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FTC's Offices and It's Function |
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FTC'S FUNCTION
FTC REGIONAL OFFICES
FOUR MOST FREQUENTLY ASKED QUESTIONS
STATES OFFICES ADMINISTERING FRANCHISE DISCLOSURE
LAWS
HOW THE FTC BRINGS AN ACTION
WHERE TO GO FOR MORE INFORMATION |
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| FTC'S
FUNCTION |
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The Federal Trade Commission enforces a variety
of federal antitrust and consumer protection laws. The Commission
seeks to ensure that the nation's markets function competitively,
and are vigorous, efficient, and free of undue restrictions. The Commission
also works to enhance the smooth operation of the marketplace by eliminating
acts or practices that are unfair or deceptive. In general, the Commission's
efforts are directed toward stopping actions that threaten consumers'
opportunities to exercise informed choice. Finally, the Commission
undertakes economic analysis to support its law enforcement efforts
and to contribute to the policy deliberations of the Congress, the
Executive Branch, other independent agencies, and state and local
governments when requested. |
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In addition to carrying out its statutory
enforcement responsibilities, the Commission advances the policies
underlying Congressional mandates through cost-effective non-enforcement
activities, such as consumer education. |
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| REGIONAL
OFFICES |
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AK | AL
| AR | AZ
| CA (No) | CA
(So) | CO | CT
| DC | DE
| FL | GA
| HI | IA
| ID | IL
| IN | KS
| KY | LA
| MA | MD
| ME | MI
| MN | MO
| MS | MT
| NC | ND
| NE | NH
| NJ | NM
| NV | NY
| OH | OK
| OR | PA
| RI | SC
| SD | TN
| TX | UT
| VA | VT
| WA | WI
| WV | WY
| PR
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| FOUR
MOST FREQUENTLY ASKED QUESTIONS |
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| The four most frequently
asked questions about franchise and business opportunities are: |
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1. Where can I get a company's
pre-sale disclosures
2. How can I find out about complaints against a
company?
3. How can I file a complaint against a company?
4. Where can I get the forms for drafting an offering
circular?
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| 1. Where can I get a company's
pre-sale disclosures? |
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The FTC does not require filings of franchise
and business opportunity disclosure statements or offering circulars.
For this reason, we are unable to provide copies of them. There
are 13 states that do keep franchise offering circulars on file,
and 23 states that require business opportunity disclosure filings.
Most states aren't able to provide copies of these disclosures,
but usually will let you visit their offices and review or copy
the documents by appointment. One private company will obtain
franchise disclosure documents filed in one or more states for
a fee:
Frandata 1155 Connecticut Avenue, NW, Suite 275 Washington, DC
20036 (202) 659-8640
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| 2. How can I find out about
complaints against a company? |
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No federal or state agency or private organization
can tell you whether or not a company is legitimate or operates
in good faith. We can only report on whether we have received
consumer complaints about a company. Operators of fly-by-night
franchise and business opportunity scams know this, and may change
the name and location of their company every six to twelve months
so they never have a record of consumer complaints.
There is no substitute for checking the track record of a franchisor
or business opportunity seller by talking to at least ten prior
purchasers in person. That is why the Franchise Rule requires
companies to include in their disclosures a list of the names,
addresses and telephone numbers of at least the ten prior purchasers
who are geographically closest to you.
If you want information about consumer complaints, we must ask
that your request be in writing. We need to check whether complaints
have been received not only in Washington, but also in our 10
regional offices. You can address your request to:
Freedom of Information Act Request Federal Trade Commission, Washington,
D.C. 20580
Please identify your letter as a "FOIA Request" and include (1)
your name, address and daytime phone number, and (2) the name
and address of the company you are checking on.
In most cases, there are no fees for searching, document review,
or copying for members of the general public. It is a good idea,
however, to state the maximum you are willing to pay, so we can
contact you in the unusual event that any applicable fees for
these services will cost more than the limit you set.
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| 3. How can I file a complaint
against a company? |
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We regret that you're having a problem
with a franchisor or business opportunity seller. We'd like to
help, but can't guarantee we'll be able to, because the Commission
lacks the resources to investigate every individual complaint
it receives. For this reason, we urge that you also consider talking
with a private attorney about the feasibility of bringing a private
lawsuit, or taking other individual or group action that may help
resolve the problem.
We would like to encourage you to send us your complaint because
consumer complaints give us important information. They help us
identify companies and practices that affect a broad segment of
the public, and are useful for law enforcement purposes.
We ask that all complaints be in writing, but no special form
is required. A short one- or two-page letter is fine. Just tell
us what you think was misleading or deceptive in the company's
promotional materials, disclosure statement or offering circular.
If you want your letter kept confidential, please print the words, "Privileged and Confidential," on the top of each page.
