Business Opportunity Rule

The Federal Trade Commission (“FTC”) has released its final amended Business Opportunity Rule, which regulates the offer and sale of business opportunity ventures. Examples of such business opportunities include vending machines and rack displays. The rule, which is similar to the FTC’s Amended Franchise Rule, imposes disclosure and sales method requirements for such business ventures.

Unlike franchises, business opportunity ventures often do not involve the license of a trademark. Furthermore, business opportunity ventures are typically less expensive and involve simpler contractual agreements, resulting in less financial risk to purchasers. Thus, since 2007, business opportunities have been regulated separately from franchises.

The amended rule significantly modifies the scope, disclosure requirements and prohibitions of the interim Business Opportunity Rule. The amendments expand the rule’s scope to include work-at-home ventures, such as envelope-stuffing, products assembly, and medical billing, that often escaped coverage under the prior version of the rule. Despite proposals to the contrary, the FTC chose not to categorically include sellers of multi-level marketing (“MLM”) opportunities within the scope of the final rule.

The rule also streamlines and simplifies the disclosures previously required of business opportunity sellers. Sellers must disclose: 1) the seller’s identifying information; 2) information about the seller’s earnings claims; 3) the existence and nature of any legal actions against the seller; 4) the terms of the seller’s cancellation or refund policy; and 5) a list of purchasers for the previous three years. The rule also prohibits various specific misrepresentations and misleading practices, and requires that disclosures be made in the same language as the offer is made.

The amended rule takes effect on March 1, 2012. We recommend that business opportunity sellers contact legal counsel prior to that date to discuss and prepare disclosures that are compliant with the new rule.

NLRB Extends Deadline for Posting Employee Rights Notice

The National Labor Relations Board (“NLRB”) has extended the deadline for posting workplace notices of employees’ rights. As discussed in our previous Franchise Law Newsletter, the NLRB issued a final rule in August 2011 requiring all private sector employers, subject to the National Labor Relations Act, to post workplace notices informing employees of their rights to participate in union activities and engage in collective bargaining, as well as to refrain from such activities. The notice also provides examples of unlawful conduct and instructs employees on how to contact the NLRB with questions and complaints.

The deadline to post this notice was extended to April 30, 2012 at the request of a federal court in Washington, D.C. that is currently hearing a legal challenge to the rule.