The Federal Trade Commission recently issued a policy statement regarding the franchise industry. The FTC is charged with protecting franchisees from unfair methods of competition and unfair and deceptive practices. The policy statement from the commission addresses restrictions on the ability to report and collect information about potential law violations. The FTC staff also issued guidance about the charging of fees not disclosed when a franchisee purchases a franchise. The response to these statements are mixed.

Policy Statement Pertaining to Communications Regarding Potential Law Violations

The FTC is concerned that franchisors suppress the ability of franchisees to voluntarily discuss or file reports about their experiences with franchisors, even if the franchisees believe a law violation has occurred. The policy statement was issued to express the FTC’s “view that provisions included in franchise agreements or other contractual documents between franchisors and franchisees may not restrict franchisees’ communications with the commission or any other or federal law enforcer or regulator about potential law violations.”