The Federal Trade Commission has obtained a temporary restraining order in the Eastern District of Pennsylvania against a local business to prevent future violations of the Franchise Rule in Federal Trade Commission v. Morrone’s Water Ice Inc. et. al., EDPA No. 02-3720. The Franchise Rule enacted under the rulemaking authority of the FTC requires a franchisor to provide prospective franchisees with a complete and basic disclosure statement containing 20 categories of information. This pre-sale disclosure of information enables a prospective franchisee to contact prior purchasers and take other steps to assess the potential risks involved in the purchase of a franchise.
The complaint in Morrone’s alleges that certain defendants prepared sold franchises through 2001 through the use of an inaccurate disclosure statement, which understated the costs of starting a franchise. In addition to the inaccurate disclosure statement, certain defendants are accused of giving information outside of the FTC disclosure statement that was misleading or inaccurate.
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