The Minnesota Supreme Court held that the Holiday Magic marketing plan violated the state multi-level marketing statute. Holiday Magic distributed cosmetics by a network of distributors who were compensated for sales and recruiting additional distributors into their downlines. The Supreme Court found that the primary purpose of the statute was to prohibit schemes that placed undue emphasis on the recruitment of additional participants and not on the sale of additional products, thereby producing a pyramiding result. Because Holiday Magic focused too much on the recruitment of additional distributors it violated the state statute.
Case and case summary also available online at: http://www.mlmlegal.com/legal-cases/Minnesota_v_Solem.php
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