Senate Bill sb2648c1

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    Florida Senate - 2005                           CS for SB 2648

    By the Committee on Commerce and Consumer Services; and
    Senator Garcia




    577-2147-05

  1                      A bill to be entitled

  2         An act relating to pyramid promotional schemes;

  3         amending s. 849.091, F.S.; deleting a provision

  4         declaring pyramid sales schemes to be a lottery

  5         and providing a criminal penalty for

  6         participating in such schemes; creating s.

  7         849.09105, F.S.; providing definitions;

  8         prohibiting establishing, promoting, operating,

  9         or participating in pyramid promotional

10         schemes; providing limitations; providing

11         construction; providing criminal penalties;

12         providing an effective date.

13  

14  Be It Enacted by the Legislature of the State of Florida:

15  

16         Section 1.  Section 849.091, Florida Statutes, is

17  amended to read:

18         849.091  Chain letters, pyramid clubs, etc., declared a

19  lottery; penalty prohibited; penalties.--

20         (1)  The organization of any chain letter club, pyramid

21  club, or other group organized or brought together under any

22  plan or device whereby fees or dues or anything of material

23  value to be paid or given by members thereof are to be paid or

24  given to any other member thereof, which plan or device

25  includes any provision for the increase in such membership

26  through a chain process of new members securing other new

27  members and thereby advancing themselves in the group to a

28  position where such members in turn receive fees, dues, or

29  things of material value from other members, is hereby

30  declared to be a lottery, and whoever shall participate in any

31  such lottery by becoming a member of, or affiliating with, any

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    Florida Senate - 2005                           CS for SB 2648
    577-2147-05




 1  such group or organization or who shall solicit any person for

 2  membership or affiliation in any such group or organization

 3  commits a misdemeanor of the first degree, punishable as

 4  provided in s. 775.082 or s. 775.083.

 5         (2)  A "pyramid sales scheme," which is any sales or

 6  marketing plan or operation whereby a person pays a

 7  consideration of any kind, or makes an investment of any kind,

 8  in excess of $100 and acquires the opportunity to receive a

 9  benefit or thing of value which is not primarily contingent on

10  the volume or quantity of goods, services, or other property

11  sold in bona fide sales to consumers, and which is related to

12  the inducement of additional persons, by himself or herself or

13  others, regardless of number, to participate in the same sales

14  or marketing plan or operation, is hereby declared to be a

15  lottery, and whoever shall participate in any such lottery by

16  becoming a member of or affiliating with, any such group or

17  organization or who shall solicit any person for membership or

18  affiliation in any such group or organization commits a

19  misdemeanor of the first degree, punishable as provided in s.

20  775.082 or s. 775.083. For purposes of this subsection, the

21  term "consideration" and the term "investment" do not include

22  the purchase of goods or services furnished at cost for use in

23  making sales, but not for resale, or time and effort spent in

24  the pursuit of sales or recruiting activities.

25         Section 2.  Section 849.09105, Florida Statutes, is

26  created to read:

27         849.09105  Pyramid promotional schemes prohibited;

28  penalties.--

29         (1)  For purposes of this section:

30         (a)  "Appropriate inventory repurchase program" means a

31  program by which a plan or operation repurchases, upon request

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    Florida Senate - 2005                           CS for SB 2648
    577-2147-05




 1  and upon commercially reasonable terms, when the salesperson's

 2  business relationship with the company ends, current and

 3  marketable inventory in the possession of the salesperson that

 4  was purchased by the salesperson for resale. Any such plan or

 5  operation shall clearly describe the program in its recruiting

 6  literature, sales manual, or contract with independent

 7  salespersons, including the disclosure of any inventory that

 8  is not eligible for repurchase under the program.

 9         (b)  "Commercially reasonable terms" means the

10  repurchase of current and marketable inventory within 12

11  months from the date of purchase at not less than 90 percent

12  of the original net cost, less appropriate set-offs and legal

13  claims, if any.

