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The US Justice Departments Little Lie

The Federal Trade Commission’s Consumer Division’s Franchising Group is not well known by consumers or the citizenry. Franchising in the United States Accounts for one-third every consumer dollar spent and 400,000 outlets or stores. The Federal Trade Commission over sees the franchising industry. Some franchisors believe the FTC desperately needs turn over at the franchising division. Some attorneys who make money suing franchisors on behalf of franchisees and vendors like things just the way they are and realize any change would tip the balance and they would lose income in a highly litigious and good paying sector of law.

One attorney we interviewed said in an email: “Well, I have to, very respectfully, disagree. Franchising has a good and competent friend in the FTC, and particularly with Steve Toporoff, who has lead responsibility for the FTC in this area.”

Yet the franchising community also knows that while at the helm there were no changes to the FTC Franchise Rule for over 10 years and this caused more hardship for franchisors who create jobs, tax base and economic vitality, which are important for a healthy economy. Now that the FTC has totally botched the franchising rules in our country and tilted the field in favor of not franchisor or franchise, not of free markets of free economies, but for attorneys to make more money due to incessant over regulation; these same attorneys wish to export these same ridiculous rules to other countries as well, thus giving our attorneys leverage and opening new markets for them.

One attorney stated; “I believe that the FTC, in general, does an excellent job, at least in the franchising area, which is the only field in which I have any meaningful experience. In addition, the proposed new rule is, again in general, a clear step forward toward more rational and effective franchise disclosure, and may well serve as the model for other countries’ attempts at rational regulation in this area.”

The current disclosure laws, which are mandatory are a set of 200 plus pages of disclosure documents given to franchise buyers before purchase. Each paragraph in the entire required disclosure is open for interpretation of law and possible lawsuits. The attorneys call this ‘rational regulation,’ I call it a windfall for them. There are few if any franchising complaints in the Industry. Even the complaints, which do come in are usually not real, just someone trying to get something for nothing. Most attorneys believe it is a good system never the less, not perfect they admit, but a good system indeed. Good for who? Good for them of course. Many franchisors have made there feelings known, here is an example of some of their comments;

http://www.ftc.gov/os/comments/franrulestaffrpt/OL-100001.pdf

The lack of law changes has helped increase franchising lawsuits over the years and instead of reducing regulation and paperwork these new sets of laws are going to increase it. More laws and rules mean more lawsuits of course. One attorney commented on this thought stating;

“While, in a perfect world, it might have been nice for the process of re-writing the FTC Franchise Rule to have moved along more quickly, we should be realistic and note that franchising is, frankly, not the FTC’s highest priority, perhaps because of the relatively low number of complaints it receives from Franchisees or others, compared to the large role franchising plays in the U. S. economy.”

These attorneys are busy hob knobbing with the government regulators and often get the inside story, yet if a franchisor calls up to criticize or point out flaws with the law they never receive a return phone call and if they are able to get thru they are often ‘hung up on’ during the conversation when they try to explain their points. Why is it that lawyers have complete access to the government regulators, yet entrepreneurs who are responsible for everything in the world cannot get through? One attorney speaking about the FTC stated:

“I recall a conversation I had at a breakfast with one of the FTC Commissioners a few years ago in which I asked her if she saw any significant problems with franchising. After a few moments for thought, she replied that she didn’t, other than possible issues related to overlapping regulation by both the states and the feds.”

Interesting, but if there are no issues in franchising, why are we not having decreased regulations? The same attorney goes on to say:

“So, for me, the FTC has done a fine job in promulgating and revising the Franchise Rule over the years, particularly given that there are other areas of much greater concern to them, such as Bus. Opp. fraud, consumer financial privacy, the National Do Not Call Registry, regulation of Truth in Advertising, overseeing corporate mergers, etc.”

”We shouldn’t let our focus on franchising become parochial and forget that our field is just one small part of the big picture, at least from the FTC’s standpoint and probably from that of regulators generally. It’s probably a tribute to the relatively good health of franchising 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 just the way they are. Of course he does, he is making money on the backs of franchisees and franchisors across America, why would he want anything to change? America, we need a regulatory reality check and we need it now. Think about it.

"Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs

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