SUBPART B. PYRAMIDS

§361. Definitions

As used in this Subpart:

(1) "Compensation" means the payment of money, a thing of value, or any financial benefit. Compensation does not include:

(a) Payment to participants based upon sales of products purchased for actual use or consumption, including products used or consumed by participants in the plan.

(b) Payment to participants under reasonable commercial terms.

(2) "Consideration" means the payment of cash or purchase of goods, services, or intangible property. Consideration does not include:

(a) Purchase of products furnished at cost to be used in making sales and not for resale.

(b) Purchase of products where the seller offers to repurchase the participant's products under reasonable commercial terms.

(c) Participant's time and effort in pursuit of sales or recruiting activities.

(3) "Participant" means a person who contributes money into a pyramid promotional scheme.

(4) "Person" means an individual, a corporation, a partnership, or any association, or unincorporated organization.

(5) "Promote" means to contrive, direct, establish, or operate a pyramid promotional scheme.

(6) "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 the person's introduction of other persons into a 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.

(7) "Reasonable commercial terms" includes repurchase by the seller, at the participant's request, and upon termination of the business relationship or contract with the seller, of all unencumbered products purchased by the participant from the seller within the previous twelve months which are unused and in commercially resalable condition, provided that repurchase by the seller shall be for not less than ninety percent of the actual amount paid by the participant to the seller of the products, less any consideration received by the participant for purchase of the products which are being returned. A product shall not be deemed nonresalable solely because the product is no longer marketed by the seller, unless it is clearly disclosed to the participant at the time of the sale that the product is a seasonal, discontinued, or special promotional product, and not subject to the repurchase obligation.

Acts 1997, No. 379, §1; Acts 2001, No. 837, §1.