TITLE 10 COMMERCE AND TRADE

Section 1. Selling and Other Trade Practices, 10-1-1 through 10-1-915.

ARTICLE 15 DECEPTIVE OR UNFAIR PRACTICES

10-1-410. Definitions.

As used in this part, the term:

"Agreement" means any agreement relating to a business opportunity or multilevel distribution company, including, but not limited to, the contract.
1. "Business opportunity" means the sale or lease of, or offer to sell or lease, any products, equipment, supplies, or services for the purpose of enabling the purchaser to start a business and in which the seller or company represents:
  1. That the seller or company will provide locations or assist the purchaser in finding locations for the use or operation of vending machines, racks, display cases or other similar devices, or currency operated amusement machines or devices. For purposes of this subparagraph, "assist the purchaser in finding locations" includes but is not limited to supplying the purchaser with names of locator companies, contracting with the purchaser to provide assistance or supply names, or collecting a fee on behalf of or for a locator company;
  2. That the seller or company will purchase any or all products made, produced, fabricated, grown, bred, or modified by the purchaser using, in whole or in part, the supplies, services, or chattels sold to the purchaser; or
  3. That the company, in conjunction with any agreement which requires a total initial payment of an amount exceeding $500.00, will provide a sales program or marketing program; provided, however, that this subparagraph shall not apply to the sale of a sales program or a marketing program made in conjunction with the licensing of a registered trademark or service mark.
2. The term "business opportunity" does not include:
  1. The sale of an ongoing business when the owner of that business sells and intends to sell only that one business opportunity;
  2. Any relationship created solely by or involving:
3. The relationship between an employer and an employee or among general business partners; or
4. Membership in a bona fide cooperative association or transactions between bona fide cooperative associations and their members. As used in this subdivision, the term "cooperative association" means either (1) an association of producers of agricultural products organized pursuant to Article 3 of Chapter 10 of Title 2 or statutes similar thereto enacted by other states, or (2) an organization operated on a cooperative basis by and for independent retailers which wholesales goods or furnishes services primarily to its member-retailers;
  1. Any agribusiness corporation;
  2. Any insurance agency;
  3. Any offer or sale of a business opportunity where the seller has a net worth on a consolidated basis of not less than $15 million as determined on the basis of the seller's most recent audited financial statement; and where the seller satisfies all of the following conditions or is a wholly owned subsidiary of a company that satisfies all of the following conditions:
5. Seller is a publicly traded company;
6. Seller has a class of securities registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934 and has timely filed all reports required under Sections 13 and 14 of the Securities Exchange Act of 1934 for a period of 36 months;
7. Seller has not failed to pay any dividend or defaulted on any loan payment in the last five fiscal years;
8. Seller has an annual trading volume of stock of 3,000,000 shares or more; and
9. Seller has an aggregate market value of the voting stock held by nonaffiliates of $100 million or more; or
  1. A landlord, property manager, or owner who licenses or leases pushcarts or kiosks within or adjacent to a retail center containing divided retail floor space and common areas which will be used by any such licensee or lessee to sell goods or services not supplied by the landlord, property manager, or owner or any entity affiliated or associated with the landlord, property manager, or owner. For the purposes of this division, the term "pushcart" means a mobile retail unit from which goods or services are sold in the common area of a retail center, and the term "kiosk" means a temporary retail unit from which goods or services are sold in the common area of a retail center.
"Business opportunity seller or company" means any corporation, whether domestic or foreign, or any business, whether a partnership, limited partnership, sole proprietorship, joint venture, association, trust, unincorporated organization, or other entity, which shall solicit, advertise, offer, or contract for any business opportunity or cause to be solicited, advertised, offered, or contracted for any business opportunity in this state, or which has a principal place of business in this state, even if solicitations are of nonresidents of Georgia.
"Company" means any multilevel distribution company or business opportunity company or seller.
"Initial payment" means the total amount which a purchaser or participant is obligated or agrees to pay under the terms of an agreement before or at the time of delivery of the goods or services to the purchaser or participant and which a purchaser or participant is obligated to pay within six months of the date that the purchaser or participant commences operation of the business.If the agreement states a total price and provides that the total price is to be paid partially as an initial cash payment and the remainder in specific monthly payments, the term means the total price. The term does not include any amount required by the seller to be deposited as security for the performance by a purchaser or participant of the operation of the business or that secures an extension of credit.If purchasers or participants may enter a multilevel distribution company or business opportunity at different levels, "initial payment" means the total sum the purchaser or participant is obligated to pay to enter at the level chosen by the purchaser or participant.
"Multilevel distribution company" means any person, firm, corporation, or other business entity which sells, distributes, or supplies for a valuable consideration goods or services through independent agents, contractors, or distributors at different levels wherein such participants may recruit other participants and wherein commissions, cross-commissions, bonuses, refunds, discounts, dividends, or other considerations in the program are or may be paid as a result of the sale of such goods or services or the recruitment, actions, or performances of additional participants.The term shall not include licensed insurance agents, insurance agencies, licensed real estate brokers, licensed real estate agents, licensed real estate agencies, licensed securities dealers, licensed limited securities dealers, licensed securities salesmen, or licensed limited securities salesmen.Any multilevel distribution company which operates in any of the forms precluded by paragraphs (1) through (4) of subsection (a) of Code Section 10-1-411 shall be considered an unlawful pyramid club under Code Section 16-12-38.
"Participant" means anyone who participates at any level in a multilevel distribution company.
"Person" means any individual, corporation, partnership, joint venture, association, trust, unincorporated organization, or other entity and shall include any other person that has a substantive interest in or effectively controls such person as well as the individual officers, directors, general partners, trustees, or other individuals in control of the activities of such person.
"Purchaser" means any person who is solicited to become obligated, or does become obligated, under any agreement.
"Seller" means any multilevel distribution company or it means any person who offers to sell to individuals any business opportunity, either directly or through any agent.

