Neora, LLC, No. 3:20-cv-1979 (filed D.N.J. 2019, 
transferred N.D. Tex.) (alleging consumer harm of over $120 
million); FTC v. Mobe, No. 6:18-cv-862, Dkt. No. 257, Renewed Motion 
for Default Judgment, at 5 (filed M.D. Fla. 2018) (alleging consumer 
harm of over $318 million); FTC v. The Tax Club, Inc., No. 13-cv-210 
(filed S.D.N.Y. 2016) (alleging consumer harm of over $200 million). 
Individual losses can be substantial; for example, tens of thousands 
of purchasers in the OTA Franchise matter each paid over $10,000 for 
purported courses on how to make money trading in the financial 
markets.

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[[Page 13953]]

    The Commission believes that initiating a rulemaking to address the 
use of earnings claims could benefit consumers and could provide useful 
guidance without burdening businesses. The rule would be designed to 
deter the use of misleading earnings claims, inform market participants 
of their legal obligations by spelling out prohibitions plainly, and 
ensure the Commission can seek monetary relief for consumers deceived 
by misleading earnings claims.

II. Objectives and Regulatory Alternatives

    The Commission requests input on whether and how it can most 
effectively use its authority under section 18 of the FTC Act, 15 
U.S.C. 57a, to address certain deceptive or unfair acts or practices 
involving the use of false, unsubstantiated, or otherwise misleading 
earnings claims.
    The Commission is aware that such claims are used by numerous 
companies and individuals to entice prospective purchasers, job-
seekers, investors, or other participants in widely varying contexts. 
For example, the Commission and other government agencies have alleged 
that misleading earnings claims have been used to tout offers as 
diverse as coaching or mentoring,\24\ education,\25\ work-from-home, 
``gig'' work, and other job opportunities,\26\ multi-level marketing 
opportunities,\27\ franchise,\28\ e-commerce \29\ or other business 
opportunities,\30\ chain referral schemes,\31\ and other investment 
opportunities,\32\ as well as other types of business or money-making 
opportunities.\33\ The Commission requests that commenters provide 
other information or evidence on the prevalence of these practices in 
these same contexts as well as any others.
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    \24\ See, e.g., FTC v. OTA Franchise Corp., No. 8:20-cv-287 
(filed C.D. Cal. 2020); FTC v. Ragingbull.com, LLC, No. 1:20-cv-3538 
(filed D. Md. 2020); FTC v. Zurixx LLC, No. 2:19-cv-713 (filed D. 
Utah 2019); FTC v. Nudge LLC, No. 2:19-cv-867 (filed D. Utah 2019); 
FTC v. Mobe Ltd., No. 6:18-cv-862 (filed M.D. Fla. 2018); FTC v. 
Digital Altitude, No. 2:18-cv-0729 (filed C.D. Cal. 2018).
    \25\ See, e.g., FTC v. Devry Education Group Inc., No. 2:16-cv-
579 (filed C.D. Cal. 2016); Commonwealth of Massachusetts v. ITT 
Educational Services, Inc., No. 16-0411 (filed Mass. Super. Ct. 
2016); State of Colorado v. Center For Excellence in Higher 
Education, Inc., No. 2014-cv-34530 (filed Denver City And County 
Dist. Ct. 2014); Macmillan, Inc., 96 FTC 208 (1980).
    \26\ See, e.g., Amazon.com, Inc., FTC Docket No. C-4746 (filed 
2021); FTC v. Moda Latina BZ Inc., No. 2:20-cv-10832 (filed C.D. 
Cal. 2020); FTC v. Fat Giraffe Mktg. Group LLC, No. 2:19-cv-63 
(filed D. Utah 2019); FTC v. Uber Technologies, Inc., No. 3:17-cv-
0261 (filed N.D. Cal. 2017); Encyclopaedia Britannica, Inc., et al., 
87 FTC 421, 450, 486-88, 531-32 (1976); Abel Allan Goodman Trading 
As Weavers Guild, 52 FTC 982, 988 (1956), order affirmed 244 F.2d 
584 (9th Cir. 1957).
    \27\ See, e.g., FTC v. Noland, No. 2:20-cv-0047 (filed D. Ariz. 
2020); FTC v. Neora, LLC, No. 3:20-cv-1979 (filed D.N.J. 2019, 
transferred N.D. Tex.); FTC v. Advocare, Int'l, L.P., No. 4:19-cv-
715 (filed E.D. Tex. 2019); FTC v. Herbalife Int'l of America, Inc., 
No. 2:16-cv-5217 (filed C.D. Cal. 2016); FTC v. Vemma Nutrition Co., 
No. 2:15-cv-01578 (filed D. Ariz. 2015).
    \28\ See, e.g., United States v. We The People Forms and Service 
Centers USA, Inc., No. 04-cv-10075 (filed C.D. Cal. 2004); FTC v. 
Government Careers Network, Inc., et al., No. 01-cv-2286 (filed 
S.D.N.Y. 2001); FTC v. Minuteman Press, Inc., No. 93-cv-2496 (filed 
E.D.N.Y. 1993); FTC v. National Business Consultants, No. 89-cv-1740 
(filed E.D. La. 1987).
    \29\ See, e.g., FTC v. National Web Design, LLC, No. 2:20-cv-846 
(filed D. Utah 2020); FTC v. AWS, LLC, No. 2:18-cv-442 (filed D. 
Nev. 2018); FTC v. Sellers Playbook, Inc., No. 18-cv-2207 (filed D. 
Minn. 2018); FTC v. Advertising Strategies, LLC, No. 2:16-cv-3353 
(filed D. Ariz. 2016); FTC v. The Online Entrepreneur, Inc., No. 
