b'UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\nDivision of Enforcement\n\nBureau of Consumer Protection\nRobert M. Frisby\n\nAssistant Director\n\nFebruary 19, 2008\n\nMr. Bill Gouldd\n20625 Cooke Drive\nReno, NY 89521\nDear Mr. Gouldd:\nThe Division of Enforcement has reviewed your letters of April 27, 2007, and January\n25, 2008, requesting a staff advisory opinion regarding whether your proposed direct sales\nprogram "is in compliance with your organization and does not lend itself to being defined as\nmulti-level marketing, pyramid scheme or endless-chain scheme." I apologize for the delay in\nresponding to your inquiry.\nWe have analyzed your proposed direct sales program to determine whether it would\nviolate Section 5 of the Federal Trade Commission Act as it applies to the marketing of multilevel marketing programs and pyramid schemes, as well as the "Order Preliminarily Approving\nStipulated Final Judgment and Class Action Settlement and Setting Fairness Hearing" entered by\nthe Court in FTC v. Equinox lilt\'! Corp., No CV-S-99-0969 (D. Nev. Apr. 20, 2000). As you\nknow, you are a defendant in this action and subject to the Order entered therein. Part ill of the\nOrder prohibits you from, among other things, engaging or participating in any multi-level\nmarketing program or pyramid scheme as the Order defines those terms.\nBased on our review of your proposed direct sales program, we cannot at this time reach\na definitive conclusion regarding whether the program would constitute either a multi-level\nmarketing program or a pyramid scheme as defined in the above Order. For that reason, we\ncannot opine whether the program would comply with the above Order. Nor can we opine that\nthe program would not violate Section 5 of the FTC Act as the FTC has applied it to the\nmarketing of such programs and schemes. This is so because whether the program constitutes a\nmulti-level marketing program would depend in large measure on how it is actually\nimplemented. Similarly, whether the program would constitute a pyramid scheme in actual\npractice would depend on a multitude of factors.\nSeveral features of your proposed program raise concerns regarding whether, as actually\nimplemented, it would constitute a multi-level marketing program or a pyramid scheme as\ndefined in the Order. Such features include the potential de facto cost of participation in the\nprogram, and incentives to recruit other participants into a downline. In addition, certain parts of\n\n\x0cBill Gouldd\nFebruary 19, 2008\n\nPage 2\n\nyour description of your proposed program seem contradictory, which makes us unsure of how\nyou will implement your program.\nAs you know, one feature of a multi-level marketing program or pyramid scheme as\ndefined in the Order is that participants must pay the promoter to participate in the program.\nAlthough your program states that there are no sign up fees to be involved, it also notes that\nparticipants can incur expenses for sales tools like business cards, training materials, and\npresentation aids. Presumably participants would obtain such items by purchasing them from\nthe promoter or someone affiliated with the promoter. It is also unclear whether participants\nwould incur any training fees or expenses. Depending on how the program is actually\nimplemented, such expenses for training or for items purchased from the promoter or someone\naffiliated with the promoter could become de facto requirements to participate in the program.\nIn addition, several features of the program as actually implemented could induce\nparticipants to focus on recruitment rather than retail sales. You state, for example, that\nsupervisory personnel must "document their ability to properly train and develop other sales\npeople by training a nainimum of two trainees." It appears that, for these trainees to become\nsupervisory personnel, they will each have to recruit and train two more trainees, and so on,\ncreating an incentive for endless recruitment.\nYour letter of January 25, 2008, states that "[t]here are only two positions under the\ncompany," qualified supervisors and trainees, that "[o]nce a trainee qualifies as a supervisor,\nthey move away from their supervisor and connect directly with the company," and that "[t]here\nis no third position or level." These statements do not appear to leave room in the organizational\nstructure for a "sales team" as described in your description under Profit Sharing that "additional\nprofit sharing equal to 5% of the total monthly sales generated by those they have trained\ndirectly and their sales team." This reference to a sales team appears to indicate that a\nparticipant has an incentive to recruit and train another participant who then acquires a sales\nteam, i.e., a downline, so that the original participant can then profit from the sales of the sales\nteamJdownline. This concern is heightened by the program\'s description of a variety of classes\nbeyond qualified supervisors and trainees, including "certified supervisor," "supervisory\npersonnel," "direct sales personnel," "sales personnel," "certified sales people," "sales team,"\nand "end users" without defining the classes or indicating clearly how they relate to each other.\nThe staff does not represent you personally and cannot offer legal advice. Determining\nwhether a direct sales program constitutes a multi-level marketing program or a pyramid scheme\noften requires a factual inquiry into the program itself, the way it is implemented, and the\ncontext sUITounding it. Therefore, as stated earlier, we cannot opine that your program would\n\n-2-\n\n\x0cPage 3\n\nBill Gouldd\nFebruary 19, 2008\n\ncomply with the above Order or the FTC Act. I We suggest that you seek legal advice regarding\nthe legality ofthe direct sales program you have proposed before beginning the program.\nIn accordance with Section 1.3(c) of the Commission\'s Rules of Practice and Procedure,\n16 C.F.R. \xe0\xb8\xa2\xe0\xb8\x87 l.3(c) (1997), this informal staff opinion has not been reviewed or approved by the\nCommission or by an individual Commissioner, and is given without prejudice to the right of the\nCommission later to rescind the advice and, where appropriate, to commence a law enforcement\naction. In addition, the views expressed in this letter are restricted to the facts described above.\nFinally, this office retains the right to reconsider its advice, and with notice to the requesting\nparty, rescind or revoke its opinion if the response is used for improper purposes, or if it would be\nin the public interest to do so.\n\nPursuant to Section 1.4 of the Commission\'s Rules of Practice and Procedure, 16 C.F.R.\n\xe0\xb8\xa2\xe0\xb8\x87 lA, this response along with your request for advice will be placed on the public record, subject\nto any limitations on public disclosure arising from statutory restrictions, the Commission\'s rules,\nand the public interest. Ifyou wish to request confidential treatment of any of the information\nyou submitted in connection with your request for an advisory opinion, please submit a separate\nrequest stating the reasons why you believe such information is entitled to confidential treatment.\n\nSincerely,\n\nRobert M. Frisby\nAssistant Director\n\nWe did not analyze whether your program would comply with statutes other than the\nFTC Act or any of the regulations enforced by the FTC.\nI\n\n\x0cBill Gouldd\n20625 Cooke Drive\nReno, NV 89521\nJanuary 25,2008\nMr. Peter J. Vander Nat\nFederal Trade Commission\n600 Pennsylvania Avenue, N.W.\nWashington, D.C. 20580\nRe: Request for an advisory opinion relating to a direct sales program as it relates to the\nFederal Trade Commission definitions regarding multi-level marketing.\nDear Mr. Vander Nat;\nHopefully you will remember me, I owned Equinox International, which you testified for as an\nexpert witness in case #CV-S-99-0969-JBR-RLH. Prior to this case I had spent hundreds of\nthousands of dollars in attorney\'s fees and even employed in-house council to ensure we were\ncompliant with all laws, regulations and requirements, both state and federal. I was stunned\nand traumatized when the F.T.C. charged my company with wrongdoing, as council had\ncontinually assured me that everything we were doing was in complete compliance with all\nagency regulations.\nI have spent several years researching and developing a new business. This new business\nwill be invaluable to millions of businesses across America. Due to the current and near future\neconomic outlook, now would be a perfect time to launch this program. I have been waiting\nmore than nine months now, as I sent my original correspondence to the attention of Donald\nClark on April 27, 2007. While he assured me several months ago this issue had been\nforwarded to the proper department, I have been unable to receive any further information from\nhim despite repeated unanswered e-mails and phone messages. I was looking through the\ncourt documents and remembered you now work with the F.T.C. and certainly would be one of\nthose whose expertise would be involved in the determination that my new business concept\nwas not MLM. I believe there is absolutely no way this could be misconstrued as an MLM, but\nI was also assured Equinox was in compliance in the past, only to discover the F.T.C. had a\ndifferent opinion.\nI am writing to you as I never again want to go through another devastating incident like the\none I experienced as a result of believing and being assured by council that I was working\n\n\x0cwithin the parameters of your agency, only to discover the opinion of the F.T.C. differed from\nthe opinion of those whom I relied upon for their expertise.\nTherefore, I would like to receive confirmation, directly from your organization, that my\nproposed business venture in direct sales is in compliance with your organization and does not\nlend itself to being defined as a multi-level marketing, pyramid scheme or endless-chain\nscheme.\nI will describe my business model, marketing strategy and compensation plan, as well as why\nI, and my attorneys, feel this concept does not constitute a multi-level marketing, pyramid or\nendless-chain scheme. I understand that I am solely responsible for the facts and content of\nthis correspondence as you will be relying on the accuracy of the information I am providing as\nthe basis for the rendering of your decision. I would however, like to reserve the right to\npossibly change the titles used to describe the level sales people achieve and the commission\namounts they can earn at those levels, as these things may need to be adjusted in order to\nachieve maximum market potential. I will be happy to notify you in writing of any changes that\nI find become necessary. Rest assured, with these small exceptions, the facts contained\nwithin regarding my request and business plan will remain unchanged.\nBUSINESS MODEL\nSeveral years ago my wife started working in the credit card industry. From time to time she\nhas come to me with issues and problems merchants she had contacted were forced to deal\nwith. It became readily apparent that many independent business owners are now facing\nalmost insurmountable obstacles in today\'s business environment. The number of large\ncorporations and their fierce competitiveness is unprecedented in the history of American\nbusiness. Companies like Wal-Mart, Home Depot, Lowe\'s and Sports Authority, as well as\nmajor restaurant chains such as Friday\'s, Olive Garden and Outback Steak House, just to\nname a few, have sent countless independent business owners into bankruptcy. Their\nmassive buying power allows these companies to buy and sell products for less and advertise\nmore, while earning more profits than the small independent business owners. Additionally,\ntheir outstanding profitability affords these large companies the ability to hire experts in the\nfields of advertising, accounting, banking, insurance, computers, software, promotions, sales\ntraining and marketing. As a result, they usually have superior business plans and support\nsystems in place and actually pay less for them, than their independently owned competitors.