Chapter 14: Market America Rights and Obligations

 

SEC. 1                Corrective Action

If Distributors violate their Independent Distributor Application and Agreement, including the policies and procedures set forth in this Career Manual, or if Distributors violate other agreements with Market America, Market America may take corrective action.

(A)     Grounds for Corrective Action: Grounds for invoking the Corrective Action Procedure (CAP) include, but are not limited to
the following:

  • Breach of the Independent Distributor Application and Agreement
  • Violation of the law relating to the Distributor’s business
  • Failure to maintain company standards
  • Falsification of reports
  • Forged documents or any false or misleading communication made to the company
  • Failure to meet retail sales requirements or improper verification of these requirements
  • Unauthorized income claims or publishing of commission checks
  • Failure to make timely payments to the company
  • Credit card violations:
  • Unauthorized use
  • Chargebacks without following Return Merchandise Policy
  • Breach of non-solicitation or trade secret covenants
  • Violation of same household rules
  • Establishment of fraudulent Business Development Centers
  • Inventory loading
  • Unauthorized or illegal re-entry
  • Misrepresentation of the marketing plan
  • Cross-group sponsoring
  • Conduct which materially impairs the company’s goodwill
  • Failure to fulfill management and fiduciary responsibility as a manager under the MPCP
  • Violation of the advertising policy, including company trademark violations
  • Violation of the 270 day policy
  • Unethical practices

The Corrective Action Procedure may result in a range of sanctions against the Distributor, including but not limited to additional training requirements, written warnings, forfeiture of commissions, suspension and termination. The severity, frequency, number of infractions, and impact on the company and other Distributors’ rights and businesses determine the type of corrective action taken, at the company’s sole discretion. If the violation, in the company’s opinion, cannot be remedied, is broad and damaging, brings irreparable harm, or threatens the reputation and goodwill of the company or its Distributors, it is grounds for immediate termination. If a Distributor is issued a written warning from the company and repeats the infraction, it is grounds for immediate termination.

(B)     Corrective Action Procedure: The following procedure will be applicable to a Distributor subject to corrective action:

(1)     When evidence of a violation comes to the attention of Market America’s Legal Counsel, Legal Counsel will notify the Distributor by certified mail return receipt requested or overnight service with signature required for delivery, sent to the Distributor’s last known address on record with the company, that the Distributor appears to have engaged in improper conduct and must submit a response explaining the situation to the Corrective Action Board (CAB). If the letter cannot be delivered, Market America may at its discretion also attempt to send notification by fax or email.

(2)     The Distributor must submit a written response to Market America within 20 days from the postmark date of the Legal Counsel’s letter (including weekends and holidays; if the twentieth day falls on a weekend or holiday, the response shall be due the next business day). If a written response is not received within said 20-day period, the Distributor’s contract may be automatically terminated.

(3)     Upon receipt of the response within the 20-day period, the Corrective Action Board will review the response within 15 business days from receipt of same and determine what action is to be implemented. In unusual circumstances, the CAB may extend the decision period with appropriate notice to the Distributor. The Corrective Action Board will consist of at least two senior executives of Market America, one representative from the company’s Legal Department, and one representative from the company’s Compliance Department.

(4)     The Corrective Action Board will notify the Distributor of its decision by Certified Mail, Return Receipt Requested, or by overnight mail service with signature required for delivery. The decision of the CAB shall take effect immediately.

(5)     If the Distributor disagrees with the decision rendered by the Corrective Action Board, he or she may appeal the decision to the Advisory Board, which includes representatives from Market America’s Distributor Advisory Council. The Distributor may request an appeal in one of two ways: (a) by requesting an appeal hearing (at Market America’s corporate office in Greensboro, NC, or by telephone), or (b) by submitting documentation for a written appeal. If the Distributor requests a written appeal, all supporting documentation must be included with the appeal request letter. Note: All documents submitted in the written appeal must be notarized, certified, or otherwise appropriately verified.

(6)     All appeal requests must be received by Market America within 15 days of the date of the CAB decision letter (including weekends and holidays; if the fifteenth day falls on a weekend or holiday, the appeal must be received the next business day). If the Distributor fails to request an appeal within 15 days, the decision of the Corrective Action Board will be final.

(7)     The Advisory Board will review the appeal within 30 days of receipt of the appeal request letter. If the Distributor requests an appeal hearing, the Advisory Board will attempt to schedule the hearing at a time convenient to the Distributor. However, the Advisory Board has discretion to schedule the hearing at any time during the 30-day period. In unusual circumstances, the Board may extend its decision time with appropriate notice to the Distributor. Please note that if Distributors exercise their appeal right, any sanction issued by the Corrective Action Board will remain in effect until the appeal process is completed. Therefore, Distributors must satisfy any sanction set forth by the Corrective Action Board even if the deadline for this sanction falls before the Advisory Board gives notice of its decision on the appeal.