14         (c)  "Compensation" means a payment of any money, thing

15  of value, or financial benefit conferred in return for

16  inducing another person to participate in a pyramid

17  promotional scheme.

18         (d)  "Consideration" means the payment of cash or the

19  purchase of goods, services, or intangible property. The term

20  does not include the purchase of goods or services furnished

21  at cost to be used in making sales and not for resale or time

22  and effort spent in pursuit of sales or recruiting activities.

23         (e)  "Current and marketable" excludes inventory that

24  is no longer within its commercially reasonable use or

25  shelf-life period; was clearly described to salespersons prior

26  to purchase as seasonal, discontinued, or special promotion

27  products not subject to the plan or operation's inventory

28  repurchase program; or has been used or opened.

29         (f)  "Inventory" includes both goods and services,

30  including company-produced promotional materials, sales aids,

31  

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    Florida Senate - 2005                           CS for SB 2648
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 1  and sales kits that the plan or operation requires independent

 2  salespersons to purchase.

 3         (g)  "Promote" means contrive, prepare, establish,

 4  plan, operate, advertise, or otherwise induce or attempt to

 5  induce another person to participate in a pyramid promotional

 6  scheme, including a pyramid promotional scheme run through the

 7  Internet, e-mail, or other electronic communications.

 8         (h)  "Pyramid promotional scheme" means any plan or

 9  operation by which a person gives consideration for the

10  opportunity to receive compensation that is derived primarily

11  from the introduction of other persons into the plan or

12  operation rather than from the sale and consumption of goods,

13  services, or intangible property by a participant or other

14  persons introduced into the plan or operation. The term

15  includes any plan or operation under which the number of

16  persons who may participate is limited either expressly or by

17  the application of conditions affecting the eligibility of a

18  person to receive compensation under the plan or operation, or

19  any plan or operation under which a person, on giving

20  consideration, obtains any goods, services, or intangible

21  property in addition to the right to receive compensation.

22         (2)  No person may establish, promote, operate, or

23  participate in any pyramid promotional scheme. A limitation as

24  to the number of persons who may participate in or the

25  presence of additional conditions affecting eligibility for

26  the opportunity to receive compensation under a plan does not

27  change the identity of the plan as a pyramid promotional

28  scheme. It is not a defense under this section that a person,

29  on giving consideration, obtains goods, services, or

30  intangible property in addition to the right to receive

31  compensation.

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    Florida Senate - 2005                           CS for SB 2648
    577-2147-05




 1         (3)  Nothing in this section may be construed to

 2  prohibit a plan or operation, or to define a plan or operation

 3  as a pyramid promotional scheme, based on the fact that

 4  participants in the plan or operation give consideration in

 5  return for the right to receive compensation based upon

 6  purchases of goods, services, or intangible property by

 7  participants for personal use, consumption, or resale so long

 8  as the plan or operation does not promote or induce inventory

 9  loading and the plan or operation implements an appropriate

10  inventory repurchase program.

11         (4)(a)  Any person who establishes, promotes, or

12  operates a pyramid promotional scheme commits a felony of the

13  third degree, punishable as provided in s. 775.082 or s.

14  775.083.

15         (b)  Any person who knowingly participates in a pyramid

16  promotional scheme commits a misdemeanor of the first degree,

17  punishable as provided in s. 775.082 or s. 775.083.

18         Section 3.  This act shall take effect October 1, 2005.

19  

20          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
21                         Senate Bill 2648

22                                 

23  This committee substitute differs from the bill as filed in
    that it deletes the provisions regarding the actions the
24  Attorney General may take against violators of the bill. This
    committee substitute also deletes a provision that requires a
25  named person in a cease and desist order to be notified of his
    or her right to file a notice for a hearing with the Attorney
26  General. This committee substitute also deletes a provision
    for an injunction, restraining order, or writ of mandamus and
27  a provision that permits the court to enter an order of
    rescission, restitution, or disgorgement for violations of any
28  provision of the bill.

29  

30  

31  

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