FTC’s New Business Opportunity Rule Becomes Effective March 1, 2012

The Federal Trade Commission’s recently-amended Business Opportunity Rule (the “BOR”), which imposes new disclosure requirements and a waiting period on business opportunity products, or “bizopps,” goes into effect March 1, 2012. Under the BOR, bizopp sellers are required to provide potential customers with a written disclosure statement containing the following information:

• Key information about the seller, including a list of any legal actions the seller –including any affiliated person or company—has been involved in;
• Evidence supporting any earnings claims made about the bizopp;
• The material terms of any cancellation or refund policy; and
• A list of all other customers who purchased the bizopp within the last three years.

Two copies of disclosure statement must be provided to the customer at least seven days before the purchase. The consumer is required to return a signed copy of the statement to the seller and retain another for the consumer’s own records.

Although the new requirements are clearly aimed to reduce the prevalence of bizopp fraud, they will undoubtedly increase the operating expenses and record-keeping responsibilities for vendors of legitimate business opportunities. In an effort to mitigate this burden, the FTC has included several exceptions in the BOR that serve to exclude several types of bizopps from having to comply with the new requirements.

Kronenberger Rosenfeld regularly provides preventative counseling on FTC and related compliance matters, as well as FTC litigation defense. If you need to determine whether your business opportunity offer complies with the FTC's new regulations, you contact us through our website or at 415-955-1155, ext. 120.