Several months ago, the Federal Trade Commission released a new set of rules for “biz ops” – a category of commerce which consists of single-operator, turn-key and work-at-home businesses. In April, the Arizona legislator also passed a similar business opportunity rule – Arizona House Bill 2825.
Specifically, HB 2825 amends the Telephone Solicitation Act by clarifying the definition of “business opportunity.” It also clarifies that “telephone” now covers all digital devices. In the simplest terms, the Arizona House made it so Internet and mobile devices are now subject to the Telephone Solicitation Act.
Of particular import to those who market or sell work-at-home opportunities and other types of bizops, the new bill includes very specific steps one must take when pitching and closing a business opportunity deal.
What Are Business Opportunities?
The most common types of business opportunities are:
- Vending Machines
- Rack Card Businesses
- Display Cases
- Businesses and Gambling Machines
Over the past 10 years, the number of online and work-at-home business opportunities has also increased. Essentially, business opportunities are usually companies you can buy in-tact, which can be operated by a single person. In many cases, the buyer does not need to have any prior experience in the field to get the company up and running.
The new bill defines a business opportunity in Arizona to be “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.”
Arizona Business Opportunity Rule: Changed Definition in Telephone Solicitation Act
In addition to defining bizopps as any “offer for sale or lease” over $500, the new bill goes a long way in detailing the exact parameters of what constitutes a business opportunity in the state of Arizona. Specifically, the law delineates business opportunity as a solicitation in which the seller says or implies that:
1) The consumer will earn more than the initial payment if they purchase;
2) A profitable market exists for the opportunity;
3) They, the seller, will provide locations or assist the consumer in setting up the business;
4) They, the seller, will buy services or goods from the consumer;
5) The consumer will make money – either conditionally or unconditionally — and that if they don’t, a refund – either partially or in whole – will be given if bizopp buyer is unsatisfied;
6) They will provide a marketing plan, unless the marketing program is offered in conjunction with an already trademarked plan that could be sold as a standalone product.
Arizona Business Opportunity Rule: Changed Disclosure Requirements
In addition to laying out a concise definition for ‘business opportunity’, House Bill 2825 also features a few new disclosure requirements. Namely, the following must be disclosed, to the buyer, before the final purchase, in the registration statement:
1) A factual description of the business, training, and assistance that the seller will provide;
2) A statement describing any goods, services signs or fixtures relating to the establishment of the operation that the consumer is required to purchase, lease or rent either directly or indirectly from the seller.
Sellers must now also disclose:
1) Their sales experience, including the length of time they have sold the bizopp in question or any other business opportunity;
2) The names of all businesses that have previously purchased the bizopp in question. Presumably this is done so potential buyers can do their own due diligence with regards to the viability of the opportunity.
Arizona Business Opportunity Rule: Changed Notice Requirements & Cancellation Standards
Amendments to cancellation and notice requirements are also an element of the updated telephonic law. The new statutes state that at least five days before the contract execution, a written disclosure must be given to buyer with highly-specific cover sheet that includes precise information.
Cancellation provisions included in the bill state that any business opportunity contract or agreement can be canceled for any reason within 10 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.”
And lastly, which may be of particular significance to mobile telemarketers, all solicitations made to home phones, cell phones or any type of mobile device must be identifiable on the caller ID mechanism. Even if you are operating from another state and soliciting individuals or businesses in Arizona, you must comply with the statute.
House Bill 2825 was signed into law on April 4, 2012 and slated to go into effect 90 days after the current legislative session ended – which was in the beginning of May.
If you’re an online or mobile marketer who wants to discuss the legal ramifications of the revised Telephone Solicitation Act and how it may affect your operation, please give Kelly / Warner law a call. We’re here to help answer all your questions and assist you with any marketing compliance issues.