\nIndependent business owners, while understanding many specific aspects of their particular\nbusinesses, often times have little knowledge or experience regarding advertising, marketing,\nwholesale product purchasing, banking, credit card processing, check services, gift and loyalty\ncard programs, professional sales techniques, website development, web hosting, employee\nretention and benefit programs, security and alarm monitoring, tool re-imbursement programs,\netc. Business owners are frequently unaware of the many alternatives available to them and\nwhat are competitive rates for these products and services. As a result, large companies can\noffer their customers more effective advertising and pricing while offering their employees\nhigher pay and benefits, putting thousands of independent businesses out of business every\nyear.\n\n\x0cMany small business owners are also unaware of the many products and services available to\nthem that are designed to increase their sales while also decreasing their expenses and costs.\nThere are millions of independent businesses across America that could benefit from working\nwith a company, which I am currently designing, that will offer more competitive alternatives to\nthe products, services and methods they are currently using. Offering a wide variety of\nbusiness support products and services to businesses nationwide will give us the opportunity\nto offer better group pricing, saving the owners money, as well as saving them valuable time,\nsince their needs will be met through one entity rather than dealing with many separate\ncompanies.\nI have found that millions of independently owned businesses across America now face the\nreality that they must work cooperatively with one another if they are to remain competitive with\nthe major conglomerates. Cooperative advertising, marketing, purchasing and expert advice in\nother areas are becoming a necessity if the independently owned small businesses across the\ncountry are to survive and thrive, yet no one has developed an organization designed to fulfill\nthese needs and capitalize on this market. The opportunity now exists for the creation of a\ncentral organization, a merchant alliance if you will, to coordinate these efforts and market\nthese products and services to independent business owners. I intend to create this alliance.\nPREPARATION\nI have spent limitless hours over the last seven years trying to figure out what went wrong in\nmy last company and how I could have prevented the debacle from occurring. I now\nunderstand a large sales company must have checks and balances in place designed to\ncontrol rogue sales personnel. The business model I have developed and the details\ndescribed below have taken countless hours of thought. Every detail was designed to\naccomplish three main objectives:\n1. All persons who achieve a minimum amount of success will be promoted to work\ndirectly with the company. The company will then be responsible for establishing a\ndirect relationship and accountability with each person prior to their being able to train\nand supervise others. This system is designed to ensure control and compliance of all\nsales personnel.\n2. We can offer a true equal opportunity, one that allows each person who chooses to get\ninvolved with the company to be immediately assigned to, and begin working directly\nwith someone who has already proven their ability to be successful in this business.\nThe immediate assistance and training that can be provided by an experienced person\nwill increase the chances for the success of the new person by dramatically reducing\nthe amount of wasted effort, improper conduct and confusion.\n3. Sales personnel will receive just compensation for their efforts. This program does not\nallow someone to earn income as a result of merely enrolling others. Those who are\nresponsible for establishing and managing the most business and earning the highest\nprofits for the company will receive equivalent earnings based on their results.\n\n\x0cMARKETING STRATEGY\nDirect sales personnel will market these products and services directly to business owners by\napproaching them in person, or by phone, and presenting the products and services either\npersonally or with the aid of video presentations. The wide variety of products will allow our\nsales people to present the most obvious products or services that a particular business will\nbenefit from initially and then add on other products and services as the business owners\nbegin to realize the benefits of our affiliation. A company that specializes in a particular area,\nsuch as employee benefit programs, will supply each product and service we represent.\nShould there be an apparent need for a business solution which does not yet exist, we will\nwork to design and develop the necessary products and programs. Our company will continue\nto develop and offer more innovative products and services, each designed to help the\nindependent business owners be more successful and profitable. Our strategy will be for the\nsales people to develop long-term relationships with the business owners through education,\ncommunication and marketing support.\nOur goal is to establish an independent business owner\'s network, or alliance, which will\ncoordinate mutual support for all members. By nationalizing the membership, all independent\nbusiness owners will have the opportunity to mutually support and promote each other\'s\nbusinesses, while contributing and benefiting from the massive advertising and buying power\nall members mutually can achieve. Obviously it will take many years to develop some of these\nprograms, products and services. I have already arranged to launch this program, pending\nyour response, with products that are currently available in the marketplace and plan to add\nadditional programs as the business network grows.\nCOMPENSATION PLAN\nAll sales personnel will be paid commission only. They will be eligible for increased\ncommissions and profit sharing based on the number and size of accounts that they are\npersonally responsible for establishing and maintaining. The pay structure will be a stair-step\ncommission program, allowing the sales people to earn a higher commission percentage as\ntheir total sales volume increases. They will also have the opportunity to earn residual\ncommissions, paid monthly, for ongoing contracted products and services which are billed\nmonthly such as website hosting, alarm monitoring and the like, provided the individual\nresponsible for establishing the account remains actively involved with the company.\nMy experience during the trial with my last company revealed that the vast majority of\nindividuals who failed with the Equinox opportunity failed to comply with our company policies.\nThey either never understood the program and hurt themselves by purchasing more products\nthan they could sell, or did not completely understand what they were doing and passed their\nIt became apparent that many of the\nignorance on to others who did the same.\nrepresentatives violated their signed contract with the company by purchasing more products\nthan they were allowed to have in their possession under our agreement. They did this in a\nfutile effort to earn checks on the production of others in their sales organization, while they\nwere unable to successfully sell the products themselves. I now realize this was a result of the\n\n\x0cfact that there was no system in place to insure direct communication from the company to the\nsales person in order to establish accountability.\nMy new concept assures these same short comings simply cannot occur. First and foremost,\nthe complexity of performing a business analysis, examining account statements, mastering\nsuccessful negotiation skills and the proper completion of contracts can be complicated and\nwill automatically eliminate the unskilled and intellectually challenged. Notwithstanding, it\nremains imperative that the company establishes checks and balances to ensure that all sales\npeople understand and comply with, not only our policies, but also state and federal\nregulations.\nFor these reasons, I have designed a three step "Certification" program that all supervisory\npersonnel must complete. In order to qualify, an individual must first demonstrate their\nunderstanding and competence of the program, establishing accounts and selling equipment\nthemselves and achieving a predetermined number of personal sales. Secondly, they will be\nrequired to pass a "Certification Test" demonstrating their comprehension of the company\'s\npolicies, qualifications and requirements, along with state and federal regulations and\nknowledge of the various products, services and techniques necessary to achieve successful\nresults dealing with independent business owners. Finally, they will be required to document\ntheir ability to properly train and develop other sales people by training a minimum of two\ntrainees, while working under the watchful eye of their certified supervisor, who has also\nestablished their ability to successfully sell the products and services to business owners.\nThese two trainees will then remain under the direction of the supervisor, subsequent to the\npromotion of the newly certified individual to the same supervisory level, who will now begin\nworking directly with the company. Both of these systems are designed to uncover any bad\nhabits, misconceptions or rogue attitudes.\nAs the company will obviously benefit from the expansion of the sales force by the efforts of\nthe certified supervisory personnel whom elect to recruit and train other successful sales\npeople, those who contribute to the growth of the company will be fairly compensated for their\nefforts. Certified supervisors will be paid the difference between the commissions and\nresiduals the sales trainees they assist are eligible to earn and the commissions and residuals\nthey are qualified to receive themselves. For example, if a sales trainee is qualified to earn\n50% commission on a sale and the supervisor who works with them is qualified to earn 70%,\nthe supervisor will be eligible to receive the difference of 20%. The same will hold true for the\nresidual earnings. These commission spreads would be permanent, provided the account\nstays active and the sales personnel remain productive. The certified supervisory personnel\nwill have the opportunity to earn commission splits on the sales, leases and residual incomes\nmade by the new sales person, as well as on any accounts that they inherit from others\nresulting from inactivity or termination.\nThere are only two positions under the company, qualified supervisors, who are responsible for\ntheir own accounts, as well as assisting trainees establish accounts themselves. Once a\ntrainee qualifies as a supervisor, they move away from their supervisor and connect directly\nwith the company, as outlined in the diagram below. There is no third position or level. This is\n\n\x0cessentially the same relationship between a sales manager and sales person working at a car\ndealership or broker and agent in the real estate or insurance business.