NCL applauds proposed FTC rules on MLM and other business opportunities

Media Contact: Lisa McDonald, Vice President of Communications, (202) 207-2829 

Washington, D.C. – Yesterday, the Federal Trade Commission (FTC) proposed new and updated rules to combat deceptive earnings claims in the multi-level marketing (MLM) industry and, relatedly, business coaching and investment offers. NCL supports the FTC’s rulemakings and urges the incoming Trump Administration to see the initiatives finalized. 

“Working to keep Americans from being ripped-off is a bipartisan issue,” said NCL Vice President John Breyault. “We are glad the FTC is stepping up to protect individuals from being led into debt traps with false promises. The incoming Trump Administration should finalize these rules and bring an end to these unfair and deceptive business practices.” 

When the FTC voted to begin its rulemaking on earnings claims in 2022, the rulemaking moved forward on a bipartisan, 4-0 vote. The 2022 vote to review the Business Opportunity Rule was also a bipartisan, 4-0 vote. Without finalized rules, it is harder for the FTC to secure financial compensation for victims of deceptive MLMs and other similar firms. 

NCL’s joint comments with Consumer Federation of America in response to the 2022 advanced notice of proposed rulemaking on earnings claims can be found here. 

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About the National Consumers League (NCL)  

The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org. 

NCL hails FTC ban on hidden junk fees in ticketing and lodging

December 17, 2024

Media contact: National Consumers League – Lisa McDonald, lisam@nclnet.org, 202-207-2829

WASHINGTON, DC – Today, the FTC announced its final rule banning hidden junk fees in live-event ticketing and short-term lodging. NCL has long advocated for such a ban at the federal level and applauds the Commission for enacting this critical consumer protection regulation.

“Sellers in these industries can no longer lie to consumers to make a buck. The FTC’s final rule is a common-sense policy that will make the ticketing and lodging marketplaces fairer for everyone involved,” said NCL Vice President John Breyault. “The price that’s advertised is the price that you should pay.”

This single rule by the FTC will result in billions of dollars in savings for consumers. A non-partisan federal study of the ticketing industry found that primary and secondary ticket sellers charged fees averaging 27% and 31%, respectively, of the ticket’s price. Regarding lodging, the Council of Economic Advisers estimated that consumers lose $3.3 billion annually to hotel junk fees.

Further reading:

2024 public comments of the National Consumers League and 51 other organizations supporting the FTC’s proposed rule to ban junk fees

2024 public comments of the Break Up Ticketmaster Coalition (NCL and 14 other organizations) supporting the FTC’s proposed rule

2023 testimony of NCL’s CEO before the United States Senate on the need to prohibit junk fees

2023 public comments of the National Consumers League and 41 other organizations supporting the FTC’s advanced notice of proposed rulemaking on junk fees

2022 public comments of the National Consumers League supporting a petition for rulemaking to ban drip pricing, which resulted in this final rule

2018 public comments of the National Consumers League and the Sports Fans Coalition urging FTC intervention in the ticketing industry

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About the National Consumers League (NCL) 

The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.

NCL welcomes FTC’s click-to-cancel rule

October 16, 2024

Media contact: National Consumers League – Melody Merin, melodym@nclnet.org, 202-207-2831

WASHINGTON, DC – Today, the Federal Trade Commission (FTC) announced its final rule requiring the cancellation of subscriptions to be as easy as signing up. Slated to go into effect next year, subscription-based businesses will have to offer a simple cancellation mechanism and will be prohibited from lying about the goods and services they offer.

The following statement is attributable to NCL Vice President of Public Policy, Telecommunications, and Fraud John Breyault:

“Rather than trapping consumers with confusing cancellation processes, sellers should earn our dollars by competing to offer better products. The FTC is sticking up for everyday Americans and making clear that businesses cannot rely on deception to make a profit. NCL has long supported the Commission’s work to make subscriptions easier to manage for consumers, this rule will make those efforts even easier.”