Be sure your letter includes your name, address, and a daytime
telephone number where we can reach you. It will help if you can
provide the names and telephone numbers of other purchasers who
have experienced the same problems, and if you can send us copies
of any written claims in promotional materials or elsewhere that
you believe are false. Be sure to send copies, not originals,
of any documents you think we should have.
Please address your complaint to: Franchise & Business Opportunity
Complaint Federal Trade Commission - Rm. 238 Washington, D.C.
20580.
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| 4. Where can I get the
forms for drafting an offering circular? |
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The Franchise Rule provides its
own disclosure format, which is published in the Code of Federal
Regulations, Volume 16, Part 436 (16 CFR § 436). The Commission
also permits the use of an alternative disclosure format called
the Uniform Franchise Offering Circular, or "UFOC," issued by the
North American Securities Administrators' Association, for Franchise
Rule compliance. A copy of the Guidelines for preparing UFOC disclosures,
which franchisors wishing to use the UFOC must follow to comply
with the Franchise Rule, can be obtained from:
North American Securities Administrators' Association One Massachusetts
Avenue, N.W., Suite 310 Washington, D.C. 20001 (202) 737-0900
The current Guidelines are also reprinted in the Business Franchise
Guide published by Commerce Clearing House, Inc., which is available
in many law libraries.
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| STATES OFFICES ADMINISTERING
FRANCHISE DISCLOSURE LAWS |
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Fifteen states have franchise investment
laws that require franchisors to provide pre-sale disclosures, known
as "offering circulars," to potential purchasers. Thirteen of these
state laws treat the sale of a franchise like the sale of a security.
They typically prohibit the offer or sale of a franchise within their
state until a franchise offering circular has been filed on the public
record with, and registered by, a designated state agency. Two of
the fifteen states do not require a filing of offering circulars,
as noted in the list of state offices below.
These state laws give franchise purchasers important legal rights,
including the right to bring private lawsuits for violation of the
state disclosure requirements. We encourage potential franchise purchasers
who reside in these states to contact their state franchise law administrators
for additional information about the protection these laws provide.
California, Hawaii, Illinois, Indiana, Maryland,
Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island,
South Dakota, Virginia, Washington, Wisconsin
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| HOW
THE FTC BRINGS AN ACTION. . . |
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The FTC may begin an investigation in different
ways. Letters from consumers or businesses, Congressional inquiries,
or articles on consumer or economic subjects may trigger FTC action. |
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Investigations are either public or nonpublic.
Generally, FTC investigations are nonpublic in order to protect both
the investigation and the company. |
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If the FTC believes a violation of the law
occurred, it may attempt to obtain voluntary compliance by entering
into a consent order with the company. A company that signs a consent
order need not admit that it violated the law, but it must agree to
stop the disputed practices outlined in an accompanying complaint. |
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If a consent agreement cannot be reached,
the FTC may issue an administrative complaint. If an administrative
complaint is issued, a formal proceeding that is much like a court
trial begins before an administrative law judge: evidence is submitted,
testimony is heard, and witnesses are examined and cross-examined.
If a law violation is found, a cease and desist order or other appropriate
relief may be issued. Initial decisions by administrative law judges
may be appealed to the full Commission. |
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Final decisions issued by the Commission may
be appealed to the U.S. Court of Appeals and, ultimately, to the U.S.
Supreme Court. If the Commission's position is upheld, the FTC, in
certain circumstances, may then seek consumer redress in court. If
the company ever violates the order, the Commission also may seek
civil penalties or an injunction. |
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In some circumstances, the FTC can go directly
to court to obtain an injunction, civil penalties, or consumer redress.
This usually happens in cases of ongoing consumer fraud. By going
directly to court, the FTC can stop the fraud before too many consumers
are injured. |
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The Commission can also issue Trade Regulation
Rules. If the FTC staff finds evidence of unfair or deceptive practices
in an entire industry, it can recommend that the Commission begin
a rulemaking proceeding. Throughout the rulemaking proceeding, the
public will have opportunities to attend hearings and file written
comments. The Commission will consider these comments along with the
entire rulemaking record--the hearing testimony, the staff reports,
and the Presiding Officer's report -- before making a final decision
on the proposed rule. An FTC rule may be challenged in any of the
U.S. Courts of Appeal. When issued, these rules have the force of
law. |
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| WHERE
TO GO FOR MORE INFORMATION |
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Letters from consumers are very important
to the work of the FTC. They are often the first indication of a problem
in the marketplace and may provide the initial evidence to begin an
investigation. If you have a consumer problem or complaint, write
to the Federal Trade Commission. Although the agency cannot act to
resolve individual problems, it can act when it sees a pattern of
possible law violations develop.
Contact your nearest FTC regional office for additional information
or check the FTC Web site at www.ftc.gov |
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