\n\nTRAINING BONUS\nThe most productive certified sales people will also earn the opportunity to participate in two\nincentive programs. The training bonus will reward certified sales people who recruit and\nsuccessfully train other certified sales people. Since they will essentially be working as sales\nmanagers, training, supervising and assisting sales people, they will be rewarded for their\neffort and results by receiving a portion of the profits the company is earning in the form of a\n5% commission, based on the profits of the sales produced by those they personally are\nresponsible for training and assisting, provided they are qualified by producing a\npredetermined number of personal account either on a monthly or yearly basis.\nPROFIT SHARING\nThe most successful members of the sales organization will also have the opportunity to\nparticipate in a profit sharing program and receive profit sharing equivalent to the total sales\nthey are personally responsible for developing. Those who train and develop others who\nachieve the best results will be eligible to receive additional profit sharing equal to 5% of the\ntotal monthly sales generated by those they have trained directly and their sales team.\nDIRECT SALES PROGRAM\nI, as well as my attorneys, believe this is a straightforward direct sales program, not to be\nmisconstrued as a multi-level marketing, pyramid or endless-chain scheme. Below I have\nlisted several reasons why this direct sales program does not contain aspects defining multilevel marketing, pyramid or endless-chain schemes.\n1. There are no sign-up fees to get involved with this company. The only expenses which\ncan be incurred would be for sales tools like business cards, training materials and\npresentation aids, all of which are not required to participate in the program. Aside from\nthe business cards which are personalized, any sales tools which are current and in\nresalable condition can be returned for a full refund within 30 days, should anyone\n\n\x0cinvolved change their mind. Reasonable exceptions to the 30 day limitation certainly\nwill be granted.\n\n2. There is no benefit or income earned for enrolling others. The mere act of enrolling\nothers into the sales program offers no incentive and will produce no income. The only\nmethod of earning income in this sales company is to sell products and services directly\nto the end user; business owners.\n3. The only commissions paid to anyone will be as the result of products or services being\nsold directly to end-users. There are no products or services which can be purchased\nby, or sold to, any sales people involved in this company. This will be true with the\nexception of someone who happens to own their own business outside of the\nopportunity and decides to become end users of the services for the sole benefit of their\nother business.\n4. All sales volume needed for promotions must be personal sales. Sales personnel will\nnot be promoted based on the sales of those they enroll. They can however, earn\nresidual income if they inherit the responsibility of managing accounts which were\nestablished by someone else, but were later transferred to them because the original\nsales person was either terminated for cause or chose to no longer take responsibility\nfor managing that account. As an example; if I was a trainee and you were my certified\nsupervisor and I established two business accounts before deciding to quit and pursue\na different career, my accounts would then be assigned to you and you would begin\nreceiving the monthly residual earnings in exchange for your efforts in managing the\naccounts and maintaining the relationship with those particular businesses.\n5. There is no endless-chain pay plan. Those who decide to enroll other sales people into\nthe business receive no monetary compensation or benefit from the enrollment. All new\nsales personnel will be assigned to work with an experienced and successful certified\nsupervisor. All supervisory personnel are on the same level, working directly with the\ncompany, and are not stacked, chained, pyramided or part of any down-line. All sales\npersons will work with the experienced certified supervisor until they achieve the same\nlevel of success, at which time they are also transferred to work directly with the\ncompany and are not stacked, chained, pyramided or part of any down-line. This will\ncreate a direct relationship between the company and all those individuals who have\nproven their ability to succeed in the business, allOWing the company to ensure proper\nconduct of the certified supervisory personnel and their influences on new trainees.\nThis is the same manner in which real estate agents can, through sales and\nperformance, earn the right to become brokers and work directly with the parent\ncompany while utilizing the efforts of new agents to help the company grow. In\nessence, the company works directly with all certified supervisory personnel who, in\nturn, work directly with all sales trainees in the same way a national retail sales\ncompany would have district managers overseeing store managers.\n6. The only products a sales trainee or certified supervisor will be able to purchase from\nthe company will be a company sales manual and possibly pertinent video\n\n\x0cpresentations. There are no commissions paid to anyone for the purchase of these\nsales tools. The sales tools are solely designed and made available to sales personnel\nin order to help them be more successful in their efforts of selling products and services\nto businesses, the purchase of which is not a requirement to work with the company\nand is strictly voluntary. These sales tools will be sold with a 30-day money back\nguarantee provided they are returned in resalable condition. Certified supervisors must\nsign a contract stating they understand they are not permitted to have or possess more\nthan ten training manuals, designed for immediate availability to new trainees, at any\ntime without having a documented reason and only after receiving written permission\nfrom the company. Any violation of this policy could result in termination.\n7. There will be no products, services or licenses purchased or inventoried by sales\npersonnel. There will be no other products or services that can be resold to other sales\npersonnel. There are no sales of equipment or services made to sales personnel either\nfrom the company or from one another. No products can be stored or inventoried by\nsales personnel other than a limited amount of sales tools with a refund policy in place\nas defined above.\n8. All products and services are sold, contracted and shipped directly to end users.\n9. Any opportunity to attend sales training programs will be offered on a voluntary basis\nand will not be a requirement to work with the company. All participants will be notified\nof this policy and will be required to sign an agreement stating these facts prior to\nadmittance to any such events.\n10. All persons involved will be required to provide documentation before making any\nincome claims. Any false, misleading or undocumented income claims will result in\ntermination of the individuals responsible and all participants involved with the company\nwill be notified of such violations and terminations.\nSUMMARY\nI have spent the last several years meeting with business owners and discussing the problems\nthey are encountering. I have been exploring alternatives and solutions while completing the\nmarket research necessary to create this company. Most of the business owners I have\nspoken with are very excited about the benefits they will gain as a result of becoming part of\nthis merchant alliance program. No aspects of this business plan have been initiated as I\nunderstand that your agency will not comment regarding ongoing business entities. I am\nprepared to begin this business venture after I receive a response from your office and will\ncontinue to prepare for the initial launch as I await your reply.\nI feel it is necessary to know that your agency agrees this is simply a direct sales program\nbefore moving forward. Alternatively, I would also appreciate being notified if there are any\naspects of this program you feel may be defined otherwise, so that I can make any necessary\nchanges to ensure complete compliance prior to the launch of the company.\n\n\x0cAs unfortunate as it may be, I have learned the hard way that agencies like the Federal Trade\nCommission, on occasion, have a different perspective regarding these issues than even\nhighly respected law firms. This is why I am most interested in understanding your\nperspective, as the opinion of your agency is certainly of utmost importance. I am willing to do\nanything in my power to assure you my intentions are honorable. My past experience with\nyour agency was far too costly; both emotionally and financially, to ever want to encounter a\nsimilar experience. I am willing to do whatever it takes to work within your requirements, I am\nsimply asking for an advisory opinion so I know I am in complete compliance. I do not want to\nbe involved in anything that could be misconstrued as multi-level marketing or a pyramid\nscheme and will continue to make every attempt to ensure I comply with all federal, state and\nlocal laws.\nI realize you and your offices are extremely busy and I certainly respect and appreciate your\ntime and response in this matter. If I can be of any assistance to answer any questions or\nprovide more information I can be reached by phone at (775) 786-2455, or bye-mail at\nBG1 RHINO@AOL.COM. You can rest assured I will work relentlessly to make certain all\nthose who choose to work with this company will have a realistic opportunity to be successful\nin this business-to-business enterprise; confirming every aspect of this endeavor is in\ncompliance with your agency is an important part of this objective.\nThank you for your time and consideration in these matters.\n\ns~\n\nBil~\'UI~I"""\'-\n\n\x0cORIGINAL\n\nBILL GOULDD\n20625 Cooke Drive\nReno, NV 89521\nApril 27, 2007\nMr. Donald S. Clark\nOffice of the Secretary\nFederal Trade Commission\n600 Pennsylvania Avenue, N.W.\nWashington, D.C. 20580\nRe: Request for an advisory opinion relating to a direct sales program as it relates to the\nFederal Trade Commission definitions regarding multi-level marketing.\nDear Mr. Clark;\nI owned and operated Equinox International and, as a result, was the defendant in case #CVS-99-0969-JBR-RLH. Prior to this case I had spent hundreds of thousands of dollars in\nattorney\'s fees and even employed in house council to ensure we were compliant with all laws,\nregulations and requirements, both state and federal. I was stunned and traumatized when\nyour agency charged my company with wrongdoing, as council had continually assured me\nthat everything we were doing was in complete compliance with all agency regulations.\nI am writing to you as I never again want to go through another devastating incident like the\none I experienced as a result of believing and being assured by council that I was working\nwithin the parameters of your agency, only to discover the opinion of your organization differed\nfrom the opinion of those whom I relied upon for their expertise.\nTherefore, I would like to receive confirmation, directly from your organization, that my\nproposed business venture in direct sales is in compliance with your organization and does not\nlend itself to being defined as a multi-level marketing, pyramid scheme or endless-chain\nscheme.