In selling, leasing, or offering to sell or lease a seller assisted marketing plan in this state, sellers shall not:
(a) Use the phrase “buy-back” or “secured investment” or similar phrase orally or in writing when soliciting, offering, leasing, or selling a seller assisted marketing plan if the “security” is the value of the equipment, supplies, products or services supplied by the seller to the purchaser.
(b) Use the phrase “buy-back” or “secured investment” or similar phrase orally or in writing when soliciting, offering, leasing, or selling a seller assisted marketing plan unless there are no restrictions or qualifications whatsoever preventing or limiting a purchaser from being able to invoke the “buy-back” or “secured” portion of the seller assisted marketing plan contract at any time the purchaser desires during the one-year period following the contract date. Upon invocation of the “buy-back” or “security” provision, the minimum amount a purchaser shall be entitled to have returned to him is the full amount of his initial payment, less the amount actually received by him from the operation of the seller assisted marketing plan. The “amount actually received” means either the amount the purchaser actually obtained from the seller for any product resold to the seller or the amount of money the purchaser received for use of the purchaser’s product, equipment, supplies or services, less any amount: (1) the purchaser has paid the owner or manager of the location at which the purchaser’s products, equipment, supplies or services are placed; and (2) the purchaser has paid to obtain other items needed in order to sell, make, produce, fabricate, grow, breed, modify, or develop the item which the seller assisted marketing plan purchaser intends to sell, lease, distribute, or otherwise dispose of.
(c) Represent that a purchaser’s initial payment is “secured” in any manner or to any degree or that the seller provides a “buy-back” arrangement unless the seller has, in conformity with subdivision (b) of Section 1812.214, either obtained a surety bond issued by a surety company admitted to do business in this state or established a trust account at a federally insured bank or savings and loan association located in this state.
(d) Represent that the seller assisted marketing plan provides income or earning potential of any kind unless the seller has data to substantiate the claims of income or earning potential and discloses this data to the purchaser at the time the claim is made, if made in person, or if made through written or telephonic communication, at the first in-person communication thereafter and, when disclosed, the data is left with the purchaser. A mathematical computation of the number of sales multiplied by the amount of profit per sale to reach a projected income figure is not sufficient data to substantiate an income or earning potential claim. Income or earning potential claims cannot be made or implied at all unless they are based on the experience of at least 10 purchasers from the seller assisted marketing plan being offered. The data left by the seller must, at a minimum, disclose:
(1) The length of time the seller has been selling the particular seller assisted marketing plan being offered;
(2) The number of purchasers from the seller known to the seller to have made at least the same sales, income or profits as those represented; and
(3) The percentage the number represents of the total number of purchasers from the seller.
(e) Use the trademark, service mark, trade name, logotype, advertising or other commercial symbol of any business which does not either control the ownership interest in the seller or accept responsibility for all representations made by the seller in regard to the seller assisted marketing plan, unless the nature of the seller’s relationship to such other business entity is set forth immediately adjacent to and in type size equal to or larger than that used to depict the commercial symbol of such other business. If a member of a trade association, the seller may use the logo or registration mark of the trade association in advertisements and materials without regard to this subdivision.
(f) Place or cause to be placed any advertisement for a seller assisted marketing plan which does not include the actual business name of the seller, and if it differs, the name under which the seller assisted marketing plan is operated and the street address of the principal place of business of the seller.
(Amended by Stats. 1981, Ch. 258, Sec. 2.)
Last modified: October 25, 2018