Additional reading:

  • Public comments of NCL and five other organizations supporting the click-to-cancel rule, filed in response to the Commission’s 2023 notice of proposed rulemaking
  • Letter from NCL, Consumer Federation of America, and the National Consumer Law Center supporting the rule in a 2024 administrative law proceeding
  • Public comments of NCL on the harms of current negative-option business practices, filed in response to the Commission’s 2019 advanced notice of proposed rulemaking

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About the National Consumers League (NCL) 

The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.

Getting a ticket to the U.S. Open: My story

By Sally Greenberg, CEO of the National Consumers League

Each year, I look forward to the end of summer because I take an annual pilgrimage to the U.S. Open tennis tournament in Queens, NY.  What I don’t look forward to is the process of trying to get a ticket to this event. Like millions of other fans, it always feels to me like I’m playing a rigged game designed to wring every dime of profit out of me.

In the olden days, I could stand in line at the window of the tennis center an hour before the gates opened and buy a face-value ticket with no fees attached. In those halcyon days of yore, the tickets were typically priced around $120 – 160, getting me a grounds pass and entry into the show courts, where the best matches are played.

So much for the good old days; today, there are no face-value tickets to be had.  The business of selling and scalping tickets has become a corporate enterprise, with private equity firms getting in on the game as tickets get sold for sky-high prices with exorbitant junk fees tacked on for good measure.

In sum, my chances of getting a face-value ticket to the U.S. Open are about the same as my chances of seeing a dodo bird.

My effort to get tickets to the U.S. Open was as frustrating as it is familiar for millions of fans.  On August 15, I searched the Ticketmaster site to see about getting a ticket to the Open on Friday, August 30. Being a good consumer, I comparison shopped by googling “U.S. Open Tickets” and up came results from SeatGeek, StubHub, and Vivid. On the official Ticketmaster site for the tournament, I could find no face-value tickets for games on the Arthur Ashe court during an in-demand weekend, just “Verified Resale” tickets.

Why were there no tickets available? This is where the lack of transparency in the ticket marketplace comes into play. Were those tickets scooped up by ticket brokers looking to turn a quick buck? Did they have special “deals” with corporate sponsors, the U.S. Open itself, or other connected insiders? Or did the brokers get their tickets with the help of illegal ticket-buying “bot” software? No one knows though FTC enforcement against several brokers in 2021 suggests this may be the case more often than not.

In the end, I knuckled under and bought two tickets from a resale site—$249.00 + $47.67 in fees each, for two tickets in the top row of a huge stadium. Even then, my ordeal was not over. I received a confusing “Good News” email telling me that the seller had transferred the tickets to me and to check the U.S. Tennis Association app, which I did. No tickets.

I checked the U.S. Open app.  No tickets.

I checked the Ticketmaster app. No tickets.

I continued to check all week to no avail.

I tried reaching out to the reseller via their customer service email address and received no response. I looked for a customer service phone number to call to no avail. The event was getting close, and I began to panic.

While my story did end happily (I got my tickets), it required me to move heaven and earth (and get in touch with the company’s lobbyist) to find a resolution. This is not an option for most consumers who too often have to put up with lousy customer service to get simple problems resolved.

There are no angels in this industry. Whether buying from a reseller, Ticketmaster, or directly from the box office, consumers find themselves feeling gouged, forced to pay junk fees thanks to drip pricing, and having to put up with bad customer service operations. Just ask the millions of Oasis fans who suddenly learned what “dynamic pricing” can do to the price of a ticket.

It does not have to be this way.

The National Consumers League has long been a voice for consumers fed up with having to navigate what feels like a Rube Goldberg-esque scheme simply to get a simple ticket to a concert, theater, or sporting event.

So, what are our policy recommendations?