\nI will describe my business model, marketing strategy and compensation plan, as well as why\nI, and my attorneys, feel this concept does not constitute a multi-level marketing, pyramid or\nendless-chain scheme. I understand that I am solely responsible for the facts and content of\n\n\x0cthis correspondence as you will be relying on the accuracy of the information I am providing as\nthe basis for the rendering of your decision. I would however, like to reserve the right to\npossibly change the titles used to describe the level sales people achieve and the commission\namounts they can earn at those levels, as these things may need to be adjusted in order to\nachieve maximum market potential. I will be happy to notify you in writing of any changes that\nI find become necessary. Rest assured, with these small exceptions, the facts contained\nwithin regarding my request and business plan will remain unchanged.\nBUSINESS MODEL\nSeveral years ago my wife started working in the credit card industry. From time to time she\nhas come to me with issues and problems merchants she had contacted were forced to deal\nwith. It became readily apparent that many independent business owners are now facing\nalmost insurmountable obstacles in today\'s business environment. The number of large\ncorporations and their fierce competitiveness is unprecedented in the history of American\nbusiness. Companies like Wal-Mart, Home Depot, Lowe\'s and Sports Authority, as well as\nmajor restaurant chains such as Friday\'s, Olive Garden and Outback Steak House, just to\nname a few, have sent countless independent business owners into bankruptcy. Their\nmassive buying power allows these companies to buy and sell products for less and advertise\nmore, while earning more profits than the small independent business owners. Additionally,\ntheir outstanding profitability affords these large companies the ability to hire experts in the\nfields of advertising, accounting, banking, insurance, computers, software, promotions, sales\ntraining and marketing. As a result, they usually have superior business plans and support\nsystems in place and actually pay less for them, than their independently owned competitors.\nIndependent business owners, while understanding many specific aspects of their particular\nbusinesses, often times have little knowledge or experience regarding advertising, marketing,\nwholesale product purchasing, banking, credit card processing, check services, gift and loyalty\ncard programs, professional sales techniques, website development, web hosting, employee\nretention and benefit programs, security and alarm monitoring, tool re-imbursement programs,\netc. Business owners are frequently unaware of the many alternatives available to them and\nwhat are competitive rates for these products and services. As a result, large companies can\noffer their customers more effective advertising and pricing while offering their employees\nhigher pay and benefits, putting thousands of independent businesses out of business every\nyear.\nMany small business owners are also unaware of the many products and services available to\nthem that are designed to increase their sales while also decreasing their expenses and costs.\nThere are millions of independent businesses across America that could benefit from working\nwith a company, which I am currently designing, that will offer more competitive alternatives to\nthe products, services and methods they are currently using. Offering a wide variety of\nbusiness support products and services to businesses nationwide will give us the opportunity\nto offer better group pricing, saving the owners money, as well as saving them valuable time,\nsince their needs will be met through one entity rather than dealing with many separate\ncompanies.\n\n\x0cI have found that millions of independently owned businesses across America now face the\nreality that they must work cooperatively with one another if they are to remain competitive with\nthe major conglomerates. Cooperative advertising, marketing, purchasing and expert advice in\nother areas are becoming a necessity if the independently owned small businesses across the\ncountry are to survive and thrive, yet no one has developed an organization designed to fulfill\nthese needs and capitalize on this market. The opportunity now exists for the creation of a\ncentral organization, a merchant alliance if you will, to coordinate these efforts and market\nthese products and services to independent business owners. I intend to create this alliance.\nPREPARATION\nI have spent limitless hours over the last five years trying to figure out what went wrong in my\nlast company and how I could have prevented the debacle from occurring. I now understand a\nlarge sales company must have checks and balances in place designed to control rogue sales\npersonnel. The business model I have developed and the details described below have taken\ncountless hours of thought. Every detail was designed to accomplish three main objectives:\n1. All persons who achieve a minimum amount of success will be promoted to work\ndirectly with the company. The company will then be responsible for establishing a\ndirect relationship and accountability with each person prior to their being able to train\nand supervise others. This system is designed to ensure control and compliance of all\nsales personnel.\n2. We can offer a true equal opportunity, one that allows each person who chooses to get\ninvolved with the company to be immediately assigned to, and begin working directly\nwith, someone who has already proven their ability to be successful in this business.\nThe immediate assistance and training that can be provided by an experience person\nwill increase the chances for the success of the new person by dramatically reducing\nthe amount of wasted effort, improper conduct and confusion.\n3. Sales personnel will receive just compensation for their efforts. This program does not\nallow someone to eam income as a result of merely enrolling others. Those who are\nresponsible for establishing and managing the most business and eaming the highest\nprofits for the company will receive equivalent eamings based on their results.\nMARKETING STRATEGY\nDirect sales personnel will market these products and services to business owners by\napproaching them in person, or by phone, and presenting the products and services either\npersonally or with the aid of on-line video presentations. The wide variety of products will allow\nour sales people to present the most obvious products or services that a particular business\nwill benefd: from initially and then add on other products and services as the business owners\nbegin to realize the benefits of our affiliation. A company that specializes in a particular area,\nsuch as employee benefit programs, will supply each product and service we represent.\nShould there be an apparent need for a business solution which does not yet exist, we will\nwork to design and develop the necessary products and programs. Our company will continue\n\n\x0cto develop and offer more innovative products and services, each designed to help the\nindependent business owners be more successful and profitable. Our strategy will be for the\nsales people to develop long-term relationships with the business owners through education,\ncommunication and marketing support.\nOur goal is to establish an independent business owner\'s network, or alliance, which will\ncoordinate mutual support for all members. By nationalizing the membership, all independent\nbusiness owners will have the opportunity to mutually support and promote each other\'s\nbusinesses, while contributing and benefiting from the massive advertising and buying power\nall members mutually can achieve. Obviously it will take many years to develop some of these\nprograms, products and services. I have already arranged to launch this program, pending\nyour response, with products that are currently available in the marketplace and plan to add\nadditional programs as the business network grows.\nCOMPENSATION PLAN\nAll sales personnel will be paid commission only. They will be eligible for increased\ncommissions and profit sharing based on the number and size of accounts that they are\npersonally responsible for establishing and maintaining. The pay structure will be a stair-step\ncommission program, allowing the sales people to eam a higher commission percentage as\ntheir total sales volume increases. They will also have the opportunity to eam residual\ncommissions, paid monthly, for ongoing contracted products and services which are billed\nmonthly such as website hosting, alarm monitoring and the like, provided the individual\nresponsible for establishing the account remains actively involved with the company.\nMy experience during the trial revealed that the vast majority of individuals who failed with the\nEquinox opportunity failed to comply with our company policies. They either never understood\nthe program and hurt themselves through ignorance, or did not completely understand what\nthey were doing and passed their ignorance on to others who did the same. It became\napparent that many of the representatives violated their signed contract with the company by\npurchasing more products than they were allowed to have in their possession under our\nagreement. They did this in a futile effort to eam checks on the production of others in their\nsales organization, while they were unable to successfully sell the products themselves. This\nwas a result of the fact that there was no system in place to insure direct communication from\nthe company to the sales person in order to establish direct accountability.\nMy new concept assures these same short comings simply cannot occur. First and foremost,\nthe complexity of performing a business analysis, examining account statements, mastering\nsuccessful negotiation skills and the proper completion of contracts can be complicated and\nwill automatically eliminate the unskilled and intellectually challenged. Not with standing, it\nremains imperative that the company establishes checks and balances to ensure that all sales\npeople understand and comply with not only our policies, but also state and federal\nregulations.\nFor these reasons, I have designed a three step "Certification" program that all supervisory\npersonnel must complete. In order to qualify, an individual must first demonstrate their\n\n\x0cunderstanding of the program and their ability to establish accounts and sell equipment\nthemselves by achieving a predetermined number of personal sales. Secondly, they will be\nrequired to pass a "Certification Tesf\' demonstrating their comprehension of the company\'s\npolicies, qualifications and requirements, along with state and federal regulations and\nknowledge of the various products, services and techniques necessary to achieve successful\nresults dealing with independent business owners. Finally, they will be required to document\ntheir ability to properly train and develop other sales people by training a minimum of two\ntrainees, while working under the watchful eye of their certified supervisor, who is also\nsuccessful at selling the products and services to business owners. These two trainees will\nthen remain under the direction of the supervisor, subsequent to the promotion of the newly\ncertified individual to the same supervisory level, who will now begin working directly with the\ncompany. Both of these systems are designed to uncover any bad habits, misconceptions or\nrogue attitudes.