Print Friendly SENATE BILL NO. 1237 – Pyramid promotional schemes/prohbtd
SENATE BILL NO. 1237
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S1237................................................by JUDICIARY AND RULES
PYRAMID PROMOTIONAL SCHEMES - Amends existing law to revise terminology; to
prohibit certain actions relating to pyramid promotional schemes; to revise
definitions; and to provide that certain plans or operations shall not be
prohibited or defined as pyramid promotional schemes.
01/27 Senate intro - 1st rdg - to printing
01/28 Rpt prt - to Jud
02/05 Rpt out - rec d/p - to 2nd rdg
02/06 2nd rdg - to 3rd rdg
02/11 3rd rdg - PASSED - 34-0-1
AYES -- Andreason, Bailey, Brandt, Bunderson, Burkett, Burtenshaw,
Cameron, Compton, Darrington, Davis(Davis), Gannon, Geddes, Goedde,
Hill, Ingram, Kennedy, Keough, Little, Lodge, Malepeai, Marley,
McKenzie, McWilliams, Noble, Noh, Pearce, Richardson, Schroeder,
Sorensen, Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Calabretta
Floor Sponsor - Richardson
Title apvd - to House
02/12 House intro - 1st rdg - to Jud
03/01 Rpt out - rec d/p - to 2nd rdg
03/02 2nd rdg - to 3rd rdg
03/08 3rd rdg - PASSED - 67-0-3
AYES -- Andersen, Barraclough, Barrett, Bauer, Bayer, Bedke, Bell,
Black, Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins,
Cuddy, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth, Eskridge,
Field(18), Field(23), Gagner, Garrett, Henbest, Jaquet, Jones,
Kellogg, Kulczyk, Lake, Langford, Langhorst, Martinez, McGeachin,
McKague, Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen,
Pasley-Stuart, Raybould, Ridinger, Ring, Ringo, Roberts, Robison,
Rydalch, Sali, Sayler, Schaefer, Shirley, Skippen, Smith(30),
Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills, Wood, Mr.
NAYS -- None
Absent and excused -- Crow, Harwood, Shepherd
Floor Sponsor - Clark
Title apvd - to Senate
03/09 To enrol
03/10 Rpt enrol - Pres signed
03/11 Sp signed
03/12 To Governor
03/16 Governor signed
Session Law Chapter 51
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE SENATE
SENATE BILL NO. 1237
BY JUDICIARY AND RULES COMMITTEE
1 AN ACT
2 RELATING TO PYRAMID SCHEMES; AMENDING SECTION 18-3101, IDAHO CODE, TO REVISE
3 TERMINOLOGY, TO PROHIBIT CERTAIN ACTIONS RELATING TO PYRAMID PROMOTIONAL
4 SCHEMES, TO DELETE THE DEFINITION FOR "CHAIN DISTRIBUTOR" OR "PYRAMID DIS-
5 TRIBUTOR SCHEME," TO DEFINE TERMS, TO REVISE DEFINITIONS, TO PROVIDE THAT
6 CERTAIN PLANS OR OPERATIONS SHALL NOT BE PROHIBITED OR DEFINED AS PYRAMID
7 PROMOTIONAL SCHEMES, TO PROVIDE CORRECT TERMINOLOGY AND TO MAKE A TECHNI-
8 CAL CORRECTION.
9 Be It Enacted by the Legislature of the State of Idaho:
10 SECTION 1. That Section 18-3101, Idaho Code, be, and the same is hereby
11 amended to read as follows:
12 18-3101. CHAIN OR PYRAMID DISTRIBUTOR PROMOTIONAL SCHEMES PROHIBITED --
13 PENALTIES -- SALE OF INTEREST VOIDABLE -- SCOPE OF REMEDY. (1) It is illegal
14 and prohibited for any person, or any agent or employee thereof, to establish,
15 promote, offer, operate, advertise or grant participation in a chain or any
16 pyramid distributor promotional scheme.
17 (2) As used herein in this section:
18 (a) A "chain distributor scheme" or a "pyramid distributor scheme" means
19 any plan or operation whereby a person gives consideration for the oppor-
20 tunity to receive consideration to be derived primarily from any person's
21 introduction of other persons into participation in the plan or operation
22 rather than from the sale of goods, services, or other intangible property
23 by the person or other persons introduced into the plan or operation
24 "Appropriate inventory repurchase program" means a program by which a plan
25 or operation repurchases, upon request at the termination of a
26 participant's business relationship with the plan or operation and based
27 upon commercially reasonable terms, current and marketable inventory pur-
28 chased and maintained by the participant for resale, use or consumption,
29 provided such plan or operation clearly describes the program in its
30 recruiting literature, sales manual, or contracts with participants,
31 including the manner in which the repurchase is exercised and disclosure
32 of any inventory that is not eligible for repurchase under the program.
33 (b) "Commercially reasonable terms" means the repurchase of current and
34 marketable inventory within twelve (12) months from the date of original
35 purchase at not less than ninety percent (90%) of the original net cost to
36 the participant, less appropriate set-offs and legal claims, if any. In
37 the case of service products, the repurchase of such service products
38 shall be on a pro rata basis, unless clearly disclosed otherwise to the
39 participant, in order to qualify as "commercially reasonable terms."
