American Home Shield 2010 Annual Report Download - page 10

Table of Contents
restricts the services provided by ServiceMaster's operating segments or the methods by which ServiceMaster's operating segments offer, sell and fulfill those
services or conduct their respective businesses, or subjects ServiceMaster and its operating segments to the possibility of regulatory actions or proceedings.
Noncompliance with these laws and regulations can subject ServiceMaster to fines or various forms of civil or criminal prosecution, any of which could have
a material adverse effect on its reputation, business, financial condition, results of operations and cash flows.
These federal, state and local laws include laws relating to consumer protection, wage and hour regulations, deceptive trade practices, permit and license
requirements, real estate settlements, workers' safety, environmental regulations and employee benefits. The TruGreen LawnCare, TruGreen LandCare and
Terminix businesses must also meet certain Department of Transportation and Federal Motor Carrier Safety Administration requirements with respect to some
types of vehicles in their fleets. American Home Shield is regulated in certain states by the applicable state insurance regulatory authority and by the Real
Estate Commission in Texas. TruGreen LawnCare, TruGreen LandCare and Terminix are regulated by federal, state and local laws, ordinances and
regulations which are enforced by Departments of Agriculture, Pest Control Boards, Departments of Environmental Conservation and similar government
entities. AmeriSpec is regulated by various state and local home inspection laws and regulations.
Consumer Protection and Solicitation Matters
ServiceMaster is subject to federal and state laws and regulations designed to protect consumers, including laws governing consumer privacy and fraud,
the collection and use of consumer data, telemarketing and other forms of solicitation.
The telemarketing rules adopted by the Federal Communications Commission pursuant to the Federal Telephone Consumer Protection Act and the
Federal Telemarketing Sales Rule issued by the Federal Trade Commission govern ServiceMaster's telephone sales practices. In addition, many states and
local governing bodies have adopted laws and regulations targeted at direct telephone sales and "do-not-knock," "do-not-mail" and "do-not-leave" activities.
The implementation of these marketing regulations requires TruGreen LawnCare, and, to a lesser extent, ServiceMaster's other operating segments, to rely
more extensively on other marketing methods and channels. In addition, if ServiceMaster were to fail to comply with any applicable law or regulation,
ServiceMaster could be subject to substantial fines or damages, be involved in litigation, suffer losses to its reputation and its business or suffer the loss of
licenses or penalties that may affect how the business is operated, which, in turn, could have a material adverse effect on its financial position, results of
operations and cash flows.
Franchise Matters
TruGreen LawnCare, Terminix, ServiceMaster Clean, AmeriSpec, Furniture Medic and Merry Maids are subject to various international, federal and
state laws and regulations governing franchise sales, marketing and licensing and franchise trade practices generally, including applicable rules and
regulations of the Federal Trade Commission. These laws and regulations generally require disclosure of business information in connection with the sale and
licensing of franchises. Certain state regulations also affect the ability of the franchisor to revoke or refuse to renew a franchise. ServiceMaster seeks to
comply with regulatory requirements and deal with franchisees and licensees in good faith. From time to time, ServiceMaster and one or more franchisees
may become involved in a dispute regarding the franchise relationship, including payment of royalties or fees, location of branches, advertising, purchase of
products by franchisees, compliance with ServiceMaster standards and franchise renewal criteria. There can be no assurance that compliance problems will
not be encountered from time to time or that material disputes with one or more franchisees will not arise.
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