8:12-cv-2500 (filed M.D. Fla. 2012).
    \30\ See, e.g., FTC v. Digital Income System, Inc., No. 1:20-cv-
24721 (filed S.D. Fla. 2020); FTC v. 8 Figure Dream Lifestyle LLC, 
No. 8:19-cv-1165 (filed C.D. Cal. 2019); FTC v. Money Now Funding, 
LLC, No. 2:13-cv-1583 (filed D. Ariz. 2013); FTC v. American 
Business Builders, LLC, No. 2:12-cv-2368 (filed D. Ariz. 2012); 
United States v. The Zaken Corp., No. 2:12-cv-9631 (filed C.D. Cal. 
2012); FTC v. Universal Advertising, Inc., No. 1:06-cv-152 (filed D. 
Utah 2006).
    \31\ See, e.g., FTC v. BINT Operations LLC, No. 4:21-cv-518 
(filed E.D. Ark. 2021); FTC v. Dluca, No. 0:18-cv-60379 (filed S.D. 
Fla. 2018); FTC v. Evans, No. 4:03-cv-178 (E.D. Tex. 2003); FTC v. 
Lightfoot, No. C 3-02-145 (filed S.D. Ohio 2002); FTC v. 
Bigsmart.com LLC, No. 01-cv-466 (filed D. Ariz. 2001); FTC v. Cano, 
No. 97-cv-7947 (filed C.D. Cal. 1997).
    \32\ See, e.g., SEC v. Senderov, No. 19-cv-5242 (filed E.D. Wa. 
2019); SEC v. Peterson, No. 19-cv-8334 (filed C.D. Cal. 2019); In re 
Spectrum Concepts LLC, SEC No. 3-16358 (filed SEC 2015); In re 
Pankaj Kumar Srivastava, SEC No. 3-1267 (filed SEC 2014); SEC v. 
Butts, No. 13-23115 (filed S.D. Fla. 2013); SEC v. Shavers, No. 
4:13-cv-416 (filed E.D. Tex. 2013).
    \33\ See, e.g., FTC v. Position Gurus, LLC, No. 2:20-cv-710 
(filed W.D. Wash. 2020) (marketing and other business-related 
services); FTC v. Montano, No. 6:17-cv-2203 (filed M.D. Fla. 2017) 
(``automatic money systems'' and ``secret codes''); FTC v. World 
Patent Mktg., No. 17-cv-20848 (filed S.D. Fla. 2017) (invention 
promotion); FTC v. Blue Saguaro Marketing, LLC, No. 2:16-cv-3406 
(filed D. Ariz. 2016) (grant scheme).
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    The Commission also is interested in exploring disclaimers: 
Specifically, whether a disclaimer can be sufficient to correct a 
misleading impression from an atypical earnings claim,\34\ and, if so, 
what features such a disclaimer must have, and in what contexts will it 
suffice. In the Commission's experience, we have not seen probative 
evidence that disclaimers effectively cure atypical earnings claims. In 
Commission enforcement actions where defendants have argued that 
disclaimers or disclosures cured any deceptive earnings claims, courts 
have repeatedly found otherwise.\35\ Further, research by the 
Commission has found that even clear and prominent disclaimers of 
``Results not typical'' or the stronger ``These testimonials are based 
on the experiences of a few people and you are not likely to have 
similar results,'' are not sufficient to dispel the implication that a 
testimonial depicts typical results.\36\ Yet, some companies continue 
to use disclaimers with such language. Based on the foregoing, the 
Commission seeks comment, information, and evidence on whether a 
disclaimer can be sufficient to correct an otherwise misleading 
impression created by earnings claims, and, if so, whether and how the 
issue should be addressed in a rule.
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    \34\ An atypical earnings claim is a representation, express or 
implied, regarding profit, earnings, or other financial gain, that 
does not reflect the experience of the typical purchaser, employee, 
independent contractor, or other participant engaged in the money-
making opportunity at issue. Such claims often convey the message 
that the represented earnings are typical--this is deceptive. See 
notes 5 & 6, supra; FTC's Guides Concerning the Use of Endorsements 
and Testimonials in Advertising (``Endorsement Guides''), 16 CFR 
255.2(b).
    \35\ World Patent Mktg., No. 17-cv-20848, 2017 WL 3508639, *13-
14 (even if disclaimers were seen, ``they failed to change the net 
impression created by Defendants' salespeople who verbally promised 
financial gain''); Vemma, No. 2:15-cv-01578, 2015 WL 11118111, at 
*6-7 (disclaimers of ``results not typical'' not sufficient, as 
``consumer may [still] reasonably believe that a statement of 
unusual earning potential represents typical earnings''); Medicor, 
217 F. Supp. 2d at 1053-54 (``consumers could reasonably believe 
that the statements of earnings potential represent typical or 
average earnings'' despite disclaimer); Minuteman Press, 53 F. Supp. 
2d at 262-63 (written disclaimers contradicting oral earnings claims 
not sufficient, as ``a reasonable consumer could legitimately 
conclude that he or she was being furnished important specific 
earnings information, subrosa, to assist in the decision-making 
process notwithstanding the general disclaimers in the 
[contract]'').
    \36\ Endorsement Guide 16 CFR 255.2(b) n. 105.
---------------------------------------------------------------------------