\nAs the company will obviously benefit from the expansion of the sales force by the efforts of\nthe certified supervisory personnel whom elect to recruit and train other successful sales\npeople, those who contribute to the growth of the company will be fairly compensated for their\nefforts. Certified supervisors will be paid the difference between the commissions and\nresiduals the sales trainees they assist are eligible to eam and the commissions and residuals\nthey are qualified to receive themselves. For example, if a sales trainee is qualified to eam\n50% commission on a sale and the supervisor who works with them is qualified to eam 70%,\nthe supervisor will be eligible to receive the difference of 20%. The same will hold true for the\nresidual eamings. These commission spreads would be permanent, provided the account\nstays active and the sales personnel remain productive. The certified supervisory personnel\nwill have the opportunity to eam commission splits on the sales, leases and residual incomes\nmade by the new sales person, as well as on any accounts that they inherit from others\nresulting from inactivity or termination. This is essentially the same relationship between a\nsales manager and sales person working at a car dealership or broker and agent in the real\nestate or insurance business.\nTRAINING BONUS\nThe most productive certified sales people will also eam the opportunity to participate in two\nincentive programs. The training bonus will reward certified sales people who recruit and\nsuccessfully train other certified sales people. Since they will essentially be working as sales\nmanagers, training, supervising and assisting sales people, they will be rewarded for their\neffort and results by receiving a portion of the profits the company is eaming in the form of a\n5% commission, based on the profits of the sales produced by those they personally are\nresponsible for training and assisting.\nPROFIT SHARING\nThe most successful members of the sales organization will also have the opportunity to\nparticipate in a profit sharing program and receive profit sharing equivalent to the total sales\nthey are personally responsible for developing. Those who train and develop others who\n\n\x0cachieve the best results will be eligible to receive additional profit sharing equal to 5% of the\ntotal monthly sales generated by those they have trained directly and their sales team.\nDIRECT SALES PROGRAM\nI, as well as my attorneys, believe this is a straight forward direct sales program, not to be\nmisconstrued as a multi-level marketing, pyramid or endless-chain scheme. Below I have\nlisted several reasons why this direct sales program does not contain aspects defining multilevel marketing, pyramid or endless-chain schemes.\n1. There are no sign up fees to get involved with this company. The only expenses which\ncan be incurred would be for sales tools like business cards, training materials and\npresentation aids, all of which are not required to participate in the program. Aside from\nthe business cards which are personalized, any sales tools which are in current and in\nresalable condition can be returned for a full refund within 30 days, should anyone\ninvolved change their mind. Reasonable exceptions to the 30 day limitation certainly\nwill be granted.\n2. There is no benefll: or income earned for enrolling others. The mere act of recruiting\nothers into the sales program offers no incentive and will produce no income. The only\nmethod of earning income in this sales company is to sell products and services directly\nto end user business owners.\n3. The only commissions paid to anyone will be as the result of products or services being\nsold to retail, end-user accounts. There are no products or services which can be\npurchased by, or sold to, any sales people involved in this company. This will be true\nwith the exception of someone who happens to own their own business outside of the\nopportunity and they decide to become end users of the services for the sole benefit of\ntheir other business.\n4. All sales volume needed for promotions must be personal sales. Sales personnel will\nnot be promoted based on the sales of those they enroll. They can however, earn\nresidual income if they inherit the responsibility of managing accounts which were\nestablished by someone else, but was later transferred to them because the original\nsales person was either terminated for cause or chose to no longer take responsibility\nfor managing that account. As an example; if I was a trainee and you were my certified\nsupervisor and I established two business accounts before deciding to quit and pursue\na different career, my accounts would then be assigned to you and you would begin\nreceiving the monthly residual earnings in exchange for your efforts in managing the\naccounts and maintaining the relationship with those particular businesses.\n5. There is no endless-chain pay plan. Those who decide to enroll other sales people into\nthe business receive no monetary compensation or benefIT from the enrollment. All new\nsales personnel will be assigned to work with an experienced and successful certified\nsupervisor. All supervisory personnel are on the same level, working directly with the\ncompany, and are not stacked, chained, pyramided or part of any down-line. All sales\n\n\x0cpersons will work with the experienced certified supervisor until they achieve the same\nlevel of success, at which time they are also transferred to work directly with the\ncompany and are not stacked, chained, pyramided or part of any down-line. This will\ncreate a direct relationship between the company and all those individuals who have\nproven their ability to succeed in the business, allowing the company to ensure proper\nconduct of the certified supervisory personnel and their influences on new trainees.\nThis is the same manner in which real estate agents can, through sales and\nperformance, eam the right to become brokers and work directly with the parent\ncompany while utilizing the efforts of new agents to help their company grow. In\nessence, the company works directly with all certified supervisory personnel who, in\ntum, work directly with all sales trainees in the same way a national retail sales\ncompany would have district managers overseeing store managers.\n6. The only products a sales trainee or certified supervisor will be able to purchase from\nthe company will be a company sales manual and possibly pertinent video\npresentations. There are no commissions paid to anyone for the purchase of these\nsales tools. The sales tools are solely designed and made available to sales personnel\nin order to help them be more successful in their efforts of selling products and services\nto businesses, the purchase of which are not a requirement to work with the company\nand are strictly voluntary. These sales tools will be sold with a 30-day money back\nguarantee provided they are retumed in resalable and current condition. We will\nobviously make announcements prior to, and make exceptions immediately following,\nany changes in the sales materials. Certified supervisors must sign a contract stating\nthey understand they are not permitted to have or possess more than ten training\nmanuals, designed for immediate availability to new trainees, at any time without having\na documented reason and only after receiving written permission from the company.\nAny violation of this policy could result in termination.\n7. There will be no products, services or licenses purchased or inventoried by sales\npersonnel. There will be no other products or services that can be resold to other sales\npersonnel. There are no sales of equipment or services made to sales personnel either\nfrom the company or from one another. No products can be stored or inventoried by\nsales personnel other than a limited amount of sales tools with a refund policy in place\nas defined above.\n8. All products and services are sold, contracted and shipped directly to end users.\n9. Any opportunity to attend sales training programs will be offered on a voluntary basis\nand will not be a requirement to work with the company. All participants will be notified\nof this policy and will be required to sign an agreement stating these facts prior to\nadmittance to any such events.\n10.AII persons involved will be required to provide documentation before making any\nincome claims. Any false, misleading or undocumented income claims will result in\ntermination of the individuals responsible and all participants involved with the company\nwill be notified of such violations and terminations.\n\n\x0cSUMMARY\nI have spent the last several years meeting with business owners and discussing the problems\nthey are encountering. I have been exploring alternatives and solutions while completing the\nmarket research necessary to create this company. Most of the business owners I have\nspoken with are very excited about the benefits they will gain as a result of becoming part of\nthis merchant alliance program. No aspects of this business plan have been initiated as I\nunderstand that your agency will not comment regarding ongoing business entities. I am\nprepared to begin this business venture after I receive a response from your office and will\ncontinue to prepare for the initial launch as I await your reply.\nI feel it is necessary to know that your agency agrees this is simply a direct sales program\nbefore moving forward. Alternatively, I would also appreciate being notified if there are any\naspects of this program you feel may be defined otherwise, so that I can make any necessary\nchanges to ensure complete compliance prior to the launch of the company.\nAs unfortunate as it may be, I have learned the hard way that agencies like the Federal Trade\nCommission, on occasion, have a different perspective regarding these issues than even\nhighly respected law firms. This is why I am most interested in understanding your\nperspective, as the opinion of your agency is certainly of utmost importance. I am willing to do\nanything in my power to assure you my intentions are honorable. My past experience with\nyour agency was far too costly; both emotionally and financially, to ever want to encounter\nanother one. I am willing to do whatever it takes to work within your requirements, I am simply\nasking for an advisory opinion so I know we are in compliance. I do not want to be involved in\nanything that could be misconstrued as multi-level marketing or a pyramid scheme and will\ncontinue to make every attempt to ensure we comply with all federal, state and local laws.\nI realize you and your offices are extremely busy and I certainly respect and appreciate your\ntime and response in this matter. If I can be of any assistance to answer any questions or\nprovide more information I can be reached by phone at (561) 702~1321, or bye-mail at\nBG1RHINO@AOL.COM. You can rest assured I will work relentlessly to make certain all\nthose who choose to work with this company will have a realistic opportunity to be successful\nin this business-to-business enterprise. Confirming that every aspect of this endeavor is in\ncomplete compliance with your agency is an important aspect of this objective.\nThank you for your time and consideration in these matters.\n\nCc: Phil Sechler\nWilliams & Connolly\n\n\x0c'


