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Arizona's Passes Legislation that Regulates Business Opportunities

Arizona House Bill 2825 broadly defines "business opportunity" where it wasn't defined before.

Arizona House Bill 2825 which was passed by the Arizona legislature and signed by the governor amends the Telephone Solicitations Act and broadly defines business opportunity. Before this bill Arizona's statute did not define 'business opportunity'.

The legislation broadly defines 'business opportunity' as a the sale or lease, or offer for sale or lease, of any goods or services to a consumer for an initial payment of five hundred dollars or greater for the purpose of enabling the consumer to start or operate a business, which sale or lease is not limited to sales initiated or made by the telephone.

The legislation also includes the following in the definition of a "business opportunity:" a solicitation of consumers in which the seller represents one or more of the following: 1) that the consumer may or will earn an amount in excess of the initial payment as a result of the purchase; 2) that a market exists for any goods to be made or sold or services to be rendered by the consumer; 3) that the seller will provide locations or assist the consumer in finding locations for the use or operation of vending machines, racks, display cases or other similar devices or currency-operated amusement machines or devices or any other devices; 4) that the seller may purchase from the consumer goods to be made or services to be rendered by the consumer; 5) that the seller guarantees, either conditionally or unconditionally, that the consumer will derive income from the business opportunity or that the seller will refund all or part of the price paid for the business opportunity or repurchase any of the goods supplied by the seller if the consumer is unsatisfied with the business opportunity; or 6) that the seller or an entity associated with the seller will provide a sales program or marketing program to the consumer unless the marketing program is offered in conjunction with the licensing of a registered trademark or service mark, if the trademark or service mark has been effectively registered under federal law.

The legislation requires sellers of business opportunities to provide certain information with registration. If the seller is soliciting consumers to purchase a business opportunity or merchandise related to a business opportunity the following must be disclosed in the registration statement: 1) the business experience of the seller, including the length of time that the seller has sold the business opportunity being offered to consumers or sold any other business opportunity to consumers; 2) the names of all businesses for which each principal or manager previously sold business opportunities; 3) the dates that each principal or manager previously sold business opportunities. If a solicitation involves a business opportunity or merchandise related to a business opportunity: the following must be disclosed in the registration statement: 1) a factual description of the business opportunity offered to be sold and of the merchandise, training and assistance that the seller will provide to the consumer; and 2) a statement describing any goods, services, signs or fixtures relating to the establishment or the operation of the business opportunity that the consumer is required to purchase, lease or rent directly or indirectly from the seller.

The legislation also requires the seller to provide the consumer a written disclosure document at least five business days before the earlier of the consumer's execution of a contract imposing a binding legal obligation on the consumer or the payment of any monies, receipt of anything of value or authorization to charge a credit or debit card. The disclosure document shall have a cover sheet that contains specific wording.

In addition legislation provides that a consumer may cancel a business opportunity contract or agreement with a seller for any reason at any time within ten business days after the date that the consumer signs the contract or agreement or the date that the seller notifies the consumer in writing that the contract or agreement is accepted by the seller, whichever is later.

The Governor signed the bill on April 4, 2012 and it will go into effect 90 days after the current legislative session ends.

Recently the Arizona Attorney General has brought many enforcement actions against marketers that sell business opportunities. Companies that sell business opportunities need to carefully review these requirements to ensure they are in compliance.

To learn more about our Telemarketing law practice, click here.

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