    The Commission also wishes to explore in this rulemaking whether 
some or all entities and individuals making earnings claims should be 
required to give recipients specific earnings information. The 
Franchise and Business Opportunity Rules require companies that make 
earnings claims to furnish prospective members with a disclosure 
document that includes information about earnings.\37\ Should similar 
provisions be implemented in an earnings claim rule? How would it 
effectively prevent or curb deception regarding earnings? If so, what 
information should such a disclosure include? What would be the benefit 
to consumers and the burden to business of such a disclosure 
requirement? Given the wide variety of commercial contexts in which 
earnings claims may be used, should a disclosure requirement apply to 
only certain types of entities and individuals or in certain contexts, 
or should its application be limited in some other way? For example, 
should

[[Page 13954]]

its coverage exclude job postings and help wanted ads? Should it apply 
only to those whose claims cite atypical earnings figures? Or should it 
be limited on some other basis?
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    \37\ 16 CFR 436.2 and 436.5(u); 16 CFR 437.2.
---------------------------------------------------------------------------

    Relatedly, the Commission is interested in exploring whether a rule 
should address the use of real or purported earnings data or statistics 
from an industry or professional field in the promotion of money-making 
opportunities.\38\ In the Commission's experience, some such uses are 
misleading. These seemingly objective figures may create the impression 
that the depicted level of sales or earnings is typical in the industry 
or field, or for the opportunity being advertised, and by implication, 
that the prospective purchaser, employee, or other participant will 
achieve similar results.\39\ The Commission seeks comment on whether a 
prohibition on such misleading ``industry'' earnings claims should be 
included in a rule, and if so, what the proper scope of its coverage 
should be.
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    \38\ For example, the Business Opportunity Rule bars business 
opportunity sellers from disseminating industry financial 
information to prospective purchasers unless they have 
substantiation that the information ``reflects, or does not exceed, 
the typical or ordinary'' experience of purchasers. 16 CFR 437.4(c).
    \39\ FTC v. Zurixx, No. 2:19-cv-0713, (filed D. Utah 2019), 
Second Amended Complaint, Dkt. 219, para. 62 & 88 (earnings claims 
included national averages drawn from industry sources); Dkt. 12-15 
(p.7) (same); Dkt. 12-48 (p.35) (same); Med. Billers Network, 543 F. 
Supp. 2d at 305-06 (earnings claims based on industry statistics 
deceptively implied that participants in defendants' opportunity 
would make the depicted amounts); cf. FTC Endorsement Guides, 16 CFR 
255.2(b) (representations of individual consumers' experiences 
``will likely be interpreted as representing that the . . . 
experience is representative of what consumers will generally 
achieve'').
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    The Commission also seeks comment on whether and how a rule can 
most effectively provide clarity on the substantiation a company must 
possess before making an earnings claim, and whether those who make 
earnings claims should be required to keep records to demonstrate how 
they have substantiated the claims. In the Commission's experience, 
numerous companies have taken positions that appear to misunderstand 
the substantiation obligation. For example, the Commission is aware 
that, historically, some multi-level marketing companies have made 
earnings claims to potential distributors without knowing what expenses 
their distributors incur. But earnings claims that reflect gross income 
and omit material expenses are misleading.\40\ Before making an 
earnings claim, a business must have a reasonable basis for the claim 
\41\--that means both gross income and expenses incurred in generating 
that income. As another example, entities and individuals often argue 
before the Commission that earnings claims made in testimonials are 
substantiated if the testimonialist provides evidence that he or she 
attained the results described in the testimonial. But confirming that 
a testimonialist is accurately describing their own experience does not 
substantiate a key message that such representations usually convey--
that prospective participants can expect similar results.\42\ Given the 
frequency with which these and other similar issues arise, the 
Commission is considering how a rule might provide clarity on the 
matter. How should a rule define the evidence necessary to meet the 
substantiation requirement? Also, should a rule impose a recordkeeping 
requirement for substantiation evidence? Such requirements ensure that 
the Commission can obtain the evidence necessary to evaluate a 
company's claims that its earnings representations are 
substantiated.\43\ If the rule includes a recordkeeping requirement, 
what must be kept? In what form? For how long? What would be the costs 
of such a requirement, and are there ways to streamline the requirement 