  • America needs a national all-in ticket pricing law to end hidden junk fees. The House of Representatives overwhelmingly passed the TICKET Act earlier this year, which would do just that. The Senate should follow suit.
  • The FTC should investigate how tickets end up on the resale marketplace. While much attention gets paid to the eye-watering price of tickets on the resale market, shockingly, little has been paid to how they get there in the first place.
  • Primary ticket sellers should be required to disclose how many tickets will be made available to the general public and how many are being “held back” for connected insiders.
  • Ticket sellers should be required to maintain 24/7 customer service phone lines to assist consumers who need help navigating the overly complicated processes for actually accessing tickets.

All of the stakeholders in the success of live events should get behind these recommendations. If fans continue to be mistreated by the industry, they’ll stop going to events, and that will be a loss for more than just this tennis fan.

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About the National Consumers League (NCL)

The National Consumers League, founded in 1899, is America’s pioneer consumer organization.  Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad.  For more information, visit nclnet.org.

Guest blog: NCL encourages FTC to propose new rule regarding protections for franchisees in response to exclusion from the agency’s non-compete covenants

By Tesa Hargis, NCL summer intern

On April 24, 2024, the Federal Trade Commission (FTC) announced its final rule on non-compete covenants (the “Rule”).

Fifteen months earlier, on January 19, 2023, the FTC posted the notice of proposed rulemaking (NPRM) for the Non-Compete Clause Rule. The public comments on the proposed rule sought to answer the question of “whether the proposed rule should also apply to noncompete clauses between franchisors and franchisees.”

The Non-Compete Clause Rule comment period closed on April 19, 2023, after being extended from the original deadline of March 20, 2023. The FTC received 26,813 comments and posted 20,697 comments to the rulemaking docket.

A year after the notice and comment period for the Non-Compete Clause Rule lapsed, the FTC’s Final Non-Compete Rule was issued. The Rule bans non-compete agreements at the national level except for those between franchisors and franchisees. The Rule does, however, apply to non-competes between the employees of a franchisee.

Within the supplemental information of the Rule, the FTC explained that franchisees were excluded from the definition of “worker” within the rule because “the relationship between a franchisor and franchisee may be more analogous to the relationship between two businesses than the relationship between an employer and a worker.” However, many comments argued that franchisor-franchisee relationships are similar to employer-employee relationships because, like employees, franchisees generally lack bargaining power, and their interests are not generally protected “because franchisors generally do not entrust franchisees with trade secrets or details about their broader commercial strategy.”

The final rule ultimately does not apply to franchisor-franchisee non-competes, and those covenants remain subject to State common law and Federal and State antitrust laws.

Franchisor business practices and franchise agreements

Parallel to the comment period for the Non-Compete Clause Rule, in March of 2023, the FTC announced a separate request for public comment on franchisor business practices and franchise agreements in an effort to inform policy and enforcement efforts by hearing from a broad range of stakeholders and ensure a fair marketplace and halt unfair and deceptive franchise practices.

The comment period for the Franchise Agreements and Franchisor Business Practices closed on June 8, 2023, after being extended from the original deadline of May 9, 2023, with 5,291 comments received and 2,216 posted. A rule on Franchise Agreements and Franchisor Business Practices has yet to be proposed in response to the comment period which closed thirteen months ago.

Stakeholder comments

Franchisees such as William Kyle, who owns 14 McDonald’s franchises, have highlighted the restrictive nature of non-compete clauses in their agreements. Kyle describes his situation as a “take it or leave it” scenario, with a non-negotiable contract that includes an 18-month non-compete clause preventing him from starting a similar business within a ten-mile radius after his franchise term ends. This severely limits his ability to use his industry experience to support his family if McDonald’s denies him a contract renewal.

Similarly, Melissa Catalano, a Wellbiz Brands franchisee for over ten years, has expressed concerns about being trapped by franchisors who exploit their position. She detailed issues such as arbitrary fees, forced purchases of overpriced supplies, and restrictive policies that leave franchisees financially vulnerable and powerless.

