Indiana Pyramid Promotional Schemes Act
24-13-1-1. Applicability.
The definitions in this chapter apply throughout this article.
24-13-1-2. Appropriate inventory repurchase program.
“Appropriate inventory repurchase program” means a program by which an entity repurchases from a salesperson current and marketable inventory in the possession of the salesperson, upon request and upon commercially reasonable terms, when the salesperson’s business relationship with the entity ends.
24-13-1-3. Commercially reasonable terms.
“Commercially reasonable terms” means the repurchase of current and marketable inventory within twelve (12) months after the date of purchase at not less than ninety percent (90%) of the original net cost, less appropriate set-offs and legal claims, if any.
24-13-1-4. Compensation.
“Compensation” means a payment of any money, thing of value, or financial benefit conferred in return for inducing another person to participate in a pyramid promotional scheme.
24-13-1-5. Consideration.
“Consideration” means the payment of cash or the purchase of goods, services, or intangible property. The term does not include the purchase of goods or services furnished at cost to be used in making sales and not for resale, or time and effort spent in pursuit of sales or recruiting activities.
24-13-1-6. Inventory.
“Inventory” includes both goods and services, including company produced promotional materials, sales aids, and sales kits that an entity requires independent salespersons to purchase.
24-13-1-7. Inventory loading.
“Inventory loading” means the requirement or encouragement by a plan or operation that its independent salesperson purchase inventory in an amount that exceeds the amount that the salesperson can expect to resell for ultimate consumption or to consume in a reasonable time period, or both.
24-13-1-8. Promote.
“Promote” means to contrive, prepare, establish, plan, operate, advertise, or otherwise induce or attempt to induce another person to participate in a pyramid promotional scheme.
24-13-1-9. Pyramid promotional scheme.
“Pyramid promotional scheme” means any plan or operation by which a person gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other persons into the plan or operation rather than from the sale and consumption of goods, services, or intangible property by a participant or other persons introduced into the plan or operation. The term includes any plan or operation under which the number of people who may participate is limited either expressly or by the application of conditions affecting the eligibility of a person to receive compensation under the plan or operation, or any plan or operation under which a person, on giving any consideration, obtains any goods, services, or intangible property in addition to the right to receive compensation.
24-13-2-1. Pyramid promotional schemes prohibited.
A person may not establish, promote, or operate any pyramid promotional scheme. A limitation as to the number of persons who may participate or the presence of additional conditions affecting eligibility for the opportunity to receive compensation under the plan does not change the identity of the plan as a pyramid promotional scheme.
24-13-3-1. Remedies of attorney general.
(a) If the attorney general has reasonable cause to believe that a person has engaged or is about to engage in any act or practice constituting a violation of any provision of this article, or any order issued under this article, the attorney general may do any of the following:
(1) Issue a cease and desist order, with or without a prior hearing, against any person engaged in the prohibited activities, directing the person to cease and desist from further illegal activities.
(2) Bring an action in the circuit court of the county in which the violation is believed to have occurred to:
(A) enjoin the acts or practices constituting a violation of this article; or
(B) enforce compliance with this article or any order issued under this article.
(3) Impose by order and collect a civil penalty against any person found in an administrative action to have violated any provision of this article or any order issued under this article.
(b) The maximum amount of a civil penalty that may be imposed upon a person under subsection (a) is ten thousand dollars ($10,000) for each violation committed by the person. The attorney general may bring an action in the circuit court of the county in which the violation occurred to recover a penalty imposed under this chapter. The attorney general shall transfer all civil penalties collected under this chapter to the treasurer of state for deposit in the state general fund.
24-13-3-2. Cease and desist order.
(a) A person named in a cease and desist order issued under this article must be notified of the person’s right to file, within fifteen (15) days after the receipt of the order, a written notice for a hearing. If the attorney general does not receive a written request for a hearing within the time specified, the cease and desist order is permanent and the person named in the order is considered to have waived all rights to a hearing. A cease and desist order issued under this article must state:
(1) the effective date of the order;
(2) the intent or purpose of the order; and
(3) the grounds on which the order is based.
(b) A person aggrieved by a final order issued under this article may obtain a review of the order in the circuit court of the county in which the violations of this article are found to have occurred.
