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FTC Addresses Earnings Claims in Internet Advertising

As franchisors find new ways to reach out to prospective franchisees, there are inevitably questions about how franchise laws ' written long before electronic media such as the Internet and e-mail were contemplated ' might apply. Recently, the Federal Trade Commission's (FTC) staff provided some guidance to help franchisors understand how the FTC Franchise Rule applies with respect to earnings claims made in the context of Internet advertising.

In January 2004, the FTC's Franchise Rule staff issued an advisory opinion (FTC Staff Advisory Opinion No. 04-2, available at Bus. Franchise Guide (CCH) ' 6522; it can be found online at www.ftc.gov/bcp/franchise/advops/advis04-2.htm). The staff's advisory opinion makes for interesting reading and helps franchisors with questions about how to comply with the FTC's Franchise Rule when advertising on the Internet. While staff advisory opinions are not binding on the FTC, they are nonetheless useful in that they reflect the current views of the staff lawyers responsible for administration and enforcement of the Franchise Rule. In the author's view, the Commission will be reluctant to proceed against a private company that reasonably relied upon the guidance given by staff in an informal advisory opinion that was not revoked.

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