HB347 Alabama 2021 Session

Summary

Primary Sponsor

Rhett MarquesRepresentative

Republican

Co-Sponsors

Chip BrownJamie KielMatt SimpsonJeff Sorrells

Session

Regular Session 2021

Title

Consumer protection, deceptive trade practices, pyramid sales structure, further provided, Secs. 8-19-3, 8-19-5 am'd.

Summary

HB347 tightens consumer protection by banning pyramid promotional schemes unless a clearly described bona fide inventory repurchase program is in place with specific requirements.

What This Bill Does

The bill bans selling the right to participate in pyramid schemes and defines what counts as a pyramid promotional scheme. It creates an exception for plans that include a bona fide inventory repurchase program, but only if the program meets detailed terms (inventory repurchase within 12 months at at least 90% of original net cost, and other conditions). It requires clear disclosure of eligible and ineligible inventory in recruiting materials and contracts, and it prohibits inventory loading. It also maintains existing deceptive-practice provisions and adds that certain plan types (like chain referral schemes) are unlawful if compensation depends on introducing others rather than selling goods or services. The act becomes law on the first day of the third month after it passes and is approved.

Who It Affects

• Consumers who buy goods or services, who would gain protection from deceptive pyramid schemes and related misrepresentations.
• Independent salespersons and companies operating or considering pyramid-like plans, who must comply with the bona fide inventory repurchase program requirements or risk being in violation of the law.
• Businesses that run or promote inventory-based compensation plans, which must clearly describe repurchase terms and disclose eligible vs. ineligible inventory in recruiting materials.

Key Provisions

• Defines bona fide inventory repurchase program as a program where an entity repurchases current and marketable inventory from a salesperson within 12 months on commercially reasonable terms at not less than 90% of the original net cost, with certain exclusions.
• Defines commercially reasonable terms and inventory concepts (current and marketable, excludes inventory past shelf life, used, or designated as seasonal/discontinued).
• Prohibits pyramid promotional schemes; allows plans where compensation is based on personal purchases and does not cause inventory loading, provided there is a bona fide inventory repurchase program.
• Requires repurchase programs to be clearly described in recruiting literature or contracts, disclose inventory not eligible for repurchase, and specify excluded inventory (seasonal, discontinued, or special promotions).
• Requires entities to describe excluded inventory before repurchase, ensuring transparency about what can and cannot be repurchased.
• Includes prohibitions on chain referral sales plans and other deceptive practices related to pyramid schemes, aligning with existing deceptive trade practices laws.
• Effective date: the act takes effect on the first day of the third month following passage and governor approval.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Consumers and Consumer Protection