Chapter 3 - Multilevel And Pyramid Distributorships
CHAPTER 3 - MULTILEVEL AND PYRAMID DISTRIBUTORSHIPS
40-3-101. Short title.
This act may be cited as the "WyomingMultilevel and Pyramid Distributorship Act."
40-3-102. Definitions.
(a) As used in this act:
(i) "Multilevel distribution companies" means anyperson, firm, corporation or other business entity which sells, distributes orsupplies for a valuable consideration, goods or services through independentagents, contractors or distributors, at different levels wherein suchparticipants may recruit other participants, and wherein commissions,cross-commissions, bonuses, refunds, discounts, dividends or otherconsiderations in the program are, or may be, paid as a result of the sale ofsuch goods or services or the recruitment, actions or performances ofadditional participants;
(ii) "Multilevel distribution marketing plan" meansany agreement for a definite or indefinite period, either expressed or implied,in which a person agrees, for a valuable consideration, to distribute goods orservices of a multilevel distribution company to members of the public or topersons who occupy different levels in the multilevel distribution company'sdistribution system;
(iii) "Distributor" means any independent contractedperson, agent, employer or participant who has agreed to perform, at one (1) ormore levels in a multilevel distribution marketing plan, the functions ofdistributing the goods or services of the multilevel distribution company orthe recruitment of subordinate distributors or both functions;
(iv) "Resalable condition" means products that willpass without objection in the trade, or are still fit for the ordinary purposesfor which the products are used;
(v) "Referral sale" means any inducement offered to aperson, for the purpose of selling a product or service, which is theopportunity to receive compensation without exercising a bona fide andcommensurate responsibility for the sale of the product or service to theultimate customer; or any offer to a person of an opportunity to receivecompensation related to the recruitment of third persons who will be entitledto substantially similar recruiting opportunities when the offer is used as aninducement for the payment of an entrance fee, given toward a purchase or otherconsideration, except for the actual cost of necessary sales materials by thepersons to whom the offer is made;
(vi) "Endless chain" means any scheme or plan for thedisposal or distribution of property or services whereby a participant pays avaluable consideration for the chance to receive compensation for introducingone (1) or more additional persons into participation in the scheme or plan orfor the chance to receive compensation when the person introduced by theparticipant introduces a new participant;
(vii) "Documentary material" means the original or acopy of any book, record, report, memorandum, paper, communication, tabulation,map, chart, photograph, mechanical transcription, other tangible document orrecording, reproductions of information stored magnetically, file layout, codeconversion tables, computer programs to convert file to readable printout,wherever situate.
40-3-103. Endless chains and referral sales prohibited.
No person may contrive, prepare, set up, proposeor operate an endless chain or referral sale.
40-3-104. Prohibitions and requirements.
Every multilevel distribution company shallprovide in its contract of participation that the contract may be cancelled forany reason at any time by a participant upon notification in writing to thecompany of his election to cancel. If the participant has purchased productswhile the contract of participation was in effect, all unencumbered products ina resalable condition then in the possession of the participant shall berepurchased by the multilevel distribution company. The repurchase shall be ata price of not less than ninety percent (90%) of the original net cost to theparticipant returning such goods, taking into account any sales made by orthrough such participant prior to notification to the company of the electionto cancel.
40-3-105. Restrictions on marketing programs.
(a) No multilevel distribution company, nor any participant,shall require participants in its marketing program to purchase products orservices or pay any other consideration in order to participate in themarketing program unless the multilevel distribution company agrees in writing:
(i) To repurchase all or part of any products which areunencumbered and in a resalable condition at a price of not less than ninetypercent (90%) of the original net cost to the participant, taking into accountany sales made by or through such participant prior to notification to thecompany of election to cancel;
(ii) To repay not less than ninety percent (90%) of the originalnet cost of any services purchased by the participants; or
(iii) To refund not less than ninety percent (90%) of any otherconsideration paid by the participant in order to participate in the marketingprogram.
40-3-106. Additional restrictions in marketing programs.
