PocketLaw | Georgia Code | Prohibited Activities by Multilevel

Prohibited Activities by Multilevel Distribution Company or Participant in Marketing Program; Disclosure Statement

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No multilevel distribution company or participant in its marketing program shall:
1. Operate or, directly or indirectly, participate in the operation of any multilevel marketing program wherein the financial gains to the participants are primarily dependent upon the continued, successive recruitment of other participants and where sales to nonparticipants are not required as a condition precedent to realization of such financial gains;
2. Offer to pay, pay, or authorize the payment of any finder's fee, bonus, refund, override, commission, cross-commission, dividend, or other consideration to any participant in a multilevel marketing program solely for the solicitation or recruitment of other participants therein;
3. Offer to pay, pay, or authorize the payment of any finder's fee, bonus, refund, override, commission, cross-commission, dividend, or other consideration to any participant in a multilevel marketing program in connection with the sale of any product or service unless the participant performs a bona fide supervisory, distributive, selling, or soliciting function in the sale or delivery of such product or services to the ultimate consumer;
4. Offer to pay, pay, or authorize the payment of any finder's fee, bonus, refund, override, commission, cross-commission, dividend, or other consideration to any participant:
  1. Where payment thereof is or would be dependent on the element of chance dominating over the skill or judgment of such participant;
  2. Where no amount of judgment or skill exercised by the participant has any appreciable effect upon any finder's fee, bonus, refund, override, commission, cross-commission, dividend, or other consideration which the participant may receive; or
  3. Where the participant is without that degree of control over the operation of such plan as to enable him substantially to affect the amount of finder's fee, bonus, refund, override, commission, cross-commission, dividend, or other consideration which he may receive or be entitled to receive; or
5. Represent, directly or by implication, that participants in a multilevel marketing program will earn or receive any stated gross or net amount or represent in any manner the past earnings of participants except as may be permitted under this part; provided, however, that a written or verbal description of the manner in which the marketing plan operates shall not, standing alone, constitute a representation of earnings, past or future. Multilevel distribution companies shall not represent, directly or by implication, that it is relatively easy to secure or retain additional distributors or sales personnel or that most participants will succeed.
At least 48 hours prior to the time the purchaser signs a business opportunity contract or at least 48 hours prior to the receipt of any consideration by the seller, whichever occurs first, the seller must provide the prospective purchaser a written document, the cover sheet of which is entitled in at least ten-point boldface capital letters: "DISCLOSURES REQUIRED BY GEORGIA LAW." Under this title shall appear the statement in at least ten-point type that:
"The State of Georgia has not reviewed and does not approve, recommend, endorse, or sponsor any business opportunity. The information contained in this disclosure has not been verified by the state. If you have any questions about this investment, see an attorney before you sign a contract or agreement."

Nothing except the title and required statement shall appear on the cover sheet. The disclosure document shall contain the following information:
1. The name of the company; whether the company is doing business as a proprietorship, partnership, or corporation; the names under which the company has done, is doing, or intends to do business; and the name of any parent or affiliated company that will engage in business transactions with purchasers or which takes responsibility for statements made by the seller;
2. The names, addresses, and titles of the company's officers, directors, trustees, general partners, general managers, principal executives, and any other persons charged with responsibility for the company's business activities relating to the sale of business opportunities;
3. The length of time the company has:
  1. Sold business opportunities; and
  2. Sold business opportunities involving the products, equipment, supplies, or services currently offered to the purchaser;
4. A full and detailed description of the actual services that the seller or company undertakes to perform for the purchaser;
5. A copy of a current (not older than 13 months) financial statement of the company, updated to reflect any material changes in the company's financial condition;
6. If training of any type is promised by the seller or company, a complete description of the training and the length of the training;
7. If the seller or company promises services to be performed in connection with the placement of equipment, product, or supplies at various locations, the full nature of those services as well as the nature of the agreements to be made with the owners or managers of those locations where the purchaser's equipment, product, or supplies will be placed;
  "If the company fails to deliver the product, equipment, or supplies necessary to begin substantial operation of the business within 45 days of the delivery date stated in your contract, you may notify the company in writing and demand that the contract be canceled.";
  1. The total number of purchasers of business opportunities involving the product, equipment, supplies, or services being offered who, to the company's knowledge, have actually received earnings in the amount or range specified within three years prior to the date of the disclosure statement; and
  2. The total number of purchasers of business opportunities involving the product, equipment, supplies, or services being offered within three years prior to the date of the disclosure statement;
    The following statement:
    
    "The company selling a business opportunity or the seller shall collect no more than 15 percent of the purchase price. The balance of the purchase price shall be paid into an escrow account, established with a bank or an attorney, which is agreed upon by both parties. The balance in escrow shall be paid to the company 60 days after the date the purchaser commences operation of the business or upon complete compliance with the terms of the contract, whichever happens first."; and
    
    The seller's principal business address and the name and address of its agent in this state authorized to receive service of process.
In lieu of the disclosures required by paragraphs (1) through (7), (9), and (10) of subsection (b) of this Code section, a seller may utilize the documents prescribed by the Federal Trade Commission, pursuant to Title 16, Chapter 1, Subchapter D, Trade Regulation Rules, Part 436 - Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures, provided that the seller shall provide the prospective purchaser with a separate written cover sheet which is entitled in at least ten-point boldface capital letters: "DISCLOSURES REQUIRED BY GEORGIA LAW." Under this title shall appear the statement in at least ten-point type that:
"The State of Georgia has not reviewed and does not approve, recommend, endorse, or sponsor any business opportunity. The information contained in this disclosure has not been verified by the state. If you have any questions about this investment, see an attorney before you sign a contract or agreement."

Nothing except the title and required statement shall appear on the cover sheet.

(8) If the company is required to secure a bond or establish a trust deposit pursuant to Code Section 10-1-412, either of the following statements:

(A) "As required by Georgia law, the company has secured a bond issued by ___________________________________________________________________________, (name and address of surety company) a surety company authorized to do business in this state. Before signing a contract to purchase this business opportunity, you should check with the surety company to determine the bond's current status."; or (B) "As required by Georgia law, the company has established a trust account _______________________________________________________________ with (number of account) ___________________________________________________________. Before signing (name and address of bank or savings institution) a contract to purchase this business opportunity, you should check with the bank or savings institution to determine the current status of the trust account.";

The following statement:

If the seller or company makes any statement concerning sales or earnings or range of sales or earnings that may be made through this business opportunity, the following disclosures:

(Ga. L. 1980, p. 1233, § 2; Ga. L. 1982, p. 3, § 10; Ga. L. 1984, p. 522, § 2; Ga. L. 1988, p. 1868, § 1.)

Law reviews.

- For note, "The Georgia Sale of Business Opportunities Act," see 1 Ga. St. U.L. Rev. 219 (1985).

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