Seller Assisted Marketing Plans
Running your own business is always hard work with long hours and substantial risks. People who are in business for themselves, or interested in starting their own business, should beware of any get rich quick schemes which promise riches and short work weeks as a result of buying into a business opportunity.
In 1978 the California Legislature, at the urging of this office, acted to regulate small business opportunity offerings. It passed the "Seller Assisted Marketing Plan Act" in order to assist inexperienced or unsophisticated buyers in making an informed decision prior to investing in
a business opportunity. The law, California Civil Code Section 1812.200 et seq., requires Seller Assisted Marketing Plans (SAMPs) to register with the Attorney General's Office, to provide significant disclosure statements to potential buyers prior to signing any contracts, and to
provide the buyer specific contractual rights after a purchase has been made.
Seller Assisted Marketing Plans are defined in the California Civil Code as follows:
"(A) 'Seller assisted marketing plan' means any sale or lease or offer to sell or lease any product, equipment, supplies, or services which requires a total initial payment exceeding five hundred dollars ($500), but requires an initial cash payment of less than fifty thousand dollars
($50,000), which will aid a purchaser or will be used by or on behalf of the purchaser in connection with or incidental to beginning, maintaining, or operating a business when the Seller Assisted Marketing Plan seller has advertised or in other manner solicited the purchase or lease of the Seller Assisted Marketing Plan and done any of the following acts:
(1) Represented that the purchaser will earn, is likely to earn, or can earn an amount in excess of the initial payment paid by the purchaser for participation in the Seller Assisted Marketing Plan.
(2) Represented that there is a market for the product, equipment, supplies, or services, or any product marketed by the user of the product, equipment, supplies, or services sold or leased or offered for sale or lease to the purchaser by the seller, or anything, be it tangible or intangible, made, produced, fabricated, grown, bred, modified, or developed by the purchaser using, in whole or in part, the product, supplies, equipment, or services which were sold or leased or offered for sale or lease to the purchaser by the Seller Assisted Marketing Plan seller.
(3) Represented that the seller will buy back or is likely to buy back any product made, produced, fabricated, grown, or bred by the purchaser using, in whole or in part, the product, supplies, equipment, or services which were initially sold or leased or offered for sale or lease
to the purchaser by the Seller Assisted Marketing Plan seller."
SAMP sellers are required to file with the Attorney General's Office prior to advertising or selling business opportunities in California. The Attorney General's Office then reviews the information for compliance with law before the company can begin selling in California.
The SAMP law requires that the seller give the same information to prospective purchasers at least 48 hours before the purchaser signs any contract or pays the seller any money.
As part of the filing, the prospective seller must provide the Attorney General's Office with information about the company including; the people running the company, the financial condition of the company and the length of time that the company has been in business and a copy of the
contract they plan to have the purchasers sign. The SAMP Act prohibits statements about potential earnings unless data is given about average earnings and prohibits charging payment of more than 20% in advance of delivering goods and services.
Investigations show that business opportunity scams are most often promoted at trade shows and through small ads that appear in the classified sections of newspapers and magazines though they also occur in large print advertisements, over the Internet, by direct mail, by radio, and by special invitation to meetings. Many of the ads promise big earnings, possibly on a part-time basis; contain references to vending machines, display racks or other "proven" concept; promise that no selling or other experience is necessary; and urge the reader to call an 800 number
for more information.
Consumers who are considering entering into a business opportunity should consider the following prior to making any commitments or providing any up-front money:
People who have been approached, been the victim of a fraudulent business opportunity or those who want to learn whether a business opportunity is registered in California, should contact California Attorney General Bill Lockyer's Office by writing or telephoning:
- Be skeptical about earnings claims that sound too good to be true;
- Exercise caution when it comes to newspaper and magazine ads that contain little more than glowing promises and an 800 number;
- Obtain and review the government-mandated disclosure documents before any money is exchanged;
- Make sure that the business opportunity is registered for sale with the California Attorney General's Office if it is a SAMP as described above;
- Examine the disclosure document to determine what the average investor has earned in the plan;
- Talk to current investors;
- Research the business and the market; and
- Do not automatically assume those promises of prime sites, speedy repairs and ongoing assistance will be there when you need them.
| Attorney General's Office
Public Inquiry Unit
P.O. Box 944255
Sacramento, CA 94244-2550
Toll-free in California only (800) 952-5225
Out-of-state callers (916) 322-3360