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Bill

A 3773

Establishes penalties for certain actions relating to the operation of multi-level marketing companies.

2024-2025 Regular Session Introduced by Roy Freiman and 1 co-sponsor

NJ A3773 targets MLMs: bans deceptive recruitment and earnings claims, requires truthful disclosures, and lets the state levy civil penalties and private lawsuits to curb abuses.

Introduced in the Assembly, Referred to Assembly Financial Institutions and Insurance Committee
#consumeraff #crimes
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Bill Summary · A 3773

Summary of A 3773 – Multi-Level Marketing Company Conduct and Penalties

Overview

A 3773, introduced January 30, 2025, would regulate individuals associated with multi-level marketing (MLM) companies in New Jersey. The bill defines MLMs (distinct from pyramid schemes) and establishes prohibited conduct, Division of Consumer Affairs (the Division) responsibilities, complaint procedures, enforcement penalties, and a private civil action. It seeks to curb deceptive recruitment, misrepresentation of earnings, and false advertising by MLM participants.

Purpose and intent

  • To protect consumers from deceptive practices by persons recruiting others to MLM companies.
  • To require truthful disclosures about earnings potential and to prohibit misleading health or effectiveness claims for advertised merchandise.
  • To create state-level resources (webpage) and a formal complaint process to address violations.
  • To provide civil penalties and potential private remedies to deter violations and fund Division investigations.

Key definitions

  • Director: Director of the Division of Consumer Affairs (DCA), Department of Law and Public Safety.
  • Division: Division of Consumer Affairs.
  • Multi-level marketing: A marketing arrangement distributing/selling consumer merchandise through direct sellers that is not a pyramid promotional scheme.
  • Multi-level marketing company: Any business engaged in MLM.
  • Pyramid promotional scheme: A scheme where compensation derives primarily from introducing participants rather than from merchandise sales.

Prohibited conduct and required disclosures

  • Recruiting others to participate in an MLM company may not involve false statements or intentional misrepresentation about:
    • The MLM company itself.
    • The amount or nature of the recruiter’s earnings.
    • Any other material fact relating to the MLM.
  • Individuals associated with MLMs must disclose to recruits the profit or potential profit from recruiting others.
  • Those who sell or advertise merchandise through the MLM may not make false or intentionally misleading statements, including:
    • Unproven health benefit claims.
    • Deceptive before-and-after images.
    • False stories illustrating effectiveness of the merchandise.
  • The bill explicitly states it does not impose liability on news media accepting/publishing MLM-related advertisements.

Division duties and consumer resources

  • The Division must establish a web page on the dangers of MLMs, covering:
    • Economic impact of MLM participation.
    • How to identify MLMs.
    • Predatory practices of MLMs.
  • The Division must create a process for filing complaints alleging violations.

Enforcement and penalties

  • Civil penalties (in a state court) for MLM violations:
    • First violation: $500 to $5,000.
    • Second violation: $1,000 to $10,000.
    • Each subsequent offense: $5,000 to $50,000.
  • Penalties are collected under the Penalty Enforcement Law of 1999; court costs and reasonable attorney’s fees awarded to the Division.
  • Penalties collected are used to fund the Division’s investigation of future complaints.
  • If an MLM company is found in violation more than twice, the Director may order it to immediately cease all activities related to the relevant MLM.
  • There is a private right of action (see next section) that can also trigger penalties.

Private right of action and damages

  • Individuals harmed economically by MLM violations may bring suit in a court of competent jurisdiction.
  • Courts may award economic damages and reasonable attorney’s fees.

Effective date

  • The act would take effect on the 180th day after enactment.

Procedural history and sponsors

  • Status: Introduced in the Assembly on January 30, 2025; referred to the Assembly Financial Institutions and Insurance Committee (per provided info; additional listings show related actions).
  • Sponsors include primary sponsor Jaime R. Williams and several co-sponsors.

Related information

  • Related bill: A 9870 (prior-session).
  • The bill’s provisions apply to those associated with MLMs and do not assign liability to news media for advertising content.

This summary captures the bill’s core aims, provisions, and potential impact on MLM-related conduct and enforcement in New Jersey.

Compiled from official sources — confirm details with the bill’s official record.

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