to minimize the costs on businesses?
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    \40\ Febre, No. 94-cv-3625, 1996 WL 396117, *3-5 (finding ads 
with earnings claims deceptive because they failed to disclose 
expenses); Encyclopaedia Britannica, 87 FTC at 445-50, 486-87, 505, 
510, 532. See also Med. Billers Network, 543 F. Supp. 2d at 315 
(failure to disclose costs necessary to earn income with product was 
a deceptive telemarketing practice and violated the Telemarketing 
Sales Rule); Southwest Sunsites, Inc., et al., 105 FTC 7, 99-102 
(1985) (claims about potential use of property were deceptive 
because they implied the property was a good investment but failed 
to disclose substantial expenses that rendered the proposed uses 
uneconomical), aff'd 785 F.2d 1431, 1438 (9th Cir. 1986).
    \41\ See, e.g., Grant Connect, 827 F. Supp. 2d at 1225-1226 
(defendants ``cannot fabricate a number [in an earnings claim] and 
then fall back on the defense that they would not have access to the 
documentation to support that claim''); Holiday Enterprises, No. 
1:06-cv-2939, 2008 WL 953358, at *6-7 (granting summary judgement to 
FTC in part because ``defendants had no substantiation for [their 
earnings] claims'').
    \42\ World Patent Mktg., No. 17-cv-20848, 2017 WL 3508639, *12 
(``success stories'' in ads implied purchasers would see similar 
results); John Beck Amazing Profits, 865 F. Supp. 2d at 1072-73 (ad 
with ``numerous testimonials'' conveyed impression that ``a typical 
consumer'' would ``earn thousands of dollars per week''); Cliffdale 
Assocs., Inc., 103 FTC 110, 171-72 (1984) (``[b]y printing the 
testimonials, respondents implicitly made performance claims'' that 
were deceptive; ``irrespective of the veracity of the individual 
consumer testimonials, respondents' use of the testimonials to make 
underlying claims that were false and deceptive was, itself, 
deceptive''); Macmillan, 96 FTC at 301 (``testimonials . . . implied 
that the success portrayed therein was ordinary and typical''). See 
also FTC Endorsement Guides, 16 CFR 255.2(b) (testimonials ``will 
likely be interpreted as representing that the . . . experience is 
representative of what consumers will generally achieve'').
    \43\ For example, the Business Opportunity Rule requires 
retention of substantiation documents for three years after an 
earnings claim is made. 16 CFR 437.7. The Franchise Rule and 
Business Opportunity Rules both require that substantiation 
materials be made available to consumers upon request, thereby 
implicitly requiring retention of substantiation documents. 16 CFR 
436.9(d); 16 CFR 437.6(f).
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    Additionally, the Commission seeks comments on whether, if at all, 
lifestyle claims should be addressed by a rule. Lifestyle claims are 
claims that participating in a money-making opportunity will lead to a 
material change in lifestyle--such as getting to go on expensive 
vacations, quitting your job, or buying a luxury car. These claims are 
being used frequently on online advertisements and social media. And 
the Commission has initiated several enforcement actions that involved 
deceptive lifestyle claims.\44\ The Commission, however, has never 
comprehensively analyzed such claims, instead addressing them on a 
case-by-case basis.\45\ Comment, evidence, and information is therefore 
sought on (a) whether and what lifestyle claims are deceptive; (b) the 
benefits to businesses and consumers from receiving guidance on this 
topic; and (c) what evidence a company must have before making a 
lifestyle claim to substantiate it.
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    \44\ See, e.g., FTC v. Neora, LLC, No. 3:20-cv-1979 (filed 
D.N.J. 2019, transferred N.D. Tex.); FTC v. Advocare, Int'l, L.P., 
No. 4:19-cv-715 (filed E.D. Tex. 2019); FTC v. Herbalife Int'l of 
America, Inc., No. 2:16-cv-5217 (filed C.D. Cal. 2016); FTC v. 
Fortune Hi-Tech Mktg., Inc., No. 13-cv-578 (filed N.D. Ill. 2013).
    \45\ The Business Opportunity Rule's definition of earnings 
claims includes lifestyle claims, but only if they imply a certain 
minimum level of earnings. 16 CFR 437.1(f).
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    Finally, the Commission seeks comment on, among other things, the 
costs and benefits of a rule that would address the above practices, 
and on alternatives to such a rulemaking, such as the publication of 
additional consumer and business education. In their replies, 
commenters should provide any available evidence and data that supports 
their position, such as empirical data, consumer perception studies, 
and consumer complaints.

III. Request for Comments

    Members of the public are invited to comment on any issues or 
concerns they believe are relevant or appropriate to the Commission's 
consideration of potential rulemaking in this area. The Commission 
requests that commenters also submit any relevant factual data

[[Page 13955]]

upon which their comments are based. In addition to the issues raised 
above, the Commission solicits public comment on the specific questions 
identified below. These questions are designed to assist the public and 
should not be construed as a limitation on the issues on which public 
comment may be submitted.

