There’s a waiting period for MLM Trend in the works

The state of Delaware is proposing a waiting period with certain disclosures and procedures to be presented to someone starting as a distributor in an MLM Company. Good idea? Bad idea?

Read the bill:
https://legis.delaware.gov/json/BillDetail/GenerateHtmlDocument?legislationId=142291&legislationTypeId=1&docTypeId=2&legislationName=HB162

Then Vote on MLM.vote and let your opinions count!

AI Summary from Grok:
Summary of the Act

The Act amends Title 6 of the Delaware Code to regulate multilevel distribution companies (commonly associated with multilevel marketing or MLM schemes) under Subchapter VI, Chapter 25. It introduces definitions, mandatory disclosure requirements, and repurchase obligations to protect participants in multilevel marketing programs. The legislation aims to increase transparency, prevent deceptive practices, and provide legal recourse for violations. Key provisions include defining terms like “multilevel distribution company,” requiring detailed disclosures before contracts are signed, and mandating repurchase agreements for goods. Violations of disclosure rules are treated as violations of existing consumer protection laws, while repurchase violations allow participants to seek treble damages, court costs, and attorney’s fees.

Bullet Point Explanation

• Definitions (§ 2561):
  • Consideration: Includes fees, bonuses, commissions, dividends, or any financial remuneration.
  • Multilevel Distribution Company: A person or entity that sells goods/services through independent agents at different levels, pays for sales or recruitment, but excludes licensed insurance, real estate, or securities professionals.
  • Multilevel Marketing Program: The marketing plan of a multilevel distribution company.
• Mandatory Disclosures (§ 2565):
  • At least 48 hours before a contract is signed or payment is made, companies must provide a written document with:
    • A first page with specific Delaware law disclaimers in bold, stating the state does not endorse the program and advising consultation with an attorney or financial advisor.
    • Seller’s name, business name, and any parent/affiliated company details.
    • A full description of the compensation plan, including inventory purchase requirements.
    • Details of services the seller will provide.
    • A disclaimer that no earnings are guaranteed if earnings claims are made.
    • Data on participants earning claimed amounts and total participants in the last 3 years.
    • Description of promised training, including duration.
    • Details of services for product placement and agreements with location owners/managers.
    • Explanation of any “buy-back,” “protection,” or “security” arrangements if claimed.
    • Number of other sellers in each Delaware county.
    • Percentage of buyers earning more than initial payments and inventory costs.
    • Median and typical earnings of all program participants.
  • Violations are treated as breaches of Subchapter II, Chapter 25, subject to civil penalties.
• Repurchase Requirements (§ 2566):
  • Companies cannot require participants to buy goods/services or pay to join unless they agree to repurchase resalable goods.
  • Contracts must state:
    • Participants can cancel within 3 months for any reason via email or first-class mail.
    • The company will repurchase goods at 90% of the original price paid.
  • Violations allow participants to sue for triple damages, court costs, and reasonable attorney’s fees, in addition to other legal remedies.
• Purpose and Protections:
  • Enhances transparency by mandating detailed disclosures about the company, earnings, and risks.
  • Protects participants by ensuring refund opportunities and legal recourse for deceptive practices.
  • Aims to curb exploitative practices in multilevel marketing by enforcing accountability.

This Act strengthens consumer protections for individuals engaging with multilevel distribution companies in Delaware, addressing common MLM concerns like misleading earnings claims and lack of refund options.

Special Thanks to Scott “Tex” Johnson who brought this to the next level as we are having conversations about this on Building Fortunes Radio. https://buildingfortunesradio.com