The little lie of the US Department of Justice
BusinessThe Franchise Group of the Consumer Division of the Federal Trade Commission is not well known to consumers or the public. Franchises in the United States account for a third of every dollar spent by consumers and 400,000 outlets or stores. The Federal Trade Commission oversees the franchise industry. Some franchisors believe that the FTC desperately needs a turnaround in the franchise division. Some lawyers who make money suing franchisors on behalf of franchisees and sellers like things the way they are and realize that any change would tip the scales and they would lose revenue in a highly litigious and well-paid legal industry.
An attorney we interviewed said in an email: “Well, very respectfully, I disagree. The franchise has a good and competent friend in the FTC, and particularly Steve Toporoff, who has primary responsibility for the FTC in this area. “.
However, the franchise community also knows that while he was at the helm, there were no changes to the FTC Franchise Rule for over 10 years and this caused further hardship for franchisors creating jobs, tax base and economic vitality, that are important to a healthy economy. Now that the FTC has totally screwed up the franchise rules in our country and tilted the field in favor of no franchisors or franchises, not free markets of free economies, but for lawyers to make more money due to relentless over regulation; these same lawyers want to export these same ridiculous rules to other countries as well, thus giving our lawyers leverage and opening up new markets for them.
A lawyer testified; “I think the FTC, overall, does an excellent job, at least in the area of franchising, which is the only field in which I have any meaningful experience. Also, the proposed new rule is, again overall, a clear a step toward more rational and effective franchise disclosure, and may well serve as a model for other countries’ attempts at rational regulation in this area.”
Current disclosure laws, which are mandatory, are a 200+ page set of disclosure documents given to franchise buyers prior to purchase. Every paragraph in all required disclosure is open to interpretation of the law and possible lawsuits. Lawyers call this ‘rational regulation’, I call it a windfall for them. There are few to no franchise complaints in the industry. Even the complaints that do come in are usually not real, but rather someone trying to get something for nothing. However, most lawyers believe that it is a good system, not perfect, they admit, but a good system. Good for whom? Good for them, of course. Many franchisors have made their sentiments known, here is an example of some of their comments;
http://www.ftc.gov/os/comments/franrulestaffrpt/OL-100001.pdf
The lack of change in the laws has helped increase franchise laws over the years, and instead of reducing regulation and paperwork, these new sets of laws are going to increase them. More laws and rules mean more laws, of course. A lawyer commented on this thought stating;
“While, in a perfect world, it might have been a good thing if the process of rewriting the FTC’s Franchise Rule had moved faster, we have to be realistic and keep in mind that, frankly, franchises are not the FTC’s top priority. FTC, perhaps due to the relatively low number of complaints it receives from franchisees or others, compared to the important role franchises play in the US economy.”
These lawyers are busy flirting with government regulators and often get the inside story, yet if a franchisor calls to criticize or point out flaws in the law, they never get a return phone call and if they can get through, they often They are ‘hung up’ during the conversation when they try to explain their points. Why do lawyers have full access to government regulators, but businessmen who are responsible for everything in the world can’t get through? An attorney who spoke about the FTC stated:
“I remember having a breakfast conversation with one of the FTC commissioners a few years ago, asking him if he saw any major issues with franchising. After thinking for a moment, he said no, that there are potential franchise-related issues. overlapping regulations by both states and federals”.
Interesting, but if there are no franchise issues, why don’t we have lower regulations? The same lawyer goes on to say:
“So, to me, the FTC has done a good job enacting and revising the Franchise Rule over the years, particularly since there are other areas of much greater concern to them, such as bus opportunity fraud, the financial privacy of the consumer, the National Registry Do Not Call, the regulation of Truth in Advertising, the supervision of business mergers, etc.”
“We must not allow our focus on franchising to become parochial and forget that our field is only a small part of the big picture, at least from the point of view of the FTC and probably from the point of view of regulators in general. It is probably a tribute to the relatively good health of franchises that we don’t get more regulatory attention than we do!”
Again, the attorney seems to indicate that franchising is a small part of the FTC’s agenda and therefore not to worry, he likes things the way they are. Of course he is, he is making money off of franchisees and franchisors all over the United States, why would he want anything to change? America, we need a regulatory reality check and we need it now. Think about it.