On March 23, Utah Governor Spencer Cox signed into law sweeping amendments to the state’s Business Opportunity Disclosure Act (BODA). The amendments expand the scope of the statute to cover a broad spectrum of business activity. The amendments apply to any seller of a “business opportunity” who represents to the buyer that the buyer will—or may—derive income from the business that exceeds the amount the buyer pays to buy the product, equipment, supply, or service.
How Do the Amendments Expand the Scope of BODA?
Prior to these amendments, BODA applied to sellers of “assisted marketing plans”—defined as the sale or lease of any product, equipment, supplies, or service to a buyer for an initial payment of $500 or more for the purpose of enabling the buyer to start a business—who also made one of four qualifying representations to buyers about the plan. The first three representations are largely unchanged in the new amendments, but the fourth, which has been the focus of litigation under BODA, has changed. The prior language covered representations: that upon payment by the buyer of more than $500 to the seller, the seller will provide a sales program or marketing program that will enable the buyer to derive income that exceeds the price paid.
Under the amended BODA, the term “assisted marketing plan” has been eliminated and replaced with “business opportunity.” To fall within the amended statute’s reach, the seller simply has to (a) sell goods or services for an initial consideration of at least $500; (b) for the purpose of enabling the buyer to start a business; and (c) represent to the buyer that buyer will or may derive income from the business that exceeds the amount the buyer pays to buy the product.
Utah’s Division of Consumer Protection (DCP), which enforces BODA, has been laser focused for years on sellers of business opportunities (i.e., biz opps) and training—with mixed success. These changes align with DCP’s mission of eliminating fraudulent operations within Utah’s borders, but also cast a wide net, arguably entangling any form of training, coaching, or ecommerce tool or platform that allows individuals and small businesses to start or grow a business.
What Does BODA Require?
First, sellers of business opportunities must first register with DCP, which requires submission of a “Disclosure Statement” and payment of a fee. The Disclosure Statement requires the seller to disclose detailed information about the applicant, its directors, and executives.
Second, sellers are required to provide copies of the Disclosure Statement filed with DCP to prospective buyers at least 10 business days before the prospective buyer executes a binding agreement to purchase a business opportunity or the prospective buyer makes a payment in connection with the proposed sale (whichever is earlier).
Moreover, sellers who qualify under BODA by making the fourth qualifying representation (see above) must also make the following disclosure to prospective buyers:
The number of purchasers who have earned through this business opportunity an amount in excess of the amount the purchaser pays for the business opportunity is at least _____ which represents at least _____% of the total number of purchasers of this business opportunity.
What Else Is New Under the Amended BODA?
Under the amended BODA, franchisors must register with DCP and certify “substantial compliance” with the FTC’s regulations governing franchising.
With respect to enforcement of the BODA, the amendments provide additional powers to DCP. Now, DCP can go straight to court to seek an array of remedies, including injunctions, disgorgement, and civil penalties. Previously, DCP had to bring an administrative action to obtain civil penalties.
Finally, the amended BODA provides a private right of action that allows buyers of a business opportunity to bring lawsuits against sellers for violations of BODA.