Questions

    1. How widespread is the use of false, unsubstantiated, or 
otherwise misleading earnings claims by entities or individuals in 
connection with the offer or sale of a good or service, participation 
in a job or other work opportunity, or in a business, investment, or 
other money-making opportunity? Is the practice prevalent among those 
who make earnings claims? Are there certain business contexts or 
industries in which the practice is prevalent, or certain business 
contexts or industries in which it is not? For example, are deceptive 
earnings claims prevalent among all businesses that offer work or 
employment, or just among those in certain industries? \46\ If so, 
describe the relevant industry or business context and the basis for 
your position. Provide any evidence, such as empirical data, consumer 
perception studies, or consumer complaints, that demonstrates the 
extent of such practices. Provide all evidence that supports your 
answer.
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    \46\ See, e.g., Amazon.com, Inc., FTC Docket No. C-4746 (filed 
2021); FTC v. Uber Technologies, Inc., No. 3:17-cv-0261 (N.D. Cal. 
filed 2017); Encyclopaedia Britannica, 87 FTC at 450, 486-88, 531-
32; Abel Allan Goodman, 52 FTC at 988, order affirmed 244 F.2d 584 
(9th Cir. 1957).
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    2. Are there circumstances in which the practices described in 
Question 1, above, would not be deceptive or unfair? If so, what are 
those circumstances? Should the Commission exclude such circumstances 
from the scope of any rulemaking? Why or why not? Provide all evidence 
that supports your answer.
    3. Do the practices described in Question 1, above, cause injury to 
consumers, and if so, how much? Do such practices cause injury to other 
businesses by unfairly disadvantaging them? Provide any evidence that 
quantifies or estimates these injuries if possible, including the size 
of the discrepancy between misleading earnings claims and actual 
earnings. Provide all evidence that supports your answer.
    4. Do the practices described in Question 1, above, 
disproportionately target or affect certain groups, including 
communities of color or other historically underserved communities? If 
so, why and how? Provide all evidence that supports your answer.
    5. Please provide any evidence concerning consumer perception of, 
or experience with, earnings claims that is relevant to the practices 
described in Question 1, above.
    6. Is there a need for new regulatory provisions to prevent the 
practices described in Question 1, above? If yes, why? If no, why not? 
What evidence supports your answer?
    7. How should a rule addressing the practices described in Question 
1, above, be crafted to maximize the benefits to consumers while 
minimizing the costs to businesses? Provide all evidence that supports 
your answer, including any evidence that quantifies the benefits to 
consumers, and the costs to businesses.
    8. Should the Commission consider additional consumer, employee, 
independent contractor, and business education to reduce harm to 
consumers associated with the practices described in Question 1, above? 
If so, what should such education materials include, and how should the 
Commission communicate that information to consumers and businesses?
    9. What alternatives to regulations should the Commission consider 
to address the practices described in Question 1, above? Would those 
alternatives obviate the need for regulation? If so, why? If not, why 
not? What evidence supports your answer?
    10. Should a rule addressing the practices described in Question 1, 
above, define or describe the substantiation required to make an 
earnings claim? Why or why not? If so, how should it do so? Should a 
rule adopt the Business Opportunity Rule's language of ``a reasonable 
basis'' for a claim at the time the claim is made, or should it use 
some other definition? If the latter, what? What are the benefits to 
consumers, and costs to businesses, and in particular small businesses, 
from such a rule? Provide all evidence that supports your answer, 
including any evidence that quantifies the benefits to consumers, and 
the costs to businesses, and in particular small businesses.
    11. Should a rule addressing the practices described in Question 1, 
above, require the preservation or documentation of substantiation? Why 
or why not? If so, what types of recordkeeping requirements should be 
required? What are the benefits to consumers, and costs to businesses, 
and in particular small businesses, from such a rule? Provide all 
evidence that supports your answer, including any evidence that 
quantifies the benefits to consumers, and the costs to businesses, and 
in particular small businesses.
    12. What requirements, if any, should a rule impose to address 
earnings claims made by agents or others interacting with prospective 
purchasers, employees, independent contractors, or participants on a 
company's behalf, to address the potential use of misleading claims? 
How can the Commission ensure that companies effectively monitor the 
actions of such agents or other persons? Should a rule addressing the 
practices described in Question 1, above, impose affirmative 
requirements on companies regarding earnings claims made by their 
agents or others acting with them or on their behalf? Why or why not? 
If so, how? What are the benefits to consumers, and costs to businesses 
from such a rule? Provide all evidence that supports your answer, 
including any evidence that quantifies the benefits to consumers, and 
the costs to businesses.
    13. Are there circumstances in which disclaimers or disclosures can 
effectively dispel a misleading impression regarding earnings or 
profits, or prevent such an impression? If so, describe such 
circumstances in detail, including all necessary aspects of such 
disclaimer or disclosure, such as language, format, or the context in 
which it is presented. Provide all evidence that supports your answer, 
or that otherwise addresses the effectiveness of disclaimers or 
disclosures.
    14. In the cases the Commission has brought, we have repeatedly 
seen circumstances where earnings claims convey the impression that the 
represented earnings are typical. Are there circumstances where they do 
not? If so, describe such circumstances in detail. Provide all evidence 
that supports your answer.
    15. How should the rule address disclaimers? Are there any 
circumstances in which a rule should require a disclaimer, such as with 
atypical earnings claims? Why or why not? If so, describe such 
circumstances in detail. How should a rule define or describe such 
disclaimer? Should the rule address conduct that may minimize the 
effectiveness of any disclaimer, and if so, how? What are the benefits 
to consumers, and costs to businesses from such a rule? Provide all 
evidence that supports your answer, including any evidence that 
quantifies the benefits to consumers, and the costs to businesses.
    16. Based on the Commission's enforcement experience, 
representations of an expensive or otherwise desirable lifestyle--such 
as images of or references to mansions, yachts, luxury

