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Utah House passes bill clarifying anti‑pyramid‑scheme law, encourages industry buyback standard
Summary
The Utah House passed House Bill 269, 66–3, to better distinguish illegal pyramid schemes from lawful multi‑level marketing and to encourage a 90% one‑year buyback policy to curb inventory loading. Sponsors said the change strengthens consumer protection while preserving legitimate direct selling.
Representative Mike Noel, sponsor of House Bill 269, urged colleagues to support legislation that “clearly distinguishes between the practice of illegally receiving compensation for the mere act of recruiting and legally receiving compensation from the sale and consumption of goods.” The House passed the bill as amended, 66 yes to 3 no.
Noel framed the bill as a consumer‑protection clarification built on model statutes from Idaho and South Dakota and supported by industry and Utah’s attorney general. He described local businesses such as Stampin' Up and noted the Direct Selling Association’s involvement in drafting model language. The sponsor said the measure is “not a referendum on multilevel marketing” but a targeted fix to make prosecution and consumer‑protection enforcement clearer.
Representative Allen offered a multi‑point amendment (items 1, 3, 4, 5, 6 and 7) to clarify the statute’s long title, disclosure timing and formatting, and consistent terminology (changing some uses of “independent salesperson” to “participant”). Allen said the amendments were drafted with the Division of Consumer Protection so complaints would be handled without confusion. Noel called the changes largely friendly but flagged a single wording item he preferred to work out in the Senate.
Key policy details in the final bill include language to distinguish compensation based on recruiting from compensation based on sales, and an encouragement that companies adopt a buyback program to reduce inventory loading (sponsor described a 90% one‑year buyback as a benchmark). Sponsors said the buyback provision is written to be permissive and consumer‑protective rather than punitive.
Supporters argued the bill will help the Division of Consumer Protection and prosecutors identify unlawful pyramid schemes without sweeping legitimate direct‑selling activities into criminal penalties; opponents raised drafting concerns that the sponsor and amendment authors agreed should be resolved in follow‑up drafting if needed. After the amendment passed, the House voted to approve HB269 as amended; the bill will be referred to the Senate.
