Session: State Capitol, Room 428 Juneau, AK 99801-1182 Toll Free: (800) 821-4925 Phone: (907) 465-4925 Fax: (907) 465-3517 Interim: 112 Mill Bay Road Kodiak, AK 99615 Phone: (907) 486-4925 Fax: (907) 486-5264

Sponsor Statement for HB 393
Sales Of Business Opportunities

An Act relating to unfair and deceptive trade practices and to the sale of business opportunities; amending Rules 4 and 73, Alaska Rules of Civil Procedure; and providing for an effective date.

House Bill 393 creates a new, comprehensive statute regulating the sale of business opportunities. Business opportunities, commonly referred to as "biz opps," are prepackaged small business deals primarily targeted to novice entrepreneurs. Although some business opportunities offer consumers legitimate methods for earning income, the field is fraught with unfair and deceptive practices.

Typical business opportunities range from work-at-home schemes, like medical billing, to the sale of vending machines, ATMs, greeting card display racks and other products, to the sale of "900 numbers." These deals are initially pitched to consumers through classified ads, over the Internet, and through "infomercials," and potential buyers are subjected to high-pressure sales tactics. Unwary consumers are enticed by the promise of high earnings, which rarely materialize. According the to the Federal Trade Commission, biz opp scams bilk consumers across the country of tens of millions of dollars each year.

With this bill, Alaska will join approximately half of the states in regulating the sale of business opportunities. Persons who want to sell or advertise business opportunities in Alaska would be required to register with the state, to disclose information to buyers, to use escrow accounts to assure delivery of business assets, and to provide a 30-day right of cancellation to the buyer. Violators will be subject to civil and criminal penalties. The bill provides important consumer safeguards for entrepreneurial-minded Alaskans.

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