DELAWARE -The Delaware House of Representatives has passed Substitute 1 for House Bill 162, a consumer protection measure designed to safeguard individuals who participate in multi-level marketing businesses. The bill, sponsored by District 10 Rep. Melanie Ross Levin (D) with District 10's Stephanie Hansen (D) leading the effort in the state Senate, claims to bring greater transparency and financial protections to a business model that has come under increasing scrutiny.
The legislation deals with practices that its sponsors say often targets economically vulnerable areas with promises of flexible income opportunities.
“We have plenty of data that shows multilevel marketing sellers often target women in economically vulnerable positions: stay-at-home moms, military spouses, or women with caretaking responsibilities looking for flexible work,” said Rep. Ross Levin. “Unfortunately, the truth is that most of them end up losing money in these schemes.”
A Federal Trade Commission report found that 99 percent of these marketing participants lose money.
Key Provisions:
Requires MLM sellers to provide clear and conspicuous disclosures, including:
The seller’s contact information
Verified earnings claims and statistics
Buy-back terms
The percentage of participants who earn more than they invest
Allows participants to cancel contracts for any reason within the first three months
Requires sellers to buy back at least 90 percent of unsold inventory if a participant cancels
According to supporters of the bill in the General Assembly, MLMs often require participants to pay an upfront fee, with many using credit cards to finance the cost.
“Too many individuals are lured into multi-level marketing schemes by promises of financial independence, only to face hidden costs and unrealistic earnings expectations,” said Sen. Hansen. “This bill is about transparency, accountability, and fairness.”
HB 162 (S) now heads to the Senate for consideration.