HB 162 MLM “house bill” has passed Delaware’s House of Representatives.

Officially the title of HB 162 is “An act to amend Title 6 of the Delaware Code relating to multilevel distribution companies”.

This Act defines a multilevel distribution company and multilevel marketing program for purposes of this Subchapter.

It sets forth mandatory disclosures that must be made by a multilevel distribution company to any potential purchaser that discloses details about the company, sometimes based on certain representations that the company makes.

It sets forth that a multilevel distribution company may not require a participant in its marketing program to buy a good or service or pay any other consideration to participate in the marketing program unless it agrees to repurchase the goods, under certain conditions.

It permits a civil penalty to be imposed for violations of the required disclosures.

It provides a private right of action for violation of the repurchase requirement, including treble damages, attorneys’ fees and costs to be awarded for a prevailing plaintiff.

The specifics of paragraphs two and three above pertain to disclosures and MLM companies being required to buy back purchased products “under certain conditions”.

With respect to disclosures, HB 162 requires MLM companies to provide new recruits within 48 hours of them signing up:

  • this statement: “The State of Delaware has not reviewed and does not approve, recommend, endorse, or sponsor any multilevel marketing program. The information contained in this disclosure has not been checked by the State. If you have any questions about this purchase, see an attorney or other financial adviser before you sign a contract or agreement.”;
  • the name of the MLM company (including any patent and/or affiliates companies);
  • a “complete description of the compensation plan”, noting “any inventory purchase requirements”;
  • a “description of the actual service the seller will undertake to perform for the” recruit (I’m not 100% sure what this means);
  • the following earnings disclaimer when any income representations are made, “no guarantee of earnings or range of earnings can be made.”;
  • when any income representations are made, “the total number of participants who have received” the represented earnings “within the last 3 years.”;
  • the total number of participants who have signed up with the MLM company over the past 3 years;
  • a “complete description” of any training provided;
  •  disclosure of any “services” offered in connection with the purchase of products;
  • disclosure of “the entire and precise nature” of any product buy-back program offered;
  • disclosure of how many other company promoters there are in the state;
  • disclosure of how many promoters who have purchased products earn more than they spent signing up and purchasing products (percentage ratio);
  • “median and typical earnings of every person involved in the program”;

Mandatory product purchases by participants is an immediate red flag in any BehindMLM review. It’s also “pay to play”, a strong indication of a pyramid scheme.

HB 162 stipulates that an MLM company

may not require a participant in its marketing program to buy a good or service or pay any other consideration to participate in the marketing program[,] unless the multilevel distribution company agrees to repurchase the goods that are in resaleable condition.

For new recruits, HB 162 also stipulates new recruits are able to cancel their contract “for any reason within 3 months after the date of receipt of goods or services”.

On cancellation, MLM companies will be required to buy-back products at “at least 90% of the original price paid”.

Violations of HB 162 will entitle MLM company recruits to “3 times the amount of actual damages, court costs and reasonable attorney’s fees.”

Such treble damages shall be in addition to any other damages to which the victim is entitled pursuant to common law or other provisions of the Delaware Code.

All sounds pretty reasonable to me. You’re given ample information to make a reasonably informed decision about joining an MLM company.

Then, provided you don’t use any products purchased, you have 3 months to remain satisfied with a 90%+ product buy-back option.

If an MLM company doesn’t live up to the marketing hype within 3 months, I don’t see what the issue is with being required to buy-back products.

Weirdly enough, over at the Direct Selling Association they’re having a bit of a meltdown.

A reader sent in “leaked” footage of what appeared to be a DSA crisis meeting for MLM company owners last month. Treading the “political activist” line carefully, BehindMLM chose not to report on HB 162 until after it had passed or been rejected by the House of Reps.

Following HB 162 passing on June 18th, DSA CEO Dave Grimaldi (right) framed it as an “anti-MLM bill” and “serious development“.

While you did not receive the initial message that was sent out to DSA members earlier today, I want to share the urgent update below: HB 162 has just passed the Delaware House of Representatives.

This bill would impose unworkable restrictions on even the most ethical direct selling companies and set a dangerous precedent for other states.

We are inviting all companies—whether or not you are currently a DSA member—to join us in this fight.

The bill now moves to the Senate—and that’s where we must stop it. Now we need Delaware’s direct sellers to stand up and speak out.

This legislation directly impacts their freedom to earn, their right to choose, and their ability to build flexible, independent businesses. Their voices are powerful—and they are the ones lawmakers need to hear next.

Not really sure why the DSA CEO is framing consumer awareness and buy-back protections as

  • “anti-mlm”
  • a “dangerous precedent”
  • impacting “freedom to earn”
  • “right to choose” (???) and
  • anyone’s “ability to build flexible, independent businesses

…but here we are I guess.

DSA and Grimaldi followed up on June 21st with a “call to action”, inviting “every (MLM) company” to participate in a spam campaign.

While we certainly find DSA’s reaction to HB 162 concerning (“we can only build an MLM business if we oppose consumer rights!”), BehindMLM remains neutral on political processes. Getting directly involved in politics is beyond the scope of our research and reporting.

HB 162 is scheduled for a Committee meeting on June 24th, after which it’ll head to the Delaware Senate on or after June 30th.