BILL REQ. #: H-0251.1
| State of Washington | 59th Legislature | 2005 Regular Session |
Read first time 01/17/2005. Referred to Committee on Commerce & Labor.
AN ACT Relating to prohibiting pyramid promotional schemes; adding a new chapter to Title 19 RCW; and repealing RCW 19.102.010 and 19.102.020.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 The definitions in this section apply
throughout this chapter unless the context clearly requires otherwise.
(1) "Appropriate inventory repurchase program" means a program by
which a plan or operation repurchases, upon request at the termination
of a participant's business relationship with the plan or operation and
based upon commercially reasonable terms, current and marketable
inventory purchased and maintained by the participant for resale, use,
or consumption, and such plan or operation clearly describes the
program in its recruiting literature, sales manual, or contracts with
participants, including the manner in which the repurchase is
exercised, and disclosure of any inventory that is not eligible for
repurchase under the program.
(2) "Commercially reasonable terms" means the repurchase of current
and marketable inventory within twelve months from the date of purchase
at not less than ninety percent of the original net cost to the
participant, less appropriate set-offs and legal claims, if any. In
the case of service products, the repurchase of the service products
must be on a pro rata basis (unless clearly disclosed otherwise to the
participant) to be within the meaning of "commercially reasonable
terms".
(3) "Compensation" means a payment of any money, thing of value, or
financial benefit.
(4) "Consideration" means the payment of cash or the purchase of
goods, services, or intangible property, and does not include:
(a) The purchase of goods or services furnished at cost to be used
in making sales and not for resale; or
(b) Time and effort spent in pursuit of sales or recruiting
activities.
(5) "Current and marketable" includes inventory that, in the case
of consumable or durable goods, is unopened, unused, and within its
commercially reasonable use or shelf-life period; and in the case of
services and intangible property, including internet sites, represents
the unexpired portion of any contract or agreement. "Current and
marketable" does not include inventory that has been clearly described
to the participant prior to purchase as seasonal, discontinued, or
special promotion products not subject to the plan or operation's
inventory repurchase program.
(6) "Inventory" includes both goods and services, including
company-produced promotional materials, sales aids, and sales kits that
the plan or operation requires independent salespersons to purchase.
(7) "Inventory loading" means that the plan or operation requires
or encourages its independent salespersons to purchase inventory in an
amount that unreasonably exceeds that which the salesperson can expect
to resell for ultimate consumption, or to use or consume, in a
reasonable time period.
(8) "Participant" means a person who joins a plan or operation.
(9) "Person" includes an individual, a corporation, a partnership,
or any association or unincorporated organization.
(10) "Promote" means to contrive, prepare, establish, plan,
operate, advertise, or to otherwise induce or attempt to induce another
person to be a participant.
(11) "Pyramid promotional scheme" means any plan or operation in
which a participant gives consideration for the right to receive
compensation that is derived primarily from the recruitment of other
persons as participants in the plan or operation, rather than from the
sales of goods, services, or intangible property to participants or by
participants to others.
NEW SECTION. Sec. 2 No person may establish, promote, operate,
or knowingly participate in any pyramid promotional scheme.
NEW SECTION. Sec. 3 Nothing in this chapter may be construed to
prohibit a plan or operation, or to define such a plan or operation as
a pyramid promotional scheme, based upon the fact that participants in
the plan or operation give consideration in return for the right to
receive compensation based upon purchases of goods, services, or
intangible property by participants for personal use, consumption, or
resale, and the plan or operation does not promote inventory loading
and implements an appropriate inventory repurchase program.
NEW SECTION. Sec. 4 The legislature finds that the practices
covered by this chapter are matters vitally affecting the public
interest for the purpose of applying the consumer protection act,
chapter 19.86 RCW. A violation of this chapter is not reasonable in
relation to the development and preservation of business and is an
unfair or deceptive act in trade or commerce and an unfair method of
competition for the purpose of applying the consumer protection act,
chapter 19.86 RCW.
NEW SECTION. Sec. 5 Sections 1 through 4 of this act constitute
a new chapter in Title
NEW SECTION. Sec. 6 The following acts or parts of acts are each
repealed:
(1) RCW 19.102.010 (Definitions) and 1973 1st ex.s. c 33 s 1; and
(2) RCW 19.102.020 (Chain distributor schemes prohibited -- Unfair
practice) and 1973 1st ex.s. c 33 s 2.