(Ga. L. 1980, p. 1233, § 1; Ga. L. 1984, p. 522, § 1; Ga. L. 1985, p. 149, § 10; Ga. L. 1986, p. 10, § 10; Ga. L. 1988, p. 1868, § 1; Ga. L. 1989, p. 218, § 1; Ga. L. 1992, p. 2370, § 1; Ga. L. 1995, p. 757, § 1.)

Code Commission notes.

- Pursuant to Code Section 28-9-5, in 1988, "Code Section 16-12-38" was substituted for "Code Section 10-12-38" at the end of paragraph (6).

Law reviews.

- For note, "The Georgia Sale of Business Opportunities Act," see 1 Ga. St. U.L. Rev. 219 (1985).

JUDICIAL DECISIONS

"Seller" includes lessors to corporations.

- Term "individual", as used in paragraph (10) of O.C.G.A. § 10-1-410, may include artificial persons. Therefore, the fact that the lessee is a corporation would not preclude a finding that the lessor is a "seller" as defined in paragraph (10). Park Leasing Co. v. TWS, Inc., 206 Ga. App. 864, 426 S.E.2d 620 (1992).

Defendant found to be "seller."

- Because the defendant headed a field installation and maintenance services division of a business engaged in designing, manufacturing, and marketing electronic components and equipment for the coin operated telephone market, defendant was personally a "seller" within the meaning of paragraph (10) of O.C.G.A. § 10-1-410 in that the defendant was an individual who had a substantive interest in a corporation which offered to sell a business opportunity. Hornsby v. Phillips, 190 Ga. App. 335, 378 S.E.2d 870 (1989).

Officers of a limited liability company were "sellers" within the meaning of the Sale of Business Opportunities Act (SBOA), O.C.G.A. § 10-1-410(10), because the officers were individuals who had a substantive interest in a multilevel distribution company or effectively controlled such company or the company's activities; accordingly, pursuant to the Fair Business Practices Act, O.C.G.A. § 10-1-399(a), and the SBOA, O.C.G.A. § 10-1-417(b), each officer was subject to personal liability for any violation of the SBOA which he or she had committed and which was proved by a physician. Amerireach.com, LLC v. Walker, 290 Ga. 261, 719 S.E.2d 489 (2011).

Sale of franchise not a "business opportunity."

- Franchiser's sale of a restaurant franchise to a franchisee did not meet the definition of a business opportunity under O.C.G.A. § 10-1-410(2)(A)(iii) because the sales and marketing program associated with the franchise system were provided to the franchisee in conjunction with the licensing of registered trademarks and service marks; thus, the Georgia Sale of Business Opportunities Act, O.C.G.A. § 10-1-410 et seq., did not apply to the sale. Am. Casual Dining, L.P. v. Moe's Southwest Grill, L.L.C., 426 F. Supp. 2d 1356 (N.D. Ga. 2006).

Statute of limitations.

- General statute of limitations, providing that an action to enforce a right accruing to an individual under state statute must be brought within 20 years after the action accrues, governs a cause of action arising solely under the Sale of Business Opportunities Act, O.C.G.A. § 10-1-410 et seq., since the Act itself contains no statute of limitations. Hornsby v. Phillips, 190 Ga. App. 335, 378 S.E.2d 870 (1989).

Contractual defenses are inapplicable when an action is based not on the contract but solely on an alleged violation of the Sale of Business Opportunities Act, O.C.G.A § 10-1-410 et seq. Hornsby v. Phillips, 190 Ga. App. 335, 378 S.E.2d 870 (1989).

Agribusiness exemption.

- Investment in cattle feeding and sales program was exempt under the agribusiness exemption in division (2)(B)(iii) of O.C.G.A. § 10-1-410. Seale v. Miller, 698 F. Supp. 883 (N.D. Ga. 1988).

Claim sufficient against corporate officers.

- Trial court erred in dismissing a physician's complaint against a health and nutrition multi-level distribution company's officers alleging violations of the Georgia Fair Business Practices Act, O.C.G.A. § 10-1-390 et seq., and the Georgia Sale of Business Opportunities Act (SBOA), O.C.G.A. § 10-1-410 et seq., on the ground that the court lacked personal jurisdiction because in response to requests for admissions, the company admitted that the company was a "multilevel distribution company" as defined in the SBOA, that the provisions of the SBOA, O.C.G.A. § 10-1-415, applied to any agreement made in Georgia, that the officers were founding members of the company and were officers when the physician became a marketer; the officers also admitted that the physician's cancellation rights under Georgia law were generally known to the officers, and the complaint was sufficient to state a claim against the officers. Walker v. Amerireach.com, 306 Ga. App. 658, 703 S.E.2d 100 (2010), aff'd in part, 290 Ga. 261, 719 S.E.2d 489 (2011).

Cited in Georgia ex rel. Adm'r of Fair Bus. Practices Act v. Family Vending, Inc., 171 Bankr. 907 (Bankr. N.D. Ga. 1994); Touchton v. Amway Corp., 247 Ga. App. 269, 543 S.E.2d 782 (2000).

RESEARCH REFERENCES

ALR.

- Practices forbidden by state deceptive trade practice and consumer protection acts - pyramid or ponzi or referral sales schemes, 48 A.L.R.6th 511.

Judicial remedies for proceeds and funds from Ponzi schemes, 100 A.L.R.6th 281.

Syfert Injury Law Firm

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