By Wolens H.B. No. 2771
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 to prohibit pyramid promotional schemes and to provide a penalty
1-3 for promotion and participation in such schemes.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sections 17.46(18) and 17.46(20), Business and
1-6 Commerce Code, are repealed.
1-7 SECTION 2. Chapter 17, Business and Commerce Code, is
1-8 amended by adding section 17.461 to read as follows:
1-9 Sec. 17.461. (a) As used in this section:
1-10 (1) "Participant" means a person who contributes money
1-11 into a pyramid promotional scheme but does not promote, organize or
1-12 operate the scheme;
1-13 (2) "Promoting a pyramid promotional scheme" means
1-14 inducing or attempting to induce one or more other persons to
1-15 become participants, or assisting another person in promoting a
1-16 pyramid promotional scheme by any means including the provision of
1-17 references.
1-18 (3) "Pyramid promotional scheme" means any plan or
1-19 operation by which a participant gives consideration for the
1-20 opportunity to receive compensation which is derived primarily from
1-21 any person's introduction of other persons into participation in
1-22 the plan or operation rather than from the sale of goods, services
1-23 or intangible property by the participants or other persons
2-1 introduced into the plan or operation.
2-2 (4) "Compensation" means payment of any money, thing
2-3 of value, or financial benefit. Compensation does not include
2-4 payment based on sales of products by the person or by other
2-5 participants in the plan to anyone, including a participant in the
2-6 plan, who is purchasing the products for actual use or consumption.
2-7 (5) "Consideration" means the payment of cash or the
2-8 purchase of products but does not include the purchase of products
2-9 furnished at cost to be used in making sales and not for resale,
2-10 the purchase of products where the seller offers to repurchase the
2-11 products acquired by the participant from the seller at reasonable
2-12 commercial terms nor does it include time and effort spent in
2-13 pursuit of sales or recruiting activities.
2-14 (6) "Products" means goods, services, or intangible
2-15 property of any kind.
2-16 (7) "Reasonable commercial terms" includes repurchase
2-17 of all unencumbered products which are in an unused, commercially
2-18 resalable condition within one year from the participant's date of
2-19 purchase; such repurchase shall be at a price not less than 90
2-20 percent of the original net cost to the participant of the products
2-21 being returned. For purposes of this paragraph, "original net
2-22 cost" means the amount actually paid by the participant for the
2-23 products, less any consideration received by the participant for
2-24 purchase of the products being returned. Products which are no
2-25 longer marketed by a program shall be deemed "resalable" if the
3-1 products are otherwise in an unused commercially resalable
3-2 condition and are returned to the seller within one year from the
3-3 participant's date of purchase; provided, however, that products
3-4 which are no longer marketed by a program shall not be deemed
3-5 "resalable" if the products are sold to participants as
3-6 non-returnable, discontinued, seasonal, or special promotion items
3-7 and the non-returnable nature of the products was clearly disclosed
3-8 to the participant prior to purchase.
3-9 (b) A person commits a crime if he contrives, prepares,
3-10 establishes, operates, advertises, sells, promotes or participates
3-11 in a pyramid promotional scheme.
3-12 (c)(1) Any person who violates subsection (b) of this
3-13 section by contriving, preparing, establishing, operating,
3-14 advertising or promoting a pyramid promotional scheme is guilty of
3-15 state jail felony.
3-16 (2) Any person who violates subsection (b) of this
3-17 section by participating in a pyramid promotional scheme is guilty
3-18 of a Class A misdemeanor except that if the amount of consideration
3-19 which the person contributed to a pyramid promotional scheme was
3-20 $100.00 or less, the person is guilty of a Class B misdemeanor.
3-21 (d)(1) It shall be no defense to a prosecution for a crime
3-22 under this section that the scheme or plan involved both a
3-23 franchise to sell a particular product and the authority to sell
3-24 additional franchises if the emphasis of the scheme is on the sale
3-25 of additional franchises.
4-1 (2) It shall be no defense to a prosecution for a
4-2 crime under paragraph (2) of subsection (b) of this section that
4-3 the person, after signing an agreement to participates, later
4-4 withdraws from the pyramid promotional scheme.
4-5 SECTION 2. This act shall take effect immediately.
4-6 SECTION 3. The importance of this legislation and the
4-7 crowded condition of the calendars in both houses create an
4-8 emergency and an imperative public necessity that the
4-9 constitutional rule requiring bills to be read on three several
4-10 days in each house be suspended, and thes rule is hereby suspended.