(a) No multilevel distribution company or participant in itsmarketing program shall:
(i) Operate or, directly or indirectly, participate in theoperation of any multilevel marketing program wherein the financial gains tothe participants are primarily dependent upon the continued, successiverecruitment of other participants and where sales to nonparticipants are notrequired as a condition precedent to realization of the financial gains;
(ii) Offer to pay, pay or authorize the payment of any finder'sfee, bonus, refund, override, commission, cross-commission, dividend or otherconsideration to any participant in a multilevel marketing program solely forthe solicitation or recruitment of other participants therein;
(iii) Offer to pay, pay or authorize the payment of any finder'sfee, bonus, refund, override, commission, cross-commission, dividend or otherconsideration to any participant in a multilevel marketing program inconnection with the sale of any product or service unless the participantperforms a bona fide supervisory, distributive, selling or soliciting functionin the sale or delivery of the product or services to the ultimate consumer; or
(iv) Offer to pay, pay or authorize the payment of any finder'sfee, bonus, refund, override, commission, cross-commission, dividend or otherconsideration to any participant:
(A) If payment thereof is or would be dependent on the elementof chance dominating over the skill or judgment of the participant;
(B) If no amount of judgment or skill exercised by theparticipant has any appreciable effect upon any finder's fee, bonus, refund,override, commission, cross-commission, dividend or other consideration whichthe participant may receive; or
(C) If the participant is without that degree of control overthe operation of the plan as to enable him substantially to affect the amountof finder's fee, bonus, refund, override, commission, cross-commission,dividend or other consideration which he may receive or be entitled to receive.
40-3-107. Representations of prospective income restricted.
Multilevel distribution companies shall notrepresent directly or by implication that participants in a multilevelmarketing program will earn or receive any stated gross or net amount, orrepresent in any manner the past earnings of participants. A written or verbaldescription 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 byimplication, that it is relatively easy to secure or retain additionaldistributors or sales personnel or that all or substantially all participantswill succeed.
40-3-108. Licensed activities excluded.
Nothing in W.S. 40-3-101 through 40-3-125shall apply to acts or practices permitted under the laws of this state orunder rules, regulations or decisions interpreting the laws, or to any personwho has procured a license as provided by W.S. 39-17-106(a) or (b).
40-3-109. Notice of activity and consent to service of process.
Each multilevel distribution companynumbering among its participants any resident of this state shall file with thestate's attorney general a statement giving notice of this fact and designatingthe secretary of state of this state its agent for service of process for anyalleged violation of this act. The written notice shall further set forth theintention of the multilevel distribution company to abide by the provisions ofthis act. Compliance with this section shall not subject any multileveldistribution company to the provisions or consequences of any other statute ofthis state.
40-3-110. Secretary of state agent for service of process forviolations.
Any multilevel distribution company, whichfails to comply with W.S. 40-3-109 is deemed to have thereby appointed thesecretary of state its agent for service of process for any alleged violationof this act.
40-3-111. Investigatory powers.
(a) If the attorney general has reason to believe that a personhas engaged in activity which violates the provisions of this act, he shallmake an investigation to determine if this act has been violated, and, to theextent necessary for this purpose, may administer oaths or affirmations, and,upon his own motion or upon request of any party, may subpoena witnesses,compel their attendance, adduce evidence, and require the production of anymatter which is relevant to the investigation, including the existence,description, nature, custody, condition and location of any books, documents orother tangible things and the identity and location of persons having knowledgeof relevant facts or any other matter reasonably calculated to lead to thediscovery of admissible evidence.
(b) If the person's records are located outside this state, theperson at his option shall either make them available to the attorney generalat a convenient location within this state or pay the reasonable and necessaryexpenses for the attorney general or his representative to examine them at theplace where they are maintained. The attorney general may designaterepresentatives, including comparable officials of the state in which therecords are located, to inspect them on his behalf.
(c) Upon failure without lawful excuse to obey a subpoena or togive testimony and upon reasonable notice to all persons affected thereby, theattorney general may apply to the district court for an order compellingcompliance.
40-3-112. Service of process.
(a) Service of any type of process authorized by this act shallbe personal within this state, but if such personal service cannot be obtained,substituted service may be made in the following manner:
(i) By service as provided by W.S. 40-3-109 and 40-3-110;
(ii) By service on the secretary of state;
(iii) Personal service without the state;
(iv) By registered or certified mail to the last known place ofbusiness, residence or abode of such persons for whom it is intended;
(v) As to any person other than a natural person, in the mannerprovided in the rules of civil procedure as if a complaint or other pleadingwhich institutes a civil action has been filed; or
(vi) By such service as a district court may direct in lieu ofpersonal service within this state.
40-3-113. Venue of action for injunctive relief.
An action under this act may be brought inthe district court of the county in which the alleged violator resides or hashis place of business or in the district court of Laramie county, Wyoming.
