Reseller vs. License By Richard Hsu
The 70% rule derives from the 1979 FTC Amway decision in which an administrative law judge recognized that Amway’s 70% rule helped prevent inventory loading (it is not a retailing rule). Basically, the Amway rule provided: at...more
On July 1st, 2014, Tennessee became the latest government/regulatory entity to adopt updated MLM/Pyramid legislation recognizing “personal use” in pyramiding analysis.
The Tennessee language is similar to language adopted...more
Canada has a vibrant Internet community. Because of the great expansion of the Internet in Canadian homes and businesses, Canada and its provinces have, in recent years, regulated Internet activity and...more
On June 10, 2014, a New York federal court dismissed, in part, state and federal False Claims Act (FCA) claims brought against Novartis Pharmaceuticals Corporation and pharmacies to which it distributed (CVS Caremark Corp.,...more
The common industry practice of compensating independent contractor sales representatives on a "percentage of sales" commission basis may be creating an enhanced risk of False Claims Act liability for illegal kickbacks in...more
On June 17, 2014, Southern California Public Radio affiliate KPCC broadcasted a report about physician-owned distributors of implantable medical devices (“PODs”) and the legal and ethical concerns that are raised when POD...more
A Canadian or other foreign company looking to obtain a presence in the U.S. market without having to set up its own U.S. sales operation may consider using intermediariesn such as independent distributors and sales...more
FRANCHISOR 101: When is Unreasonable, Reasonable?
Crown Imports, LLC (Crown) imports Corona beer from Mexico. In 2008, two of Crown's Southern California distributors, Classic and HBC, agreed that Classic would buy...more
Regardless of labels like “dealer,” “distributor” or “reseller,” there are some fundamental issues that demand attention whenever a supply relationship is involuntarily terminated. We work with suppliers in planning and...more
When food producers and distributors are faced with a product recall, one of the most common questions is: How soon, if at all, do you report the claim to your insurance company? The answer is simple—you should be reporting...more
FRANCHISOR 101: Franchisor Successfully Fends Off Fraud Claims -
There are circumstances when a fraud claim will not succeed against a franchisor. In Dunkin' Donuts Franchised Restaurants, LLC v. Claudia I, LLC, a...more
As a distributor, can I use display booths to sell my company’s products? Is there a limit on the time I can spend selling at a booth?
First, check the company policies, as they will be the guiding rule. Most companies...more
Most companies would prohibit sales in flea markets, swap meets, vending machines or garage sales. It is generally viewed that such locations dilute the value of the company’s products and opportunity. Companies typically...more
We are often asked by executives starting a network marketing company if they can have consultants earn income by referring others and if it’s legal.
Effectively, multilevel marketing is the sale of products through...more
It has long been recognized that there is high attrition rate among MLM distributors, perhaps as high as 80-90%. The vast majority of MLM consultants are part time and they join and leave for many reasons. The fault is not...more
The Spanish Parliament has approved this week the so-called Market Unity Act. This piece of legislation is aimed at simplfying the difficulties of providing services or manufacturing or distributing goods connected with...more
If you are a network marketing company or a distributor, you know that recruiting and retention are the lifeblood of the business. What factors make companies successful and the distributors successful? Of course, a...more
MLM attrition is high. This is a fact of life. All of those distributors, who you have signed up, have competing demands on their time. So, if they go passive, it is not your fault. If that happens, you should give it a good...more
When you are starting your MLM, direct selling, network marketing, or party plan business, you’ll find that recruiting experienced distributors is often essential to your company’s success. And if you don’t have the...more
The beer industry is one of the most highly regulated industries in the United States. Every state oversees the sale and distribution of beer, and the differences among the states' regulatory processes result in a maze that...more
We continue our series for the Milan Fashion Week.
We have been discussing in the past various contractual options for devising distribution strategies in the fashion & retail sectors, from franchising and network...more
The risks posed by third party relationships (vendors, suppliers, agents, distributors, resellers, etc.) are huge – and often unaddressed. Regulations continue to increase as businesses become more global, and more and more...more
FRANCHISOR 101: CALIFORNIA REQUIREMENTS ON NEGOTIATED TERMS MAY CHANGE -
The California Franchise Investment Law and the California Code of Regulations currently require franchisors registered in California to disclose...more
On July 19, 2013, the Ninth Circuit affirmed an award of summary judgment to an aftermarket auto parts distributor that had received better prices than a competitor. Gorlick Distribution Centers, LLC v. Car Sound Exhaust...more
Richard Hsu, a technology transactions and intellectual property partner in the Mergers & Acquisitions Group at Shearman & Sterling, discusses the difference between a reseller or distributor agreement with a technology...more
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