Franchising & Distribution Law Blog

For the past year and a half, various lawsuits have alleged that daily deal coupons, such as those offered by Groupon and Living Social, violate Regulation E’s rules for gift cards because such coupons expire too quickly. Regulation E, found at 12 C.F.R. § 205, et seq., is the Treasury’s official regulations enforcing the gift card provisions of the Credit Card Responsibility Act of 2009. It requires the funds underlying all gift cards to remain valid for at least five years.

Disclosure obligations may be as light as a one-page document, but the rule is now broader.

The Federal Trade Commission Business Opportunity rule used to be so limited in scope that it rarely posed an issue for franchisors or those distribution systems structured to avoid franchise laws. If it did apply, the business opportunity seller had to prepare a disclosure document as broad in scope as a franchise disclosure document. This was a major hassle for low-investment business opportunity systems. A significantly revised federal business opportunity rule (the "FTC Business Opportunity Rule") went into effect March 1, 2012. 16 C.F.R. 437 (2011). It flips the old rule on its head: Disclosure obligations may be as light as a one-page document, but the rule is now broader and will cover some distribution systems and even franchise systems that have previously been able to avoid federal disclosure regulation.

Read the article to learn more.