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

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