[[Page 13956]]

goods or automobiles, exotic or otherwise desirable vacations, or even 
just having more free time--convey the impression that a money-making 
opportunity can or will provide participants sufficient income to 
afford a similar lifestyle. Under what circumstances, if any, do such 
representations not convey such an impression? Describe such 
circumstances in detail. Provide all evidence that supports your 
answer.
    17. Should a rule addressing the practices described in Question 1, 
above, address the use of ``lifestyle'' claims of the type described in 
Question 15? Why or why not? If so, how? What are the benefits to 
consumers, and costs to businesses from such a rule? Provide all 
evidence that supports your answer, including any evidence that 
quantifies the benefits to consumers, and the costs to businesses.
    18. Should a rule addressing the practices described in Question 1, 
above, exempt from its coverage businesses or individuals that are 
subject to the Business Opportunity Rule, the Franchise Rule, or the 
Telemarketing Sales Rule? Why or why not? If so, how and to what 
extent? What are the benefits to consumers, and costs to businesses 
from such a rule? Provide all evidence that supports your answer, 
including any evidence that quantifies the benefits to consumers, and 
the costs to businesses.
    19. If a rule addressing the practices described in Question 1, 
above, is adopted, should the Business Opportunity Rule, the Franchise 
Rule, or the Telemarketing Sales Rule be amended? Why or why not? If 
so, how and to what extent?
    20. Should a rule addressing the practices described in Question 1, 
above, exempt from its coverage any other businesses or individuals? 
Why or why not? If so, how and to what extent? What are the benefits to 
consumers, and costs to businesses from such a rule? Provide all 
evidence that supports your answer, including any evidence that 
quantifies the benefits to consumers, and the costs to businesses.
    21. Should a rule addressing the practices described in Question 1, 
above, include an example earnings disclosure statement that would not 
be mandatory, but would provide guidance for companies on how to make a 
lawful earnings claim? Why or why not? If so, what should be contained 
in the example statement? What are the benefits to consumers, and costs 
to businesses from such a rule? Provide all evidence that supports your 
answer, including any evidence that quantifies the benefits to 
consumers, and the costs to businesses.
    22. Should a rule addressing the practices described in Question 1, 
above, require that an earnings claim disclosure document be provided 
to consumers prior to purchase, prior to accepting an offer for work, 
or at any other time? Why or why not? If so, how should the rule define 
or describe the required disclosure, the time(s) at which it must be 
provided, the manner in which it must be provided (so it cannot be 
hidden or obscured by other paperwork), the languages in which it must 
be provided, and who must provide it? What are the benefits to 
consumers, and costs to businesses, and in particular small businesses, 
from such a rule? Provide all evidence that supports your answer, 
including any evidence that quantifies the benefits to consumers, and 
the costs to businesses, and in particular small businesses.
    23. How prevalent is the deceptive or misleading use of real or 
purported industry earnings data or statistics in the promotion of 
money-making opportunities? Provide any evidence, such as empirical 
data, consumer perception studies, or consumer complaints, that 
demonstrates the extent of such practices. Provide all evidence that 
supports your answer.
    24. Do the practices described in Question 21, above, cause injury 
to consumers, and if so, how, and how much? Provide any evidence that 
quantifies or estimates that injury if possible, including any non-
financial or indirect injuries to consumers, and including the size of 
the discrepancy between misleading earnings claims and actual earnings. 
Provide all evidence that supports your answer.
    25. Should a rule addressing the practices described in Question 1, 
above, include a provision concerning the use of real or purported 
industry earnings data or statistics? Why or why not? If so, how? 
Should the coverage of such a provision be limited? If so, how and why? 
Provide all evidence that supports your answer, including any evidence 
that quantifies the benefits to consumers, and the costs to businesses.
    26. Do existing laws and regulations covering false, 
unsubstantiated, or otherwise misleading earnings claims affect 
businesses, particularly small businesses? If so, how? Provide all 
evidence that supports your answer.
    27. Are there other commercial acts or practices involving earnings 
claims that are deceptive or unfair that should be addressed in the 
proposed rulemaking? If so, describe the practices. How widespread are 
the practices? Provide all evidence that supports your answer, and 
please answer Questions 2-9 with respect to the practices.
    28. Do current or impending changes in technology or market 
practices affect the need for rulemaking? If so, describe the changes 
and how they affect whether and how a rulemaking should proceed. 
Provide all evidence that supports your answer.

IV. Comment Submissions

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before May 10, 2022. 
Write ``Earnings Claims ANPR, R111003'' on your comment. Your comment--
including your name and your state--will be placed on the public record 
of this proceeding, including, to the extent practicable, on the 
https://www.regulations.gov website.
    Because of the public health emergency in response to the COVID-19 
outbreak and the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comments online through the https://www.regulations.gov website. To ensure the Commission considers your 
online comment, please follow the instructions on the web-based form.
    If you file your comment on paper, write ``Earnings Claims 
Rulemaking, R111003'' on your comment and on the envelope, and mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex B), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex B), Washington, DC 
20024. If possible, please submit your paper comment to the Commission 
by courier or overnight service.
    Because your comment will be placed on the public record, you are 
solely responsible for making sure that your comment does not include 
any sensitive or confidential information. In particular, your comment 
should not contain sensitive personal information, such as your or 
anyone else's Social Security number; date of birth; driver's license 
number or other state identification number or foreign country 
equivalent; passport number; financial account number; or credit or 
debit card number. You are also solely responsible for making sure your 
comment does not include any sensitive health information, such as 
medical records or other individually identifiable health