b'UNITFJ) STATES OF AMER!CI\\\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\nBurc~u of Compc1i1ion\n\nDecember 10, 2C07\n\nAlden f\'. J\\bholt\nJ\\ssnciute DircclOr\n\nDirect I)ial\n(202) 326\xc2\xb7288 l\n\nMr. Alan L. Cohen\nVice President & General Counsel\nCom1cil of Better Business Bureaus, Inc.\n4200 Wilson Boulevard, Suite 800\nArlington, VA 22203-1838\n\nDear Mr. Cohen:\nThis Jetter responds to your request on be.half of the Council of Better Business Bureaus\n("CBBB") for an advisory opinion regarding a proposed program to encourage increased\nadvertising of healthier choices and healthy lifestyles to children under 12. \' You have asked\nwhether, based on the facts submitted, the proposed program has any potential antitrnst\nimplications and is likely to result in an enforcement action by the Federal Trade Commission.\nWe have detennined that this matter is appropriate for a Bureau of Competition staff (..BC\nstaff\'\') opinion letter pursuant to Rule l.l(b) of the Commission\'s Rules ofPractice, 16 C.F.R. \xc2\xa7\n1. J(b). On the basis of infonnation that you provided in your letter of January 19, 2007, BC staff\nhave no present intention to recommend a challenge to implementation of the CBBB program as\nproposed. This conclusion is entirely dependent on the accuracy of our.understandiug of\npertinent facts concerning the advertising program. Our understanding of those facts, in tum, is\nentirely dependent on the infonnation that you provided. Our present enforcement inten1.io11s\nmight be different should the CBBB advertising program not be as described in your letwr and\nother materials.\n\nBackground\nWe understand that the CBBB is the national organization for the Better Businefs\nBureau ("BBB") syslem whose goal is to foster tiust between businesses and consumers. The\nCBBB administers the advertisiug industry\'s voluntary self-regulation program, which includes.\nthe National Adver1ising Division ("NAD") and the Children\'s Adve1tising Review Unil\n("CARU"). We understand that NAD resolves complaints involving the truth or accuracy of\n\nLetter of January 19, 2007 from Alan L. Cohen to Donald Clark, Secretaiy of th\xe2\x80\xa2~\nFederal Trade Commission (hereafter cited as "Cohen Letter").\n1\n\n\x0cnational advertising and CARU is a self~regulatory program that seeks to insure that advertising\nintended for children is not deceptive, unfair or inappropriate.\nYou indicate that in recent years regulatory authorities and advocacy groups have\nexpressed concern about the growth of childhood obesity in the U.S. and tha.t these groups have\nurged the food and beverage industry to change the mix of messages in their advertising directed\nto children. We understand that these same groups have also expressed concerns about related\nindustry practices, such as the use of games that include advertising, licensed characters t:>\npromote their products, product placement, and the marketing of food and beverage products in\nschools. You indicate that the CBBB and the National Advertising Review Council conducted a\nreview of CARU standards and that the proposed Children\'s Food and Beverage Adverti.-ing\n!nitiative2 ("Initiative") was designed to address the concerns that had been expressed.\nWe understand that the goal of the Initiative is to encourage children to make hea:\xc2\xb7thier\ndietary choices and pursue healthy lifestyles by changing the mix of advertising directed lo them.\nYou indicate that the program will be staffed by the CBBB and wilJ be open to any food 1>r\nbeverage advertiser. To participate in the Initiative an advertiser must agree to take the following\nactions with respect to advertising primarily directed to children under 12:\n"Devote at least half their advertising on television, radio, print and Internet to pmmote\nhealthier dietary choices andfor to messages that encourage good nutrition or healthy\nlifestyles.\nLimit products shown in interactive games to healthier dietary choices, or incorpc\xc2\xb7rate\nhealthy lifestyle messages into the games.\nNot advertise food or beverage products in elementaiy schools.\n\nNot engage in food and beverage product placement in editorial and entertainment\ncontent primarily directed to children under 12.\nReduce the use of third-party licensed characters in advertising that does not mee\xc2\xb7.: the\nInitiative\'s product or messaging cdtcria.\'\'3\nYou indicate that as of January 19, 2007 a number of companies have already agreed to\nparticipate in the lnitiative.4\n\nWe understand that each participant will draft a "Pledge" that will commit the co:npany\nto devote more tban 50% of its advertising to children under 12 to:\n\n2\n\nAn "Overview,\'\' entitled "Children\'s Food and Beverage Advertising Initiative," was\nattached to the Cohen letter and sets out in some detail the elements of the Initiative.\n3\n\nCohen letter, p. 2.\n\n4\n\nCadbury Schweppes USA; Campbell Soup Company; The Coca-Cola Company:\nGeneral Mills, Inc.; The Hershey Company_; Kellogg Company; Kraft Foods Inc.; McDonald\'s;\n\nPepsiCo, Inc.; and Unilever.\n\n\x0ca) products that represent healthy dietary choices in accordance with standards consistent\nwith established scientific/government standards5 , and/or\nb) advertising that prominently includes healthy lifestyle messages designed to appeal to\nthe intended audience. 6\nYou ir;dicate that the Pledge will be developed by each participant in consultation with Initiative\nstaff, who will also monitor compliance with each company\'s Pledge. The staff will revfow\nadvertising materials, product infonnation, and media impression information submitted by each\nparticipant. We understand that information submitted by participants on a confidential basis will\nnot be shared with other participants or outside groups. You indicate that the Initiative will\npublicly disclose the results of its monitoring, will develop procedures for expulsion of a\nparticipant that does not comply with its Pledge, and will publicly disclose any expulsion:;, with\na refen\xc2\xb7al made to regulatory authorities.\n\nAnalysis of CBBB\'s Proposed Initiative\nThe value of trnthful, non-deceptive advertising has been recognized by the Commission\nand the courts, as has the ham1 that may be suffered by consumers when such tmthful\nadvertising is limited by agreement among firms in an industry. 7 However, the antitmst hws do\n\n5\n\nExamples of govemment standards provided in the Overview are:\n\n- FDA defined "healthy" foods [ CFR 10l.65(d)(2)];\n-Products that qualify for an FDA authorized health claim [CFR 101.70-101.83]\n--- Products meeting FDA/USDA criteria for claims of "free," "low," or "reduced" calorie:>, total\nfat, saturated fat, sodium or sugar\n- Products that qualify for the USDA Healthier School Challenge Program criteria for\nSales/Service of A La Carte and/or Vended Items\n- Principles addressing recommended consumption by children tmder 12 under USDA Dietary\nGuidelines and My Pyramid\n-- Products rnpresenting a portion control option, such as products advertised and sold in .1\npackage size of 100 calories or less_\n\n6\n\nExamples given in the Overview include:\n\n- messaging that encourages physical activity\n\xc2\xb7--messaging that encourages good dietary habits, consistent with established scientific and/or\ngovernment standards such as USDA Dietary Guidelines and My Pyramid\n\nTruthful, non-deceptive advertising promotes competition by providing consumr~rs with\nimportant infonnation about product prices, quality, and availability, among other facton. that\nconsumers consider in their purchasing decisions. See, e.g., Virginia State Board ofPlw:wacy v.\nVirginia Citizens Consumer Council, Inc_, 425 U.S. 748, 765 ( 1976). Agreements on standards\namong competitors that restrict truthful, nondeceptivc adver6sing, therefore, have the pO\'.\':ential\n7\n\n\x0cnot forbid legitimate self-regulation that benet1ts consumers. As the Commission has stat~,\n"[s]uch self-regulatory activity serves legitimate purposes, and in most cases can be expe1;ted to\nbenefit, rather than to injure, competition and consumer welfare."8\nBC staff typically analyze agreements among firms that may lead to restrictions on some\nfonns of advertising under the "rule of reason" test rather than the per se test. 9 Under a mle of\nreason test, BC staff weighs the potential for competitive harm arising from an agreement among\ncompetitors against any procompeti tive or efficiency benefits produced by the agreement. If BC\nstaff concludes that the procompetive benefits more than offset the likely competitive harm, BC\nstaff will not pursue an enforcement action. Given the facts as we tmderstand them in this\ninstance, it is unlikely that BC staff would conclude that potential anticompetitive effects arising\nfrom the implementation of the CBBB Initiative would outweigh procompetitive benefits. We\nfind therefore that the CBBB Initiative does not warrant a staff recommendation to the\nCommission for enforcement action at this time . We reach this conclusion for a number :>f\nreasons.\nFirst, CBBB\'s adoption of the proposed Initiative would not create an agreement :uuong\nfim1s to restrict advertising. Based on the information supplied, it appears that any agreement\nwould be voluntruy, would be between an individual finn and the CBBB Initiative, and would\nalter the mix of advertising but not limit its amount in any way. The Initiative would enc<>urage\nindividual self-restraint by firms but would not establish a regime of self-regulation among firms\nin an industry. Limitations on output and advertising, and increased prices to consrnners ure the\ntraditional concerns of antitrust; it docs not appear that the Initiative has the potential to cause\nharm to consumers in either respect.\nSecond, the CBBB Initiative appears to have a significant pro-consumer rational<: by\nby encouraging adve11ising that may encourage children under 12 to select foods or or beverages\nthat may be the healthiest available. According to the Cohen letter and the accompanying\ndocument outlining the Initiative, the oveniding goal of the proposed program is to change the\nmix of messages i11 food and beverage adve:1ising and other promotional efforts directed to\nchildren in order to confront a national health issue. If successful, it appears that the lniti<itive\nmay make a contribution to that goal without creating any hann to consumers that might flow\nfrom a reduction in competition.\n\nto restrict competition and harm consumers. See, e.g., American Medical Association, 96. F.T.C.\nat 1005.\n8\n\nAmerica11 Academy of Ophthalmology, 101F.T.C1018 (1983) (advisory opinion); see\n\nalso American Medical Association, 117 F.T.C. 1091 (1994) (advisory opinion); Ameriw11\n\nMedical Association, 94 F.T.C . 701, 1029 (1979), ajf\'d as modified, 638 F .2d 443 (2d Cir. 1980),\naffd by an equaf~v divided Court, 455 U.S. 676 (1982).\n9\n\nSpecifically, BC staff\'s analysis follows the framework set out in the Federal Trade\nCommission/Depar1ment of Justice Guidelines for Collaborations Among Competitors, <Jvailable\nat http://www.ftc.gov/os/2000/04/ftcclojguidclines.pdf, and in the Commission\'s decision in In re\nPo~vgram Holding. Inc., Dkt. No. 9298 (2003), 2003 WL 2170765 (F.T.C.), aff\'d, Po(l-7~ram\nHolding, Inc. v. FTC, 416 F.3d 29 (D.C. Cir. 2005).\n\n\x0cConclusion\nFor the reasons stated above, we believe that. on balance, the likely benefits ofCBBB\'s\nproposed Initiative more than offset any potential for competitive hann. On this basis, BC staff\nhave no present intention to recommend a challenge to CBBB \'s Initiative.\nThis letter sets out the views of the staff of the Bureau of Competition, as authorized by\nRule l.l(b) of the Commission\'s Rules of Practice, 16 C.F.R. \xc2\xa7 1. l(b). Under Commission Rule\nl .3(c), 16 C.F.R. \xc2\xa7 l .3(c), the Commission is not bound by this staff opinion and reserves the\nright to rescind it at a later time. In addition, this Office retains the right to reconsider the\nquestions involved and, with notice to the requesting party, to rescind or revoke the opinion if\nimplementation of the proposed program results in substantial anticompetiutive effects, if the\nprogram is used for improper purposes, if facts change significantly, or if it would be in ti1e\npublic interest to do so.\nSincerely yours,\n\nAlden F. Abbott\n\nAssociate .Director\n\n\x0c'