40 (c) "Compensation" means a payment of any money, thing of value, or
41 financial benefit.
42 (d) "Consideration" means anything of value, a payment of any money, or
43 the purchase of goods, services, or intangible property but shall not
2 1. The not for profit sale of sales demonstration equipment and
3 materials for use purchase of goods or services furnished at cost to
4 be used in making sales and not for resale.
5 2. Time or and effort spent in selling pursuit of sales or recruit-
6 ing activities.
7 (e) "Current and marketable" includes inventory that, in the case of con-
8 sumable or durable goods, is unopened, unused and within its commercially
9 reasonable use of shelf-life period. In the case of services and intangi-
10 ble property, including internet sites, "current and marketable" means the
11 unexpired portion of any contract or agreement. The term "current and mar-
12 ketable" does not include inventory that has been clearly described to the
13 participant prior to purchase as a seasonal, discontinued, or special pro-
14 motion product not subject to the plan or operation's inventory repurchase
16 (f) "Inventory" includes both goods and services, including company-
17 produced promotional materials, sales aids and sales kits that the plan or
18 operation requires independent salespersons to purchase.
19 (g) "Inventory loading" means that the plan or operation requires or
20 encourages its independent salespersons to purchase inventory in an amount
21 that unreasonably exceeds that which the salesperson can expect to resell
22 for ultimate consumption, or to use or consume, in a reasonable time
24 (h) "Participant" means a natural person who joins a plan or operation.
25 ( ci) "Person" means a natural person, partnership, corporation, trust,
26 estate, business trust, joint venture, unincorporated association, or any
27 other legal or commercial entity.
28 (j) "Promote" means to contrive, prepare, establish, plan, operate,
29 advertise or otherwise induce or attempt to induce another person to be a
31 (k) "Pyramid promotional scheme" means any plan or operation in which a
32 participant gives consideration for the right to receive compensation that
33 is derived primarily from the recruitment of other persons as participants
34 in the plan or operation rather than from the sales of goods, services or
35 intangible property to participants or by participants to others.
36 (3) A limitation as to the number of persons who may participate, or the
37 presence of additional conditions affecting eligibility, or upon payment of
38 anything of value by a person whereby the person obtains any other property in
39 addition to the right to receive consideration, does not change the identity
40 of the scheme as a chain or pyramid distributor promotional scheme.
41 (4) Any person, or any agent or employee thereof who wilfully willfully
42 and knowingly promotes, offers, advertises, or grants participation in a chain
43 or pyramid distributor promotional scheme shall be guilty of a felony.
44 (5) All chain or pyramid distribution promotional schemes offered by the
45 same person, or agents or employees thereof, or any person controlled by or
46 affiliated with such person, for the same type of consideration, at substan-
47 tially the same period of time and for the same general purpose, shall be
48 deemed to be one (1) integrated chain or pyramid distributor promotional
49 scheme, even though such chain or pyramid distributor promotional schemes may
50 be given different names or other designations.
51 (6) Nothing in this section or in any rule promulgated pursuant to this
52 section shall be construed to prohibit a plan or operation, or to define such
53 plan or operation as a pyramid promotional scheme, based upon the fact that
54 participants in the plan or operation give consideration in return for the
55 right to receive compensation based upon purchases of goods, services or
1 intangible property by participants for personal use, consumption or resale,
2 provided the plan or operation implements an appropriate inventory repurchase
3 program and does not promote inventory loading.
4 (7) Any violation of this act section shall also be deemed an unfair and
5 deceptive practice in violation of the Idaho consumer protection act. Any per-
6 son aggrieved by a violation of this section can recover monetary damages pur-
7 suant to the Idaho consumer protection act.
8 ( 78) The rights and remedies that are granted under the provisions of
9 this section to purchasers in chain or pyramid distributor promotional schemes
10 are independent of and in addition to any other right or remedy available to
11 them in law or equity, and nothing contained herein shall be construed to
12 diminish or abrogate any such right or remedy.
STATEMENT OF PURPOSE
This legislation amends Section 18-3101, Idaho Code, to more clearly
define and strengthen the current law relating to the prohibition of
pyramid promotional schemes in Idaho.
This bill will differentiate between legitimate direct selling
opportunities and inherently fraudulent pyramid schemes by creating a
clear and specific set of definitions, and thus, protect Idaho
residents from becoming potential victims of illegal pyramid
promotional schemes by giving law enforcement better tools to
Not only will this bill protect the potential victims of current and
future fraudulent pyramid schemes, but it will also protect the
estimated 60,000 Idaho citizens who supplement their incomes through
legitimate direct selling opportunities.
There is no anticipated fiscal impact.
Name: Dean Heyl, Direct Selling Association
Phone: (202) 220-9420
Name: Pam Eaton, Idaho Retailers Association
Phone: (208) 342-0010 x2 S 1237