[[Page 13957]]

information. In addition, your comment should not include any ``[t]rade 
secret or any commercial or financial information which . . . is 
privileged or confidential''--as provided in section 6(f) of the FTC 
Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2) --
including in particular competitively sensitive information such as 
costs, sales statistics, inventories, formulas, patterns, devices, 
manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted publicly at www.regulations.gov--as legally required by FTC 
Rule 4.9(b)--we cannot redact or remove your comment, unless you submit 
a confidentiality request that meets the requirements for such 
treatment under FTC Rule 4.9(c), and the General Counsel grants that 
request.
    Visit the FTC website to read this document and the news release 
describing it. The FTC Act and other laws that the Commission 
administers permit the collection of public comments to consider and 
use in this proceeding as appropriate. The Commission will consider all 
timely and responsive public comments it receives on or before May 10, 
2022. For information on the Commission's privacy policy, including 
routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

    By direction of the Commission.

April J. Tabor,
Secretary.

Statement of Commissioner Rebecca Kelly Slaughter Regarding Advance 
Notice of Proposed Rulemaking on the Use of Earnings Claims

    Unfair and deceptive earnings claims underpin some of the worst and 
most financially ruinous scams Americans face. Pyramid schemes, phony 
investments, and multi-level-marketing all exploit people's hopes--for 
financial stability, for a chance to improve their lives--with false 
promises. These scammers often take advantage of national and financial 
crises to exploit the newly vulnerable. And unfortunately, we've seen 
that in the Covid-19 pandemic as well. The extent of these scams is 
astounding. In a 2020 law enforcement crackdown the FTC pursued over a 
billion dollars lost to these schemes.\1\
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    \1\ Press Release, Federal Trade Commission, As Scammers 
Leverage Pandemic Fears, FTC and Law Enforcement Partners Crack Down 
on Deceptive Income Schemes Nationwide, December 14, 2020, https://www.ftc.gov/newsevents/press-releases/2020/12/scammers-leverage-pandemic-fears-ftc-law-enforcement-partners.
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    Combating these schemes illuminates something important about the 
agency's authority and our mission, too. Section 5's requirement that 
earnings claims are honest and substantiated reflects an 
underappreciated obligation of the FTC: To protect Americans as workers 
and not simply as the consumers of products and services. Markets 
cannot function effectively without honest and transparent pricing. 
That is just as true for the labor market as it is for consumer goods. 
False or misleading earnings claims robs people of their investments, 
their time, and the fair value of their labor. It is also worth 
remembering: Individuals who put their savings into the stock market--
often wealthier individuals--can rely on the SEC to police 
misrepresentations about earnings claims with respect to those 
investments. But less wealthy folks who may pour their life savings 
into promised business opportunities deserve the protection of the 
federal government as well; that is why we must aggressively police 
misleading earnings claims.
    Two of our recent enforcement actions demonstrate how this kind of 
exploitation works in practice. Last year the FTC settled with the 
owners and operators of Moda Latina.\2\ The company primarily targeted 
Latinas with Spanish-language ads that made false promises of 
significant earnings reselling luxury products. Moda Latina's marketing 
campaign specifically targeted Latina consumers interested in starting 
work-at-home businesses.\3\ It seems like none of the women targeted in 
this scheme made money but were instead cheated out of their time and 
funds to buy useless goods. These kinds of false claims crowd out 
honest opportunities for people to start businesses, making life even 
more precarious for vulnerable workers and would-be entrepreneurs.
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    \2\ Press Release, Federal Trade Commission, Operators of Bous 
Income Scam Targeting Latinas Face FTC Settlement, March 2, 2021, 
https://www.ftc.gov/news-events/press-releases/2021/03/operators-bogus-income-scam-targeting-latinas-face-ftc-settlement.
    \3\ FTC v. Moda Latina BZ Inc., No. 2:20-cv-10832 (filed C.D. 
Cal. 2020), https://www.ftc.gov/system/files/documents/cases/001_complaint.pdf.
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    I'm also deeply concerned about the effect of the over-promises of 
the gig economy on workers and the labor market. Last year, the FTC 
settled with Amazon over our charges that it robbed its Amazon Flex 
drivers the full amount of tips it promised to them.\4\ These gig-
economy workers signed up as drivers to deliver goods and groceries 
order through Amazon based on an advertised hourly rate and the promise 
of receiving ``100% of tips'' they earned while completing deliveries. 
After people had already signed up to work for the company, Amazon 
secretly changed its payment scheme and ceased giving drivers their 
tips while still representing that it did so to these workers and to 
consumers. In settlement the agency recovered $61.7 million from 
Amazon, the full amount of the tips the agency believe Amazon withheld 
from them. By misrepresenting these drivers' take-home pay Amazon 
distorted both the gig-driver labor market and the consumer home 
delivery market in what I believe we can fairly surmise was an unlawful 
bid to increase its market share and lower its labor costs.
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    \4\ Press Release, Federal Trade Commission, Amazon to Pay $61.7 
Million to Settle FTC Charges it Withheld Some Customer Tips from 
Amazon Flex Drivers, February 2, 2021, https://www.ftc.gov/news-events/pressreleases/2021/02/amazon-pay-617-million-settle-ftc-charges-it-withheld-some.
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    Effective enforcement of Section 5's consumer protection 
obligations helps make these markets for labor functional, fair, and 
competitive. That's why I'm eager to begin a rulemaking inquiry on 
earnings claims. I'm proud of the decades of enforcement actions the 
agency has undertaken to protect against these unfair and deceptive 
practices. But case by case enforcement has left gaps unscrupulous 
actors can exploit.
    Starting this inquiry means we can now gather evidence on how best 
to protect against these scams and begin to think about how a possible 
trade regulation rule could help level the playing field between 
workers and those that employ them. Pursuing rule violations would also 
reopen an avenue to return stolen money to consumers--something we can 
no longer do under section 13(b) until Congress steps in to fix it.
    I want to thank everyone that helped bring this ANPR to the 
Commission today, in particular Melissa Dickey, Andrew Hudson and Kati 
Daffan in DMP. I'd also like to thank Elisa Jillson, the CTD for the 
Bureau, Kenny Wright in the Office of the General Counsel, Jason Adler 
and Guy Ward from the MWRO, and David Givens, Douglas