b'4200 Wilson Boulevard, Suite 800\nArlington, Virginia 22203-1838\n703.276.0100\n\n703.525.8277 (fax)\n\nCOUNCIL OF BETTER BUSINESS BUREAUS, INC.\n\nJanuary 19, 2007\n\nMr. Donald Clark\n\nSecretary of the Commission\nFederal Trade Commission\n600 Pennsylvania Avenue, NW\nWashington, D.C. 20580\n\nRE: Request for FTC Advisory Opinion on Children\xe2\x80\x99s Food and Beverage\nAdvertising Initiative\n\nDear Mr. Clark:\n\nT am writing on behalf of the Council of Better Business Bureaus to request an advisory\nopinion concerning an initiative that will be administered by the Council of Better\nBusiness Bureaus to encourage increased advertising of healthier dietary choices and\nhealthy lifestyles to children under 12. We are secking an opinion as to whether any\nelement of the proposed program is likely to result in an enforcement action by the\nCommission under Section 5 of the Federal Trade Commission Act or other Federal\nantitrust laws.\n\nThe Council of Better Business Bureaus (\xe2\x80\x9cCBBB\xe2\x80\x9d) is the national organization for the\nBetter Business Bureau (\xe2\x80\x9cBBB\xe2\x80\x9d) system. The BBB system is dedicated to fostering trust\nbetween businesses and consumers, and since its beginning in 1912 has grown to become\nthe most trusted name and recognized advocate for promoting ethical business and\nadvertising practices.\n\nThe CBBB administers the advertising industry\xe2\x80\x99s voluntary self-regulation program,\nwhich includes the National Advertising Division (\xe2\x80\x9cNAD\xe2\x80\x9d) and the Children\xe2\x80\x99s\nAdvertising Review Unit (\xe2\x80\x9c(CARU\xe2\x80\x9d). NAD is responsible for resolving complaints or\nquestions involving the truth or accuracy of national advertising. CARU was established\nas a self-regulatory program to promote responsible children\xe2\x80\x99s advertising; CARU sets\nhigh standards for the industry to assure that advertising intended for children is not\ndeceptive, unfair, or inappropriate for its intended audience. Information about these\n\nprograms can be found at www.narcpartners.org.\n\nIn recent years, regulatory authorities and advocacy groups have expressed concerns\nabout increasing childhood obesity in the United States, They have urged the food and\nbeverage industry to take responsible self-regulatory steps to change the mix of messages\nin food and beverage advertising directed to children, and also to address other related\n\nThe name Heiter Busiacss Buc eau is a registered sercive mark of the Coit of Better Mnsiness Barerus, Ine.\n\x0cMr. Donald Clark/January 19, 2007/page 2\n\nconcerns that include use of certain marketing techniques such as advergaming, use of\nlicensed characters to promote food and beverage products, product placement, and\nmarketing of food and beverage products in schools, The Council of Better Business\nBureaus and the National Advertising Review Council conducted a review of CARU\nstandards to determine if they should be modified to address these issues. As a result of\nthis review, it was determined that the best solution was to create a new initiative focused\non increasing the advertising of healthier dietary choices and healthy lifestyles to\nchildren.\n\nThe Children\xe2\x80\x99s Food and Beverage Advertising Initiative (\xe2\x80\x9cInitiative\xe2\x80\x9d) was created to\naddress the above concerns, The goal of the Initiative is to shift the mix of advertising\nmessaging to children to encourage healthier dietary choices and healthy lifestyles. In\norder to participate in the Initiative, advertisers must agree to do the following for\nadvertising primarily directed to children under 12:\n\n\xc2\xa9 Devote at least half their advertising on television, radio, print and Internet to\npromote healthier dietary choices and/or to messages that encourage good\nnutrition or healthy lifestyles.\n\ne Limit products shown in interactive games to healthier dietary choices, or\nincorporate healthy lifestyle messages into the games.\n\ne Not advertise food or beverage products in elementary schools.\n\n\xc2\xa9 Not engage in food and beverage product placement in editorial and entertainment\ncontent primarily directed to children under 12.\n\n\xc2\xab Reduce the use of third-party licensed characters in advertising that does not meet\nthe Initiative\xe2\x80\x99s product or messaging criteria.\n\nThe Initiative will be staffed by the CBBB. An overview of the Initiative is attached.\n\nParticipation in the Initiative is open to any food/beverage advertiser. As of this writing,\nthe following companies have agreed to participate: Cadbury Schweppes USA; Campbell\nSoup Company; The Coca-Cola Company; General Mills, Inc.; The Hershey Company;\nKellogg Company; Kraft Foods Inc.; McDonald\xe2\x80\x99s; PepsiCo, Inc.; and Unilever.\n\nUnder the terms of the Initiative, participants will create an individual company \xe2\x80\x9cPledge\xe2\x80\x9d\nthat will commit the company to devote a specified percentage (but not less than 50%) of\nits advertising to children under 12 to (3) products that represent healthy dietary choices\nin accordance with standards consistent with established scientific/government standards,\nand/or (2) advertising that prominently includes healthy lifestyle messages designed to\nappeal to the intended audience. The Pledge will be developed by individual participants\nin consultation with Initiative staff. The Initiative wil! monitor compliance with each\ncompany\xe2\x80\x99s Pledge by reviewing advertising materials, product information, and media\nimpression information submitted by each participant. Information submitted by\nparticipants on a confidential basis will not be shared with other participants or outside\ngroups. The Initiative will publicly disclose the results of its monitoring, and will\n\x0cMr. Donald Clark/January 19, 2007/page 3\n\ndevelop procedures for expulsion of a participant that does not comply with its Pledge.\nAny expulsions will be publicly disclosed, with a referral made to regulatory authorities,\n\nThe CBBB requests that the FTC examine the elements of the proposed Initiative and\nprovide an advisory opinion with respect to whether any element of the proposed\nprogram is likely to result in an enforcement action by the Commission. We believe that\nthe Initiative raises no anti-competitive issues, and believe that it will provide significant\npro-competitive benefits to the American public by encouraging the development and\nselection of healthier dietary choices and lifestyles.\n\nThank you for your attention to this important request.\n\nSincerely,\n\nCOL Ct\n\nAlan L. Cohen\nVice President and General Counsel\n\nCc: Chairman Deborah Platt Majoras\nJeff Schmidt, Director, Bureau of Competition\nLydia Parnes, Director, Bureau of Consumer Protection\nMary Engle, Associate Director for Advertising Practices\nSteve Cole, President and CEO, Council of Better Business Bureaus\n\x0c'


b"UNITED STATES OF AMERICA\n\nFEDERAL TRADE COMMISSION\nWASHINGTON, D.C. 20580\n\n \n\nDivision of Marketing Practices\n\nCraig Tregillus Direct Dial: (202) 326-2970\nctregillus@ftc.gov Facsimile: (202) 326-3395\n\nNovember 27, 2007\n\nMr. David Nixon, President\nNixon Consulting\n\nP.O. Box 440\n\nChatham, IL 62629-0440\n\nDear Mr. Nixon:\n\nYou have asked whether the Funeral Rule permits a funeral provider that does not offer\ncremations to omit the \xe2\x80\x9cdirect cremation\xe2\x80\x9d description and price disclosure from its General Price\nList (\xe2\x80\x9cGPL\xe2\x80\x9d). You have also asked whether a funeral provider who wants to offer cremation\nservices, but not \xe2\x80\x9cdirect cremation\xe2\x80\x9d as defined by the Funeral Rule, can omit \xe2\x80\x9cdirect cremation\xe2\x80\x9d\nfrom its GPL.\n\nThe answer to your first question is provided by Section 453.2(b)(4)(ii) of the Rule, which\nrequires a price disclosure for \xe2\x80\x9cdirect cremation,\xe2\x80\x9d and each of the other funeral goods or services\nrequired to be listed in the GPL, only \xe2\x80\x9cif [they are] offered for sale\xe2\x80\x9d by the funeral provider.\xe2\x80\x99 A\nfuneral provider that does not offer cremation therefore need not include the \xe2\x80\x9cdirect cremation\xe2\x80\x9d\nentry that would otherwise be required in its GPL. However, for the reasons which follow, if a\nfuneral provider offers packages that include cremation, the \xe2\x80\x9cdirect cremation\xe2\x80\x9d entry must appear\nin its GPL.\n\nYour second inquiry raises the issue of whether that entry likewise might not be required if\na funeral provider were to rely on the definition of \xe2\x80\x9cdirect cremation,\xe2\x80\x9d in Section 453.1(g) as \xe2\x80\x9ca\ndisposition of human remains by cremation, without formal viewing, visitation, or ceremony with\nthe body present,\xe2\x80\x9d? and offer only cremation packages that include a \xe2\x80\x9cformal viewing, visitation or\nceremony with the body present.\xe2\x80\x9d However, such literal reliance on the wording of the definition\nin isolation from its context would ignore the history and purpose of the Rule, misconstrue the\nphrase, \xe2\x80\x9cif offered for sale,\xe2\x80\x9d and ultimately violate the Rule\xe2\x80\x99s \xe2\x80\x9cunbundling\xe2\x80\x9d provision.\n\nAs the original Statement of Basis and Purpose (\xe2\x80\x9cSBP\xe2\x80\x9d) for the Rule made clear, the Rule\nis designed to prevent \xe2\x80\x9cseveral practices by funeral providers which limit the consumer\xe2\x80\x99s ability to\n\n' 16 C.E.R. \xc2\xa7 453.2(b)(4)(ii). See also 16 C.F.R. \xc2\xa7 453.2(b)(4)Gi)(C).\n\n2 16 CER. \xc2\xa7 453.1(g) (emphasis added).\n\x0cMr. David Nixon\nPage 2 of 3\n\nmake informed, independent choices,\xe2\x80\x9d the first and foremost of which was \xe2\x80\x9crequir[ing] that\nconsumers purchase \xe2\x80\x98prepackaged\xe2\x80\x99 funerals, which may include goods and services which the\nconsumers would not otherwise purchase.\xe2\x80\x9d? Thus, \xe2\x80\x9c[t]o ensure that funeral consumers have the\nability to select only the goods and services they want to purchase, the rule generally requires\nfuneral providers to \xe2\x80\x98unbundle\xe2\x80\x99 the goods and services they offer for sale and offer them on an\nitemized basis\xe2\x80\x9d while allowing providers to \xe2\x80\x9ccontinue to offer \xe2\x80\x98package funerals\xe2\x80\x99 for sale as an\nalternative to itemized purchasing.\xe2\x80\x9d\n\nAccordingly, when amending the Rule in 1994, the Commission emphasized that \xe2\x80\x9c[t]he\nRule\xe2\x80\x99s core purpose is to permit itemization so that consumers may select only the funeral items\nthey desire, and decline unwanted items.\xe2\x80\x9d> The Commission explained that \xe2\x80\x9cby \xe2\x80\x98bundling\xe2\x80\x99 all\nfuneral goods and services in a package, funeral providers had effectively forced consumers to\nbuy unwanted items,\xe2\x80\x9d but that the Rule\xe2\x80\x99s itemized price disclosure requirements had alleviated\n\xe2\x80\x9cthe primary industry restraint on consumer choice \xe2\x80\x94 package pricing.\xe2\x80\x9d\xc2\xae\n\nThus, if a funeral provider offers a funeral package that \xe2\x80\x9cbundles\xe2\x80\x9d cremation with other\nservices, such as a \xe2\x80\x9cformal viewing, visitation or ceremony with the body present,\xe2\x80\x9d it must give\nconsumers the option of purchasing \xe2\x80\x9cdirect cremation,\xe2\x80\x9d as defined by the Rule, and must include\nthe itemized price in its GPL for direct cremation required by Section 453.2(b)(4)(ii)(C) of the\nRule. To conclude otherwise \xe2\x80\x94 that the offer of a package of goods and services does not include\nthe offer of an essential element of that package \xe2\x80\x94 would contravene the purpose of the Rule.\nThus, whenever \xe2\x80\x9cdirect cremation\xe2\x80\x9d is an element of a package offered by a funeral provider, it is\n\xe2\x80\x9coffered for sale,\xe2\x80\x9d and Section 453.2(b)(4)(ii) of the Rule therefore requires that a price disclosure\nfor this service appear in the provider\xe2\x80\x99s GPL.