(8)     The Advisory Board will conduct the hearing on the scheduled date and will render a final decision and send notification to the Distributor within five days from the hearing date.

(C)     Termination: If a Distributor commits a serious violation of the provisions of the Independent Distributor Application and Agreement or of the policies, procedures, rules and regulations contained in the Career Manual, the company may, at its discretion, terminate the Distributor’s contract.

(1)     A Distributor whose contract is terminated loses all the rights, privileges and benefits of a Market America Distributor.

(2)     Market America will notify the Distributor of termination via Certified Mail, Return Receipt Requested, at the latest address for that Distributor shown in company records.

(3)     Upon receipt of notice of termination, the Distributor may seek an appeal before the Advisory Board, following the same procedural steps outlined under Corrective Action Procedure.

(D)     Arbitration: If the Distributor disagrees with the decision of the Advisory Board, the Distributor’s only recourse is to request arbitration administered by the American Arbitration Association, as provided for in the Independent Distributor Application and Agreement. Distributors have one (1) year from the date of the Advisory Board's decision to file for arbitration. If Distributors fail to request an appeal within one (1) year of the postmarked date of the Advisory Board's decision, they waive their right to request arbitration and the decision of the Advisory Board will be final.

SEC. 2                Waiver

The company never relinquishes its right to insist on compliance with stated policies, procedures, rules and regulations or with applicable law governing conduct of the business.

(A)     Authorities: This policy is true in all cases, both specifically expressed and implied, unless an officer of the company who is authorized to bind the company in contractual agreements specifies in writing that the company waives a provision or provisions. Verbal communication is not sufficient to authorize non-compliance.

(B)     Permission: In addition, if the company on any occasion authorizes a policy exception, that authorization does not extend to future non-compliance.

(C)     Scope: This provision deals with the concept of “waiver,” and the parties agree that the company does not waive any of its rights under any circumstances other than in the case of the written authorization referred to above.

SEC. 3                Right to Amend

The company expressly reserves the right to alter or amend Distributor’s cost of products, policies, procedures, rules, regulations, product availability and/or formulation, and the Management Performance Compensation Plan. Upon notification by mailing to the most recent address listed for the Distributor in the records on file with the company or notification via an UnFranchise® Business Account, UnFranchise Magazine, email, voice mail, or other sufficient method, such amendments are automatically incorporated as part of the Independent Distributor Application and Agreement between the company and the Distributor.

SEC. 4                Change in Distributor’s Registered Name

The company reserves the right to approve or disapprove Distributors’ change of registered business names, formation of partnerships, corporations, other business organizations, and trusts for tax, estate planning, and other liability purposes. If the company approves such a change by a Distributor, the Distributor must provide a list of the names of the principals of the organization and Social Security numbers and signatures for each.

SEC. 5                Effect of Termination by the Distributor

Termination will result in the loss of commission rights from the Distributor’s Business Development Center(s).

(A)     Effective Period: Effect of termination shall be retroactive to the beginning of the week in which the termination was received in writing by the company.

(B)     Payment Of Commissions: Payment of commissions to the terminated Distributor will be made only for business completed during the last full week prior to the effective date of termination.

(C)     Representation: A terminated Distributor shall no longer represent himself/herself as an Independent Distributor of Market America.

SEC. 6                Cross-Group Sponsoring and Selling

(A)     Cross-Group Sponsoring Defined: Cross-group sponsoring shall be defined as a Distributor recruiting another Distributor from another organization or line of sponsorship or moving a downline Distributor from one placement to another in their own organization, either within the company, or within another network marketing company. Cross-group sponsoring occurs when a Distributor uses his/her association with Market America, or relationships developed through Market America, including access to meetings, people and information, to divert a Distributor’s time and effort away from his/her current line of sponsorship or diminish the time and effort a Distributor spends on his/her current line of sponsorship.

(B)     Cross-Group Selling Defined: Cross-group selling shall be defined as a Distributor soliciting sales from another line of sponsorship.

(C)     Prohibition of Cross-Group Sponsoring and Selling: Cross-group sponsoring and selling is unethical and strictly prohibited. Without the prohibition of cross-group sponsoring and selling, the lines of distribution and sponsorship would be undermined, and the marketing plan could not work. There would be no security nor stability within the sales and marketing organization, and there would be no incentive to recruit, train and manage downlines.

(D)     Primary Types of Cross-Group Sponsoring and Selling

(1)     Selling products or sales aids of another network marketing company to Market America Distributors, other than one’s personally sponsored Distributors. Such infractions must be reversed and remedied and are grounds for corrective action, including termination of the Distributor’s contract.

(2)     Selling Market America products to any Market America Distributors, other than one’s personally sponsored Distributors, without proper credit of sales volume or BV.

