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Multilevel Marketing

The Attorney General's office receives many inquiries about multi-level marketing programs. While we generally do not offer opinions about the legality of specific programs, we can offer some information about the laws that apply.

Iowa's Referral Sales Statute, Iowa Code Section 714.16(2)(b)

This section applies to all multi-level marketing programs. Under this law, if the overall emphasis of the operation is money and the recruitment of others rather than on the sale of a product to people who want to purchase that product, the program may be illegal. The fact that a product is being sold does not necessarily mean that a given multi-level is legal; the product may be incidental in an attempt to mask a pyramid recruitment scheme.

The Iowa Consumer Fraud Act, Iowa Code Section 714.16(2)(a)

This section also applies to multi-level programs. Possible violations include exaggerated earnings claims, inaccurate or false product claims, or failure to provide important information to buyers.

Iowa's Door to Door Sales Act, Iowa Code Chapter 555A

The requirements of this chapter also apply to many multi-level marketing programs. This law applies to the sale of products in homes, hotel seminar rooms, or other locations other than established business locations. The law requires the seller to give the buyer three business days to cancel the transaction. This means the seller must notify the buyer orally, and in writing, of the buyer's cancellation right.

Other Statutes

A variety of other laws may also apply to a multi-level marketing programs. These could include the business opportunity law, utilities regulations and the travel registration act. A seller should contact the company and his or her own attorney to confirm that adequate efforts have been made to comply with all Iowa laws.

Liability

Finally, if a court ultimately determines that a multi-level marketing plan violates consumer protection laws there is potential liability for those who promote the plans, as well as for the company. This means that salespeople, independent contractors, dealers, distributors and promoters may be liable along with the directors of the company.

Consumer Complaint Form

To request further information or to file a complaint, write to:
Attorney General's Office
Consumer Protection Division
Hoover Building
1300 E. Walnut
Des Moines, IA 50319