\xe2\x80\x99\n\nMore importantly, a sale of a cremation package that includes more than a \xe2\x80\x9cdirect\ncremation\xe2\x80\x9d to a consumer who is not also offered an \xe2\x80\x9cunbundled\xe2\x80\x9d price for direct cremation\nwould violate the \xe2\x80\x9cunbundling\xe2\x80\x9d provision of the Rule. Section 453.4(b)(1)(i) makes it a Rule\n\n3 SB&P, 47 Fed. Reg. 42260 (1982).\n\xe2\x80\x98 47 Fed. Reg. at 42261.\n5 SB&P, 71 Fed. Reg. 1592, 1608 (1994).\n\n6 59 Fed. Reg. at 1602. Section 453.2(b)(6) of the Rule permits funeral providers to\ncontinue to offer funeral packages, 16 C.F.R. \xc2\xa7 453.2(b)(6), as the Commission emphasized in\nthe original SB&P and the SB&P for the 1994 amendments. 47 Fed. Reg. at 42261; 59 Fed. Reg.\nat 1594.\n\n7 For this reason, the only circumstance under which a funeral provider would not\nbe required to include an itemized price for direct cremation in its GPL would be if it simply\ndoes not offer or sell any cremation packages or other cremation goods or services.\n\x0cMr. David Nixon\nPage 3 of 3\n\nviolation to \xe2\x80\x9c[cJondition the furnishing of any funeral good or funeral service to a person\narranging a funeral upon the purchase of any other funeral good or funeral service, except as\nrequired by law or as otherwise permitted by [the Rule].\xe2\x80\x9d* To give a consumer no choice but to\npurchase a cremation package that includes a formal viewing, visitation, or ceremony with the\nbody present would condition the furnishing of cremation services on these additional services, in\ndirect contravention of Section 453.4(b)(1)() of the Rule.\n\nPlease be advised that the views expressed in this letter are those of the FTC staff. They\nhave not been reviewed, approved, or adopted by the Commission, and they are not binding upon\nthe Commission. However, they do reflect the opinions of those staff members charged with\nenforcement of the Funeral Rule. Staff Funeral Rule opinions are routinely posted on the FTC\nwebsite at http://www.ftc.gov/bcp/conline/edcams/funerals/ staffopinions.shtm.\n\nSincerely,\n\nlimp\n\nFuneral Rule Coordinator\n\n8 16 CFR. \xc2\xa7 453.4(b)(1)(@).\n\x0c"


b"ADVISORY OPINION\n___________________\nIN THE MATTER OF\n\nACA INTERNATIONAL\nFTC File No. P064803.\n\nRe:\n\nOpinion, October 5, 2007\n\nWhether the Fair Debt Collection Practices Act\n(\xe2\x80\x9cFDCPA\xe2\x80\x9d) prohibits a debt collector from notifying a\nconsumer who disputed a debt that the collector has\nceased its collection efforts.\n\nDear Mr. Beato:\nThis is in response to ACA International\xe2\x80\x99s (\xe2\x80\x9cACA\xe2\x80\x99s\xe2\x80\x9d) request for\na Commission advisory opinion (\xe2\x80\x9cRequest\xe2\x80\x9d) regarding whether the\nFair Debt Collection Practices Act (\xe2\x80\x9cFDCPA\xe2\x80\x9d) prohibits a debt\ncollector from notifying a consumer who disputed a debt that the\ncollector has ceased its collection efforts. ACA submitted the\nRequest pursuant to Sections 1.1-1.4 of the Commission\xe2\x80\x99s Rules of\nPractice, 16 C.F.R. \xc2\xa7\xc2\xa7 1.1-1.4. As explained more fully below, the\nCommission concludes that a debt collector providing such a notice\nto a consumer would not violate the FDCPA.\nThe Request focuses primarily on Section 809 of the FDCPA,\n15 U.S.C. \xc2\xa7 1692g. Section 809(a) provides that, within five days\nafter its initial communication with a consumer about a debt, a debt\ncollector must send the consumer a written notice. Among other\nthings, this notice must state that \xe2\x80\x9cif the consumer notifies the debt\ncollector in writing within [thirty days after receipt of the notice]\nthat the debt, or any portion thereof, is disputed, the debt collector\nwill obtain verification of the debt or a copy of a judgment against\nthe consumer and a copy of such verification or judgment will be\nmailed to the consumer by the debt collector.\xe2\x80\x9d Section 809(b)\nprovides that if a consumer provides such a notice, the debt collector\nmust cease collection until it has obtained verification of the debt or\na copy of the judgment and mailed it to the consumer.\n\n\x0c1444\n\nFEDERAL TRADE COMMISSION DECISIONS\nVOLUME 144\nAdvisory Opinion\n\nIn July 2007, ACA amended its Code of Ethics and Code of\nOperations (\xe2\x80\x9cEthics Code\xe2\x80\x9d). If a debt collector receives a written\nrequest for verification and is unable to verify the debt, the Ethics\nCode now requires \xe2\x80\x9cthe cessation of all collection efforts, removal of\nthe account from the consumer\xe2\x80\x99s credit report or reporting the\naccount as disputed, and prompt notification of the creditor or legal\nowner of the debt that collection activities have been terminated due\nto the inability to provide verification information.\xe2\x80\x9d Request at 3\n(emphasis added). ACA \xe2\x80\x9calso has considered amending the Ethics\nCode to promote the notification of a consumer that collection\nactivity has been terminated if the debt collector is unable to verify\nthe debt following the receipt of a written request for verification.\xe2\x80\x9d\nId. (emphasis added). However, ACA has not yet amended its\nEthics Code to include such a provision because of \xe2\x80\x9cconcern that\ncommunication with the consumer following a request for\nverification might be construed as an attempt to collect, even though\nthe intention merely is to inform the consumer that there will no\nfurther collections.\xe2\x80\x9d Id. at 2.\nWe note first that courts have construed Section 809(b) as giving\ndebt collectors two options when they receive a written dispute or a\nrequest for verification1: (1) provide the requested verification and\ncontinue collection activities, or (2) cease all collection activities. If\nthe debt collector ceases collection, it is not required to provide\n1\n\nCourts interpreting Section 809(b) have used the phrases \xe2\x80\x9cdisputing the\ndebt,\xe2\x80\x9d \xe2\x80\x9crequesting verification,\xe2\x80\x9d and \xe2\x80\x9crequesting validation\xe2\x80\x9d interchangeably.\nSee, e.g., Jang v. A.M. Miller and Assocs., 122 F.3d 480, 482 (7th Cir. 1997)\n(collection agencies \xe2\x80\x9cceased collection activities immediately upon receiving the\nrequests for validation, in compliance with [Section 809(b)]\xe2\x80\x9d); Wilhelm v.\nCredico Inc., 426 F. Supp. 2d 1030, 1036 (D.N.D. 2006) (debt collector\xe2\x80\x99s\nSection 809(b) obligations triggered \xe2\x80\x9conce a debt collector receives a request for\nverification\xe2\x80\x9d); Sambor v. Omnia Credit Servs., Inc., 183 F. Supp. 2d 1234, 1243\n(D. Haw. 2002) (debt collector\xe2\x80\x99s Section 809(b) obligations triggered \xe2\x80\x9c[w]hen\ntimely asked in writing to validate a debt\xe2\x80\x9d); see also Clark\xe2\x80\x99s Jewelers v. Humble,\n823 P.2d 818, 821 (Kan. Ct. App. 1991) (a consumer need not use the word\n\xe2\x80\x9cdispute\xe2\x80\x9d to trigger the debt collector\xe2\x80\x99s obligation to cease collection and provide\nverification of the debt, as long as the consumer\xe2\x80\x99s notice makes clear that the debt\nis contested).\n\n\x0cACA INTERNATIONAL\n\n1445\n\nAdvisory Opinion\n\nverification. See, e.g., Guerrero v. RJM Acquisitions LLC, 2007\nU.S. App. LEXIS 20072, at *35-36 (9th Cir. Aug. 23, 2007); Jang v.\nA.M. Miller & Assocs., 122 F.3d 480,483 (7th Cir. 1997); Wilhelm v.\nCredico Inc., 426 F. Supp. 2d 1030, 1036 (D.N.D. 2006); Zaborac v.\nPhillips and Cohen Assocs, 330 F. Supp. 2d 962, 966 (N.D. Ill.\n2004); Sambor v. Omnia Credit Servs., Inc., 183 F. Supp. 2d 1234,\n1243 (D. Haw. 2002).\nThe Request poses the question of whether a debt collector that\ndiscontinues debt collection activities after receiving a written\nrequest for verification can inform the consumer that it has done so\nwithout violating the FDCPA. As noted above, Section 809(b)\nrequires a debt collector to cease collection of a debt until the\ncollector has provided verification of the debt to the consumer if the\nconsumer, in writing within the thirty-day window, has either\ndisputed the debt or requested verification. If a debt collector cannot\nprovide such verification to the consumer, merely informing the\nconsumer that debt collection efforts have been terminated is not an\nattempt to collect a debt and therefore does not violate the FDCPA.2\nWe note that Congress enacted Section 809 to \xe2\x80\x9celiminate the\nrecurring problem of debt collectors dunning the wrong person or\nattempting to collect debts which the consumer has already paid.\xe2\x80\x9d3\nThe provision allows a consumer who does not believe that he or she\nowes a debt to require that the debt collector obtain and provide\nverification prior to contacting the consumer again. The purpose of\nSection 809 therefore is to stop further calls and letters from\ncollectors unless the consumer incurred and continues to owe the\n2\n\nThe Request also raises the question whether a notice informing a consumer\nthat collection efforts have ceased \xe2\x80\x9cmight be construed as a 'communication\xe2\x80\x99 in\nfurtherance of collecting the debt.\xe2\x80\x9d Request at 5. Regardless of whether such a\nnotice is a \xe2\x80\x9ccommunication\xe2\x80\x9d under 15 U.S.C. \xc2\xa7 1692a(2), a debt collector telling\na consumer that debt collection has ceased is not \xe2\x80\x9cin furtherance of collecting the\ndebt.\xe2\x80\x9d\n3\n\n1698.\n\nS. Rep. No. 95-382, at 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695,\n\n\x0c1446\n\nFEDERAL TRADE COMMISSION DECISIONS\nVOLUME 144\nAdvisory Opinion\n\ndebt. Interpreting Section 809 as allowing debt collectors to notify\nconsumers that they have ceased collection efforts, without\nconveying any other message, is consistent with this purpose. A\nconsumer receiving such a notice would benefit both from having\nthe calls and letters from that collector stop and from knowing that\nthe collector will not renew its collection efforts.4\nThe only other FDCPA provision that could be implicated by the\nnotification that ACA proposes to require of its members is Section\n805(c). That provision provides that, if a consumer notifies a debt\ncollector in writing that he or she \xe2\x80\x9crefuses to pay a debtor . . . wishes\nthe debt collector to cease further communication,\xe2\x80\x9d the debt\ncollector is not permitted to communicate further with the consumer\nabout the debt. However, Section 805(c) includes an express\nexception to its prohibition on communication that permits a debt\ncollector to \xe2\x80\x9cadvise the consumer that the debt collector\xe2\x80\x99s further\nefforts are being terminated.\xe2\x80\x9d Thus, even if a consumer demands in\nwriting that a debt collector cease communicating about a debt, the\ndebt collector would not violate Section 805(c) if it notified the\nconsumer that the collector\xe2\x80\x99s collection efforts have ceased.5\nAfter reviewing the language of the FDCPA and its legislative\nhistory as well as information contained in the Request, the\nCommission concludes that a debt collector does not violate the\nFDCPA if, after receiving written notice of a dispute, it informs the\nconsumer that it has ceased collection efforts.\n\n4\n\nEven if, as the amended Ethics Code now requires, a debt collector that is\nunable to provide verification of a debt ceases collection efforts, closes the\naccount, and notifies the credit grantor, client, or owner of legal title to the debt\nthat collection activities have been terminated because the collector could not\nprovide verification of the debt, the credit grantor, client, or debt owner might\nchoose to refer the account to a different debt collector. Thus, although the\nconsumer will no longer be contacted by the first debt collector, he or she might\nreceive collection calls and letters from a different debt collector.\n5\n\nWe note, however, that any such communication must not violate any other\nFDCPA provision.\n\n\x0cACA INTERNATIONAL\n\nAdvisory Opinion\n\n1447\n\n\x0c"