The Iowa Supreme Court held that American Professional Marketing (APM) was not a pyramid or referral sales program prohibited by state statutes. APM used a network of distributors to sell a fuel additive to consumers. The distributors were paid commissions based on the sales of product, not on the recruitment of other downline distributors. Distributors were prohibited from purchasing more than two cases of product at a time, could not re-order unless they had sold or consumed 75% of their inventory, were not allowed to directly recruit additional downline distributors, and could sell back any sealed, unused product. The Court held that all of these elements differentiated APM from a traditional pyramid program that heavily emphasized recruiting over sales and encouraged inventory loading. The fact that distributors were compensated for sales made by their downline suppliers was not enough to make the program an illegal pyramid or referral marketing program.
Case and case summary are also available online at: http://www.mlmlegal.com/legal-cases/Miller_v_AmericanProfessionalMarketing.php
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