Mark Liston, with over 40 years in the franchise sector, argues that the franchise model provides significant opportunities for business owners and should not be subjected to broad, sweeping regulations. He emphasizes that strong franchisor-franchisee relationships are mutually beneficial and that the franchise model has helped many achieve the American dream.

FTC developments

In response to the March 2023 request for public comment on franchisor business practices, the FTC released several significant statements on July 12, 2024. These include a Policy Statement asserting that certain contract provisions, such as non-disparagement and confidentiality clauses, are unlawful if they restrict franchisees’ communications with regulators. Additionally, the FTC issued Staff Guidance emphasizing that any new or increased fees not disclosed in the Franchise Disclosure Documents are likely violations of the FTC Act. The FTC also published an Issue Spotlight highlighting the top complaints from franchisees, including issues like unilateral changes to operating manuals and high default rates on SBA loans. Lastly, the FTC reopened the comment period until October 10, 2024, reflecting an ongoing commitment to addressing franchisee concerns.

Furthermore, on July 17, 2024, the FTC published an analysis detailing its stance against undisclosed “junk fees” imposed by franchisors, stating that such practices violate the Franchise Rule and Section 5 of the FTC Act.  This analysis explicitly targets undisclosed fees related to marketing, training, property improvement, and other franchisor-mandated products or services. While this is a step in the right direction, the ongoing process must ensure these guidelines are actionable and that franchisors do not continue to use their size and influence to bully franchise owners.

NCL’s position

NCL strongly urges the FTC to revise its current approach by proposing new rules to better protect franchisees. The exclusion of franchisor-franchisee agreements from the Non-Compete Rule, coupled with the delay in addressing franchisor business practices, has left significant gaps in protection for franchisees. The prolonged inaction following the comment period undermines the urgency to tackle pervasive and often exploitative practices in the franchising industry.

The FTC’s recent developments, including the stance against undisclosed “junk fees” and other contract provisions that restrict franchisees, are commendable but only a starting point. NCL calls for the FTC to prioritize robust and actionable regulations that ensure fair treatment of franchisees, promote transparency, and foster a competitive marketplace. It is crucial that the FTC heeds the thousands of stakeholder comments and implements comprehensive protections to address the power imbalances and unfair practices currently faced by franchisees.

NCL recently wrote a letter to FTC Chair Lina Khan on this issue, in which we highlighted that some of the largest franchisors control their franchisees to such an extent that they are effectively operating as the owners and operators of these individual locations while leveraging the legal benefits of being a franchisor. This creates a system where they enjoy the benefits of ownership without any of the risks – which they transfer to their franchisees. We are concerned that private equity firms take advantage of U.S. franchise law, and their heavy-handed control, if left unchecked, threatens to destroy the franchise model and even ruin the American Dream for so many hardworking franchisees.

Sources

Press Release

Non-Compete Clause Rule

Non-Compete Clause Rule Rulemaking Docket

Solicitation for Public Comments on Provisions of Franchise Agreements and Franchisor Business Practices

Solicitation for Public Comments on Provisions of Franchise Agreements and Franchisor Business Practices Rulemaking Docket

Financial Times

TroutmanPepper 

The National Law Review

Melissa Catalano Document (FTC-2023-0026-0001)

William Kyle (FTC-2023-0026-0001)

Mark Liston Document (FTC-2023-0026-0001)

The National Law Review: FTC Issues Statements Signaling Major Changes to its Oversight of Franchise Relationships and Franchise Disclosure Requirements

Lathrop GPM: FTC Takes Action Impacting the Franchise Relationship

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About the National Consumers League (NCL)

The National Consumers League, founded in 1899, is America’s pioneer consumer organization.  Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad.  For more information, visit nclnet.org.

NCL statement on FTC interim report on PBMs

July 10, 2024

Media contact: National Consumers League – Melody Merin, melodym@nclnet.org, 202-207-2831

WASHINGTON, DC – The National Consumers League (NCL) today applauds the Federal Trade Commission’s (FTC) interim staff report on prescription drug middlemen, pharmacy benefit managers (PBMs). The report details how PBMs profit at the expense of patients, inflating drug costs and squeezing Main Street pharmacies.

