Philpot v. Texas

Does the sale of a product as part of a promotional program exempt the program from state statutes forbidding endless chain distribution programs?


The Texas Court of Appeals held that the sale of a product does not allow a program to escape Texas' endless chain statute. The Philco Money Express was a pyramid marketing program that sold participants a quarterly financial magazine and the right to solicit new members. The magazine was held to be an attempt to subvert the endless chain statute, and not a legitimate product that people would pay $1000 to subscribe to. Also the court held that even if, strictly speaking, financial commitment wasn't required to become a distributor, the fact that nearly all who participated did commit money to the enterprise further demonstrated the sham nature of the program requirements.

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Reference Info:State, 5th Circuit, Texas | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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