MLM Law: Minnesota
Unlawful Practices
State Statutes
MINNESOTA
325F.69 Unlawful practices.
Subdivision 1. Fraud, misrepresentation, deceptive practices. The act, use, or
employment by any person of any fraud, false pretense, false promise,
misrepresentation, misleading statement or deceptive practice, with the intent that
others rely thereon in connection with the sale of any merchandise, whether or not
any person has in fact been misled, deceived, or damaged thereby, is enjoinable as
provided herein.
Subd. 2. Referral and chain referral selling prohibited.
(1) With respect to any sale or lease the seller or lessor may not give or
offer a rebate or discount or otherwise pay or offer to pay value to the
buyer or lessee as an inducement for a sale or lease in consideration of
the buyer's or lessee's giving to the seller or lessor the names of
prospective purchasers or lessees, or otherwise aiding the seller or
lessor in making a sale or lease to another person, if the earning of the
rebate, discount or other value is contingent upon the occurrence of an
event subsequent to the time the buyer or lessee agrees to buy or lease.
(2) (a) With respect to any sale or lease, it shall be illegal for any seller
or lessor to operate or attempt to operate any plans or operations for
the disposal or distribution of property or franchise or both whereby a
participant gives or agrees to give a valuable consideration for the
chance to receive something of value for inducing one or more
additional persons to give a valuable consideration in order to
participate in the plan or operation, or for the chance to receive
something of value when a person induced by the participant induces a
new participant to give such valuable consideration including such
plans known as chain referrals, pyramid sales, or multilevel sales
distributorships. (b) The phrase "something of value" as used in
paragraph (a) above, does not mean or include payment based upon
sales made to persons who are not purchasing in order to participate in
the prohibited plan or operation.
(3) If a buyer or lessee is induced by a violation of this subdivision to
enter into a sale or lease, the agreement is unenforceable and the buyer
or lessee has the option to rescind the agreement with the seller or
lessor and, upon tendering the property received, or what remains of it,
obtain full or in the case of remains, a proportional restitution of all
sums paid, or retain the goods delivered and the benefit of any services
performed without any further obligation to pay for them.
(4) With respect to a sale or lease in violation of this section an
assignee of the rights of the seller or lessor is subject to all claims and
defenses of the buyer or lessee against the seller or lessor arising out of
the sale or lease notwithstanding an agreement to the contrary, but the
assignee's liability under this section may not exceed the amount
owing to the assignee at the time the claim or defense is asserted
against the assignee. Rights of the buyer or lessee under this section
can only be asserted as a matter of defense to or setoff against a claim
by the assignee.
(5) In a sale or lease in violation of this section, the seller or lessor
may not take a negotiable instrument other than a check as evidence of
the obligation of the buyer or lessee. A holder is not in good faith if the
holder takes a negotiable instrument with notice that it is issued in
violation of this section.
(6) Any person who violates any provision of this subdivision shall be
guilty of a gross misdemeanor.
Subd. 3. Advertising media excluded. Sections 325F.68 to 325F.70 shall apply to
actions of the owner, publisher, agent or employee of newspapers, magazines, other
printed matter or radio or television stations or other advertising media used for the
publication or dissemination of an advertisement, only if the owner, publisher, agent,
or employee has either knowledge of the false, misleading or deceptive character of
the advertisement or a financial interest in the sale or distribution of the advertised
merchandise.
Subd. 4. Solicitation of money for merchandise not ordered or services not
performed. The act, use, or employment by any person of any solicitation for payment
of money by another by any statement or invoice, or any writing that could
reasonably be interpreted as a statement or invoice, for merchandise not yet ordered
or for services not yet performed and not yet ordered, whether or not any person has
in fact been misled, deceived, or damaged thereby, is enjoinable as provided herein.
Subd. 5. Prohibited going out of business sales. It is illegal for any person to represent
falsely that a sale is a "going out of business sale." Any representation that a sale is a
"going out of business sale" is presumed to be false and illegal under this subdivision,
if at that location or within a relevant market area:
(1) the sale has been represented to be a "going out of business sale"
for a period of more than 120 days;
(2) the business has increased its inventory for the sale by ordering or
purchasing an unusual amount of merchandise during the sale or
during the 90 days before the sale began;
(3) the business, or any of its officers or directors, has advertised any
other sale as a "going out of business sale" during the 120 days before
this sale began; or
(4) the sale has continued after a date on which the business has
represented, expressly or by reasonable implication, that the business
would terminate.
Any presumption arising under clauses (1) to (4) may be rebutted if the business
shows, by clear and convincing evidence, that the sale was in fact conducted in
anticipation of the imminent termination of the business. This subdivision does not
apply to a sale in any statutory or home rule charter city that by ordinance requires the
licensing of persons conducting a "going out of business sale," nor to public officers
acting in the course of their official duties.
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Originally Posted by DanBetz
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