The following statement is attributable to NCL’s Robin Strongin, Senior Director of Health Policy:

“The FTC’s continued investigation into PBMs, and this latest report, shows promising momentum in addressing the high out-of-pocket costs of medicines consumers face. Countless investigations such as this, as well as news coverage, patient stories, and pharmacy closures across the country, prove again and again that PBMs are doing more harm than good. As the report shows, the vertical integration of PBMs has allowed them to rake in profits at the expense of patients and independent pharmacies.

“That said, we also recognize that this interim report and its findings don’t go far enough. It’s well past time to examine and address the overall corporatization of health care, including the vertical integration of the industry. In the current set-up, the biggest winners are the health insurance corporations that own PBMs, doctors, pharmacies and more. The biggest losers? Consumers.

“While NCL is encouraged that the FTC is working to hold PBMs accountable, we also encourage the need for meaningful reform that helps and doesn’t harm consumers.”

The full report can be accessed here.

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 About the National Consumers League (NCL) 

The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.

Airline passenger advocates hail landmark junk fee rules

April 25, 2024

Media contact: National Consumers League – Melody Merin, melodym@nclnet.org, 202-207-2831

Washington, DC – Airline passenger rights advocacy organizations today hailed new rules announced by the U.S. Department of Transportation (DOT) that will make it easier to obtain refunds for cancelled flights and ancillary services that aren’t provided. The groups also applauded the finalization of regulations that will make it easier for flyers to do apples-to-apples comparisons of flight costs. The groups, which supported passage of these new protections for more than four years, urged Congress to follow suit and include these protections in the forthcoming FAA reauthorization bill. 

“Too often, airlines promise one thing and fail to deliver it,” said National Consumers League CEO Sally Greenberg. “The law says that when this occurs, consumers should get a refund. Far too often, the airlines make the process of getting your money back unnecessarily difficult. Today’s rules promise to bring sanity to the refund process. In addition, the new rules on fee transparency will make it easier for consumers to get an accurate price for their flights upfront. This is a far better solution making consumers wait until the end of the ticket buying process to learn what their true cost will be.” 

“It has become painfully clear that the status quo is no longer working in air travel, and we are glad to see Secretary Buttigieg acknowledge that consumers deserve better,” said Erin Witte, director of consumer protection at Consumer Federation of America. “These rules will bring transparency to opaque ticket pricing, and they will put the responsibility for refunds where it belongs: on airlines, not consumers.” 

“It’s a shame that it takes actual rules to get airlines to do the right thing and take better care of their passengers,” said Teresa Murray, Consumer Watchdog Director at U.S. Public Interest Research Group. “It’s important to remember that most Americans fly only once every 12 to 18 months. These rules will especially help those travelers who aren’t as familiar with their rights.” 

“We applaud the DOT’s move to require refunds for consumers —by default—when flights are cancelled or ‘significantly’ delayed,” said Ruth Susswein, Consumer Action’s Director of Consumer Protection. “This clear directive is sorely needed and a significant improvement for airline passengers.” 

“For years, domestic and foreign airlines both large and small have made it as hard as possible to give passengers well deserved refunds for disruptions they’ve caused or services they’ve failed to provide,” said William J. McGee, Senior Fellow for Aviation and Travel at the American Economic Liberties Project. “The DOT’s new rule is a watershed moment for passenger protection in the airline industry, making it easy and accessible for consumers to get relief when Too-Big-To-Care airlines run roughshod over them. This news follows a positive sea change in the DOT’s enforcement activity under the Biden administration, including supporting the DOJ’s successful JetBlue-Spirit merger challenge, a historic enforcement action against Southwest, and new efforts to empower state attorneys general to address consumer complaints. There’s more work to be done, but the DOT is showing that it’s getting serious about taking on corporate power across the airline industry—and we’re thrilled to see that.” 