40-3-114. Injunctive relief against violations; remedy not exclusive.
The attorney general may, whenever itappears to him that any person has engaged or is about to engage in any act orpractice constituting a violation of any provision of this act or any rule ororder hereunder, bring an action in the name of the people of the state in adistrict court to enjoin the acts or practices or to enforce compliance withthis act or any rule or order hereunder. Upon a proper showing, a permanent orpreliminary injunction or restraining order shall be granted. The court shallnot require the attorney general to post a bond. This section is not deemed tobe exclusive of the remedies available to the state and the criminal penaltiesfound in this act may also apply to individuals who are the subject of anaction brought under this section.
40-3-115. Civil penalty for violating injunction.
The attorney general, upon petition to thecourt, may recover, on behalf of the state, a civil penalty of not more thanfive thousand dollars ($5,000.00) per violation from any person who violatesthe terms of an injunction issued under W.S. 40-3-114.
40-3-116. Acceptance of assurance of voluntary compliance authorized.
In the enforcement of this act, the attorneygeneral may accept an assurance of voluntary compliance with respect to any actor practice alleged to be violative of this act from any person who has engagedin, is engaging in or is about to engage in such act or practice.
40-3-117. Jurisdiction retained by court.
The court shall retain jurisdiction in anycase where an injunction is entered or a consent agreement is reached or anassurance of voluntary compliance is agreed upon.
40-3-118. Additional relief authorized; appointment of receiver.
The court may make such additional ordersor judgments as may be necessary to restore to any person in interest anymonies or property, real or personal, which the court finds to have beenacquired by means of any act or practice committed in violation of this act.Such additional relief may include the appointment of a receiver whenever itappears to the satisfaction of the court that the defendant threatens or isabout to remove, conceal or dispose of his property to the damage of persons towhom restoration would be made under this act.
40-3-119. Receiver's power to acquire and dispose of property.
Any receiver appointed pursuant to W.S.40-3-118 has the power to sue for, collect, receive and take into hispossession all the goods and chattels, rights and credits, monies and effects,land and tenements, books, records, documents, papers, choses in action, bills,notes and property of every description derived in violation of this act by anymultilevel distribution company or any distributor in any multileveldistribution marketing plan sponsored by such company, including property whichhas been commingled with company or distributor property, if it cannot beidentified in kind because of such commingling, and to sell, convey and assignthe same and hold and dispose of the proceeds thereof under the direction ofthe court.
40-3-120. Civil penalty for willful violation; willful violationdefined.
In any action brought pursuant to this act,if the court finds that any person has engaged in prohibited activities inwillful violation of or in reckless disregard for any provision of this act,the attorney general or county attorney in any county in which the violationoccurred, upon petition to the court, may recover, on behalf of the state, acivil penalty of not more than two thousand dollars ($2,000.00) per violation.For purposes of this section, a willful or reckless disregard occurs when theparty committing the violation knew or should have known that his conduct was aviolation of this act.
40-3-121. Property acquisition and disposition remedy available inaction for private remedy.
The remedy provided by W.S. 40-3-119 isavailable to any person in any action brought for a private remedy against anymultilevel distribution company or any distributor in the multileveldistribution marketing plan sponsored by the company.
40-3-122. Penalties for violations; other criminal remediesunimpaired.
Any person who willfully violates anyprovision of this act, or who willfully violates any rule or order under thisact, shall upon conviction be fined not more than five hundred dollars($500.00) or imprisoned in a county jail for not more than one (1) year, or bepunished by both such fine and imprisonment, but no person may be imprisonedfor the violation of any rule or order if he proves that he had no knowledge ofthe rule or order. Nothing in this act limits the power of the state to punishany person for any conduct which constitutes a crime under any other statute.
40-3-123. Limitation of actions.
No action shall be maintained to enforceany liability created under this act unless brought before the expiration ofthree (3) years after the act or transaction constituting the violation or theexpiration of one (1) year after the discovery by the plaintiff of the factconstituting the violation.
40-3-124. Causes of action under other law unimpaired.
Nothing in this act shall in any way affectcauses of action arising under other laws of this state or under the common lawbrought by any private person.
40-3-125. Severability of provisions.
If a part of this act is invalid, all validparts that are severable from the invalid part remain in effect. If a part ofthis act is invalid in one (1) or more of its applications, the part remains ineffect in all valid applications that are severable from the invalidapplications.