[[Page 13958]]

Smith, and Yan Lau, in the Bureau of Economics for all their work.

Concurring Statement of Commissioner Christine S. Wilson on Advance 
Notice of Proposed Rulemaking Concerning Earnings Claims

    Today, the Commission issues an Advance Notice of Proposed 
Rulemaking (``ANPRM'') to commence proceedings to address the use of 
false, unsubstantiated, or otherwise misleading earnings claims. As 
explained in this Federal Register document, despite the Commission's 
aggressive enforcement efforts for decades to combat deceptive earnings 
claims, false claims about income opportunities continue to 
proliferate. While I remain skeptical of unleashing a tsunami of 
rulemakings to address common unfair or deceptive acts or practices, I 
do not oppose seeking comment on today's ANPRM.
    We contemplate this rule against the backdrop of AMG Capital Mgmt., 
LLC v. FTC.\1\ The Supreme Court's recent decision in AMG limits the 
Commission's authority to use section 13(b) of the FTC Act to obtain 
monetary relief for consumers harmed by misleading earnings claims. 
While a rule would not prevent fraudsters from engaging in deceptive 
earnings claims, it would enhance the FTC's ability to strip them of 
their ill-gotten gains and return that money to consumers. But for AMG, 
I would be skeptical about the need for rules regarding conduct 
frequently targeted by the FTC's extensive fraud program. That said, a 
13(b) fix would be preferable to having the FTC pursue a cornucopia of 
rules. And if a 13(b) fix is enacted during the pendency of this 
rulemaking, I likely would ask the Commission to terminate the process.
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    \1\ AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
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    In the wake of AMG, the exploration of a potential Earnings Claims 
rule is appropriate for two reasons. First, whether false earnings 
claims are made by frauds or legitimate businesses, no benefit accrues 
to consumers or competition. In fact, a 2020 FTC Data Spotlight about 
``income scams'' stated that the median loss associated with business 
and work-at-home opportunities is $3,000.\2\ Consumer losses related to 
deceptively marketed investment seminars are even higher, exceeding 
$16,000.\3\ For decades, the Commission has challenged deceptive 
earnings claims in connection with coaching and mentoring schemes, 
multi-level marketing (``MLM'') arrangements, and work-from-home or 
other business opportunity scams, to name a few.\4\ Despite decades of 
aggressive enforcement and extensive consumer and business education 
efforts, deceptive earnings claims persist.
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    \2\ Emma Fletcher, Income scams: big promises, big losses, FTC 
Consumer Protection Data Spotlight (Dec. 10, 2020), available at 
https://www.ftc.gov/system/files/attachments/blog_posts/%20scams%3A%20big%20promises%2C%20big%20losses%20/.final_.correctlink.pdf.
    \3\ Id.
    \4\ See Section I of SUPPLEMENTARY INFORMATION, supra. See also 
Notice of Penalty Offense Authority Concerning Money-Making 
Opportunities, available at https://www.ftc.gov/MMO-notice.
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    Second, consumers cannot analyze the costs and benefits of 
investing significant resources to pursue coaching, training, MLM, or 
educational opportunities without accurate representations from 
sellers. But the true value of these opportunities is best assessed by 
the entities offering them. In other words, we see significant 
information asymmetries between consumers and the entities that make 
earnings claims. The monetary value of an opportunity is likely the 
central, material claim that consumers consider before spending 
hundreds, thousands, or even tens of thousands of dollars on financial-
improvement opportunities. This ANPRM seeks information on how to 
ensure that when disclosures are made, they are substantiated.
    For these reasons, I do not oppose an ANPRM that explores ways to 
incentivize establishing a reasonable basis for earnings claims.

[FR Doc. 2022-04679 Filed 3-10-22; 8:45 am]
BILLING CODE 6750-01-P


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