24-13-3-3. Permanent injunction, temporary injunction, restraining order, or writ of mandamus — Appointment of receiver or conservator — Order of rescission, restitution, or disgorgement.
(a) Upon a proper showing to the appropriate circuit court, a permanent injunction, temporary injunction, restraining order, or writ of mandamus may be granted and a receiver or conservator may be appointed for the person alleged to have violated this article or the assets of the person alleged to have violated this article. In addition, upon a proper showing by the attorney general, the circuit court may enter an order of rescission, restitution, or disgorgement directed to any person who has engaged in any act violating this article or any order issued under this article.
(b) The circuit court may not require the attorney general to post a bond.
(c) The circuit court may award to the attorney general court costs and attorney’s fees in an action brought under this chapter.
24-13-3-4. Attorney general or prosecuting attorney not barred from proceeding under other provisions of law.
This chapter does not bar the attorney general or a prosecuting attorney from proceeding under any other provision of law against a pyramid promotional scheme or any person involved with a pyramid promotional scheme.
24-13-3-5. Rules.
The attorney general shall adopt rules under IC 4-22-2 necessary to administer and implement this chapter.
24-13-4-1. Right of private person to bring action.
(a) A person may bring an action against a person who establishes, operates, promotes, or assists another to promote a pyramid promotional scheme for:
(1) the damages actually suffered as a result of the pyramid promotional scheme; or
(2) one thousand dollars ($1,000);
whichever is greater.
(b) The court may increase damages awarded under this section in an amount that does not exceed:
(1) three (3) times the actual damages of the person suffering the loss; or
(2) three thousand dollars ($3,000).
(c) The court may award reasonable attorney’s fees to a party that prevails in an action under this section.
(d) Actual damages awarded to a person have priority over any civil penalty imposed under this article.
24-13-4-2. Right of private person to bring class action.
(a) A person who is entitled to bring an action on the person’s own behalf under section 1 [IC 24-13-4-1] of this chapter may bring a class action on behalf of any class of persons of which the person is a member and that has been damaged by the pyramid promotional scheme, subject to and under the Indiana Rules of Trial Procedure governing class actions.
(b) The court may award reasonable attorney’s fees to the party that prevails in a class action under this section. The attorney’s fees must be determined by the amount of time reasonably expended by the attorney and not by the amount of the judgment. The court, however, may consider awarding a contingency fee.
(c) Any money or other property recovered in a class action under this section that cannot, with due diligence, be restored to the members of the class within one (1) year after the final judgment must be returned to the abandoned property fund under IC 32-34-1.5-42.
(d) Actual damages awarded to a class have priority over any civil penalty imposed under this article.
24-13-5-1. Construction of article.
This article may not be construed to prohibit a plan or operation, or to define a plan or operation as a pyramid promotional scheme, based on 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 if both of the following conditions are satisfied:
(1) The plan or operation does not promote or induce inventory loading.
(2) The plan or operation implements an appropriate inventory repurchase program.
24-13-5-2. Clear description of appropriate inventory repurchase program required in recruiting literature, sales manual, or contract.
An entity must clearly describe an appropriate inventory repurchase program in its recruiting literature, sales manual, or contracts with independent salespersons. The recruiting literature, sales manual, or contract must disclose any inventory that is not eligible for repurchase under the program.
24-13-5-3. Certain inventory exempted from appropriate inventory repurchase program requirement.
An appropriate inventory repurchase program is not required to apply to inventory that:
(1) is no longer within the inventory’s commercially reasonable use or shelf life period; or
(2) has been used or opened.
24-13-5-4. Description of inventory that is excluded from appropriate inventory repurchase program.
An entity must clearly describe to a salesperson, prior to purchase, inventory that is excluded from the entity’s appropriate inventory repurchase program as seasonal, discontinued, or special promotion products not subject to the entity’s appropriate inventory repurchase program.
24-13-5-5. Burden of showing person derives compensation primarily from sale and consumption of goods, services, or intangible property.
Notwithstanding section 1 [IC 24-13-5-1] of this chapter, the burden of showing that a participant or other person derives compensation primarily from the sale and consumption of goods, services, or intangible property lies with the plan or operation or a person involved with the plan or operation.