California Business Opportunity Laws
Fraud Protection for California Business Opportunity Consumers
In addition to the standard laws on fraud, misrepresentation and similar consumer protection laws, California has a special law aimed at regulating certain business opportunities. Essentially, a seller of business opportunities in California with a price tag of more than $500 (unless $50,000 or more) must follow a stringent set of consumer protection policies. California calls this business opportunity law the "Seller Assisted Marketing Plan Act." The SAMP Act applies when a seller more or less guarantees that the buyer of the business opportunity can make a profit by using the marketing plan provided by the seller. Both sellers and buyers of California business opportunities should become familiar with the basics of this law and where to find additional information on the SAMP Act.
For starters, keep in mind that you can read the entire text of the SAMP Act online. This article is designed to give an overview of what you should be aware of, but the actual text of the law will determine particular rights and duties regarding any California business opportunity.
As stated earlier, only business plans over $500 but not $50,000 or more apply to this particular law. Of course, all business opportunities may fall under a myriad of other general civil and criminal statutes. If you are buying or selling an opportunity $500 or less or $50,000 or more, then the SAMP Act does not apply to your case.
Not all business opportunities within this price range are covered by the SAMP Act. However, most will be simply because of the manner in which business opportunities are marketed. Have a look at the "Consumers Seller Assisted Marketing Plans" page to see the three ways in which a California business opportunity falls under this consumer law. If you are promoting such a business plan, then follow all the rules to avoid potential litigation with the California Attorney General.
The basic responsibilities of the seller of the business opportunity include registering with the California Attorney General, including a $100 registration fee, creating a written contract that complies with the SAMP Act, and making other disclosures to prospective buyers of the California business opportunity. Sellers should use the links at the bottom of the Consumers Seller Assisted Marketing Plans page (see link above) to ensure that they legally register and promote the business plan in California.
For consumers, one interesting part of the law is that sellers are not permitted to ask for more than 20% of the purchase price before delivery of any products or services. If you are asked to pay the full amount on a business opportunity costing more than $500, then you should contact the Attorney General.
Consumers should also be aware that it may be difficult to even find a market for certain products or services sold as a business opportunity. Besides that, buyers need to know that certain skills are necessary to sell just about anything. If a consumer does not have such skill, no amount of statements claiming that the product is in demand, "selling like hotcakes," or any other promises should persuade a buyer into purchasing a business opportunity.
Also, just because something is against the law does not mean that it will be easy to get your money back. Don't assume that it will be easy to get a refund. However, consumers who do have problems with a business opportunity seller in California should contact the Attorney General to report the problem and seek help. Use the following contact information: Attorney General's Office, Public Inquiry Unit,
P.O. Box 944255,
Sacramento, CA 94244-2550. Consumers may also call 800-952-5225. Sellers of California business opportunities can use the same contact information for inquiries about registering their opportunity products.