Wholesale Membership and Product Distributor

In June 2007, a company planning to distribute and sell wholesale memberships and products sought an written opinion on whether its proposed multi-level marketing plan would raise concerns under the Competition Act.

It is the Bureau’s opinion that the proposed business conduct would provide the Commissioner with sufficient grounds to commence an inquiry.

It is the Commissioner’s view that representations relating to compensation are made in the promotional literature, and that participants are instructed to make similar representations, however, there was no disclosure of the likely compensation earned by typical participants, thus violating sections 55(2) and 55(2.1) of the Act. The fee to join, which consisted of an annual fee payable on joining the plan, a starter kit, and administrative fees were not stated as seller’s cost; therefore violating section 55.1(b) of the Act. The buy-back guarantee, consisting of a 10 day money back guarantee for a non-direct shipped product, is not viewed as commercially reasonable and thereby in violation of section 55.1(d)(i) of the Act.

The Written Opinion was issued in July 2007.

(3101465)