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MLM Law: Arizona Business Definitions
44-1731 . Definitions
In this article, unless the context otherwise requires:
1. "Compensation" includes a payment based on a sale or distribution made to a person who either is a participant in a pyramid promotional scheme or has the right to become a participant upon payment.
2. "Consideration" means the payment of cash or the purchase of goods, services or intangible property but does not include:
(a) The purchase of goods or services furnished at cost to be used in making sales and not for resale.
(b) Time and effort spent in pursuit of sales or recruiting activities.
3. "Pyramid promotional scheme" means any plan or operation by which a participant gives consideration for the opportunity to receive compensation which is derived primarily from any person's introduction of other persons into participation in the plan or operation rather than from the sale of goods, services or intangible property by the participant or other persons introduced into the plan or operation.
44-1732 . Violation; classification
A. Any person who violates any of the provisions of this article is guilty of a class 6 felony.
B. The attorney general or county attorney, or both, shall institute the criminal actions to enforce the provisions of this article.
C. An act or practice in violation of this article constitutes an unlawful practice under section 44-1522. The attorney general may investigate and take appropriate action as prescribed by chapter 10, article 7 of this title.
44-1733 . Sale or contract for sale of interest in pyramid promotional scheme voidable
Any purchaser in a pyramid promotional scheme may, notwithstanding any agreement to the contrary, declare the related sale or contract for sale void, and he may bring an action in a court of competent jurisdiction to recover the consideration he paid to participate in the scheme. In such action the court shall, in addition to any judgment awarded to the plaintiff, require the defendant to pay interest, reasonable attorneys' fees and the costs of the action, less any money paid to the plaintiff as profit in the transaction.
44-1735 . Pyramid promotional scheme; prohibition; defenses excluded
A. A person shall not establish, operate, advertise or promote a pyramid promotional scheme.
B. A limitation as to the number of persons who may participate or the presence of additional conditions affecting eligibility for the opportunity to receive compensation under the plan or operation does not change the identity of the scheme as a pyramid promotional scheme nor is it a defense under this article that a participant, on giving consideration, obtains any goods, services or intangible property in addition to the right to receive compensation.
Other Pages of Interest
MLM law in 50 states, IRS Publication 911, the MLM Textbook, as well as a comprehensive index of articles on the direct selling industry.read more »
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