Every state has adopted laws regulating MLM companies. Visit this page to look up MLM law in your state.read more »
In this subtitle, "multilevel distribution company" means a person who, for consideration, distributes goods or services through independent agents, contractors, or distributors at different levels of distribution with rates of pricing or discounting that differ from 1 level to another.
(a) A multilevel distribution company may not require a participant in its marketing program to buy goods or services or pay any other consideration to participate in the marketing program unless the multilevel distribution company agrees to repurchase the goods:
(1) that are in resalable condition; and
(2) that the participant has been unable to sell 3 months after receipt of the goods first ordered.
(b) A multilevel distribution company shall state in writing in each contract of participation in its marketing program that:
(1) a participant may cancel the contract for any reason within 3 months after the date of receipt of goods or services first ordered by written notice to the multilevel distribution company; and
(2) on cancellation, the multilevel distribution company shall repurchase the goods.
(c) The repurchase price shall be at least 90\% of the original price paid by the participant.
A multilevel distribution company may not represent directly or indirectly that participants in its marketing program may or will earn a stated gross or net amount or represent in any way the past earnings of participants unless the stated gross amount, net amount, or past earnings:
(1) are those of a substantial number of participants in the community or geographic area where the representation is made; and
(2) accurately reflect the average earnings of participants under circumstances similar to those of the participant or prospective participant to whom the representation is made.
(a) The Attorney General or a State's Attorney may sue to enjoin, wholly or partly, the activities of a multilevel distribution company that violate this subtitle.
(b) At least 10 days before seeking injunctive relief, the Attorney General or State's Attorney shall send written notice of the alleged violation by certified mail to the principal place of business of the multilevel distribution company.
Any person who willfully violates any provision of this subtitle is guilty of a misdemeanor and, in addition to the injunctive relief provided for in Title 13, Subtitle 4 of this article, on conviction is subject to a fine of not more than $1,000 or imprisonment of not more than one year or both.
A seller may not use any general referral sales technique, plan, arrangement, or agreement by which a buyer is induced to purchase merchandise, real property, or intangibles on the representation or promise of the seller that if the buyer furnishes to the seller the names of other prospective buyers of like or identical merchandise, real property, or intangibles, he will receive a reduction in purchase price by means of a cash rebate, commission, or credit toward balance due or any other consideration.
Crimes and Punishments
(a) In this section, the following words have the meanings indicated.
(1) "Compensation" includes payment based on a sale or distribution made to a person who is either a participant in a plan or operation or who, upon making payment, then has the right to become a participant.
(2) "Consideration" does not include:
(i) Payment for purchase of goods or services furnished at cost for use in making sales to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme;
(ii) Time or effort spent in pursuit of sales or recruiting activities; or
(iii) The right to receive a discount or rebate based on the purchase or acquisition of goods or services by a bona fide cooperative buying group or association.
(3) "Promote" means to induce one or more other persons to become a participant.
(4) "Pyramid promotional scheme" means any plan or operation by which a participant gives consideration for the opportunity to receive compensation to be 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 other intangible property by the participant or other persons introduced into the plan or operation.
(b) A person may not establish, operate, advertise, or promote a pyramid promotional scheme.
(c) A person who violates the provisions of this section is guilty of a misdemeanor and on conviction is subject to a fine of not more than $10,000 or imprisonment for not more than 1 year or both.
(d) It is not a defense to a prosecution under this section that:
(1) The plan or operation limits the number of persons who may participate or limits the eligibility of participants; or
(2) On payment of anything of value by a participant, the participant obtains any other 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 »
Key Pages to Visit While You're Here
For Startup and Existing MLM Companies
Starting and Running the Successful MLM Company manual
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