Pyramid promotional scheme prohibited

Checkout our iOS App for a better way to browser and research.

  1. A person may not establish,promote, or operate any pyramid promotional scheme. Any limitationregarding the number of persons who may participate or the presenceof additional conditions affecting eligibility for the opportunityto receive compensation under the plan does not change the identityof the plan as a pyramid promotional scheme.
  2. The provisions of thissection may not be construed to prohibit a plan or operation, or todefine a plan or operation as a pyramid promotional scheme, if theparticipants in the plan or operation give consideration in returnfor the right to receive compensation based upon purchases of goods,services, or intangible property by participants for personal use,consumption, or resale if both of the following conditions are met:(a) the plan or operation does not cause inventory loading, and (b)the plan or operation implements a bona fide inventory repurchaseprogram.
  3. An entity must clearlydescribe a bona fide inventory repurchase program in its recruitingliterature, sales manual, or contracts with independent salespersons.The recruiting literature, sales manual, or contract must discloseany inventory that is not eligible for repurchase under the program.
  4. A bona fide inventoryrepurchase program is not required to apply to inventory that is nolonger within the inventory's commercially reasonable use orshelf life period or has been used or opened.
  5. Before a salespersonof the entity purchases any inventory, the entity must clearly describethe inventory that is excluded from the entity's bona fideinventory repurchase program as seasonal, discontinued, or specialpromotion products and the inventory that is not subject to the entity'sbona fide inventory repurchase program.


Download our app to see the most-to-date content.