The new rules come as Congress closes in on approval of legislation reauthorizing the Federal Aviation Administration. The passenger rights groups are calling on leaders in the House and Senate to ensure that additional protections are put in place to ensure that a future DOT does not roll back these hard-won consumer protections. 

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About the National Consumers League (NCL)

The National Consumers League, founded in 1899, is America’s pioneer consumer organization.  Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad.  For more information, visit nclnet.org.

NCL urges regulators to investigate auto makers’ data collection practices

March 27, 2024

Media contact: National Consumers League – Melody Merin, melodym@nclnet.org, 202-207-2831

Washington, DC – Today, the National Consumers League sent a letter to the Federal Trade Commission urging oversight of vehicle manufacturers’ collection of consumer data. Modern cars can collect a range of information on drivers, including the locations they visit, their exact weight, and their texts and call records. Consumers are often unaware of this data collection and are even more surprised when insurance companies utilize this surveillance to increase drivers’ premiums. As digitally connected vehicles become more commonplace, the risks they pose to consumer privacy will only become greater—absent mandatory safeguards.

The full letter can be found here.

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About the National Consumers League (NCL)

The National Consumers League, founded in 1899, is America’s pioneer consumer organization.  Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad.  For more information, visit nclnet.org.

NCL applauds FTC action to stop imminent grocery monopoly 

February 26, 2024

Media contact: National Consumers League – Melody Merin, melodym@nclnet.org, 202-207-2831

Washington, DC – Today, the Federal Trade Commission (FTC) and bipartisan state attorneys general sued to block the proposed merger between Kroger and Albertsons. The $24.6 billion deal—the largest supermarket merger in U.S. history—would create a near monopoly by consolidating 5,000 stores and 4,000 pharmacies under one corporation. Without FTC action, consumers would see inflated prices and workers would be stuck with anticompetitive compensation.

“Decades of ignoring federal law have allowed industry consolidation to grow unchecked, leaving everyone worse off except for a handful of executives at the top,” said NCL CEO Sally Greenberg. “The FTC is rightfully asserting its authority and putting the interest of consumers and workers first. Monopolists should know that they can no longer take advantage of the American public without facing legal challenges.”

The proposed deal would eliminate competition between Kroger (including Fred Meyer, Fry’s, and Harris Teer) and Albertsons (among its subsidiaries are Haggen, Safeway, and Vons). Last year, a coalition including NCL and 250 national, state, and local organizations urged the FTC to prevent this merger from taking place. Joining the FTC’s lawsuit are bipartisan attorneys general representing Arizona, California, D.C., Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming.

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About the National Consumers League (NCL)

The National Consumers League, founded in 1899, is America’s pioneer consumer organization.  Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad.  For more information, visit nclnet.org.

National Consumers League praises FTC’s multilingual fraud reporting announcement

November 8, 2023

Media contact: National Consumers League – Melody Merin, melodym@nclnet.org, 202-207-2831

The National Consumers League (NCL), America’s oldest consumer advocacy organization today praised the Federal Trade Commission’s (FTC) announcement that consumers can now file fraud and identity complaints in their preferred languages. NCL is the home of the Fraud.org campaign, which is a long-time contributor of complaint data to the FTC’s Consumer Sentinel Network as well as being an ally in the Commission’s efforts to educate consumers about frauds.

The following statement is attributable to NCL Vice President of Public Policy, Telecommunications, and Fraud, John Breyault:

“All consumers are at risk of fraud, regardless of the language they speak. Making it easier for fraud victims to report these crimes in their own language to the FTC is a critically important step in the fight against scams. We are thrilled with today’s announcement and look forward to continuing to work with the Commission and our allies in the anti-fraud community to protect consumers from criminal scammers.”

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About the National Consumers League (NCL)

The National Consumers League, founded in 1899, is America’s pioneer consumer organization.  Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad.  For more information, visit nclnet.org.