(3)     Sponsoring or moving existing Distributors, including their efforts, recruiting activity, sales activity, or volume production, to another line of sponsorship or position in the organizational genealogy, without complying with policies and procedures for transfer of sponsorship as provided in the Career Manual. This includes attempts to divert a Distributor’s volume, effort, production or activity under the MPCP to another person or location in the organizational genealogy, thereby depriving anyone upline in the original line of sponsorship of the volume credit he/she would have been due, by use of any device, mechanism, agreement or arrangement. If the company discovers such cross-group sponsoring within the company, it has broad discretion to reorganize the sales organizations and genealogies involved in order to protect the integrity of the marketing plan. Such discretion includes moving individual Distributors, moving groups of Distributors or personally sponsored Distributors, and moving or adjusting sales volume to an appropriate genealogy location in the rightful line of sponsorship. The company may also adjust commission and/or group Business Volume by deducting the volume from the incorrect upline or sponsorship and adding it to the correct upline or sponsorship. The company may take additional corrective action, including possible termination of the Distributor’s contract.

(E)     Attempts to Circumvent: The use of any device, mechanism or arrangement such as trade names, DBAs, assumed names, “alter egos”, federal identification numbers, fraudulent Social Security or Social Insurance numbers, fabricated Business Development Centers, agreements or contracts, or spouses, significant others, and/or family members, to circumvent this rule is strictly prohibited and grounds for corrective action, including termination.

(F)     Enforcement Responsibility: All Coordinators and higher Pin Levels in the line of sponsorship are responsible for enforcing this rule by reporting any evidence of such activity to the company’s Compliance Department or by filing a grievance.

SEC. 7                Solicitation

Distributors are prohibited from soliciting, recruiting, or sponsoring Market America Distributors into any other Internet One-to-One Marketing company. Solicitation, whether done directly or indirectly, is harmful to both Market America and its sales force. Such activity is a serious violation and will result in the initiation of the Corrective Action Procedure, including possible termination of the Distributor’s contract.

SEC. 8                Distributor Grievances and Complaints

Distributors having grievances or complaints regarding business practices or conduct relative to their Market America business should first report it to their upline leadership, who should review the matter and try to resolve it in the field. If the matter cannot be resolved in the field, it can be reported in writing to marketamerica@marketamerica.com. The company will review the facts and attempt to resolve the matter. If it is not satisfactorily resolved, it may be referred to the Dispute Resolution Board (DRB) for final review and determination. The Distributor agrees to submit any complaint, grievance or claim against a Distributor or the company to the company and/or Dispute Resolution Board for settlement prior to contacting any regulatory agency or taking any legal action.

(A)     DRB Process: The Dispute Resolution Board (DRB) is the final appeal process regarding company rulings or decisions concerning policies, procedures, rules, and regulations. The DRB only reviews facts and enforces company policies and procedures. The DRB does not set policy, change policy, or make exceptions to rules and regulations. It functions to interpret policies, procedures, rules and regulations where no precedent exists or where unique mitigating circumstances are encountered.

(1)     Formal appeal to the DRB requires completing and submitting the DRB Submission Form (which is located online on your UnFranchise® Business Account), a notarized statement (affidavit), all documentation, evidence, and a $50 filing fee for the review process (this fee is non-refundable, regardless of the final decision of the DRB).

(2)     The DRB reviews all appeals on a timely basis.

(3)     Cut-off on commission claims and adjustments will not be in effect provided the DRB process was started within 45 days of the respective commission week.

(4)     If the Distributor disagrees with the decision of the DRB, the Distributor’s only recourse is to request arbitration within 90 days of the date of the DRB decision letter. This arbitration shall be administered by the American Arbitration Association, as provided in the Independent Distributor Application and Agreement.

SEC. 9                Starter Kits

A “starter kit” provides a cross-section of consumable products and necessary literature to begin the business. The company reserves the right to substitute items of equal or greater Business Volume, value or cost at any time without notice. A Distributor should not expect the exact same products to be in every kit.

SEC. 10              UnFranchise Management System Accuracy

The company cannot guarantee the absolute accuracy of the information on the UnFranchise Management System (UFMS) until the close of a commission week, which occurs two weeks after the actual week ends, due to continuous updates, adjustments, and reconciliations.

(A)     Adjustment Factors: There are a multitude of factors that can affect the volume numbers shown on the UFMS, such as incorrect placements, data processing errors caught in reconciliation, bounced checks, refund requests, volume erasure, volume purges, etc.

(1)     The figures are not final until posting and reconciliation on Friday, two weeks after the week-ending commission cycle.

(2)     Commissions will be paid only on the actual reconciled volume.

(B)     Limitations: The information provided by the UFMS is to be used as a management tool, supplying the Distributor with an approximation of Business Development Centers’ Group Business Volume.

SEC. 11              Group Terminations

In the event a group of Distributors in the same line of sponsorship are leaving (terminating) as Market America Independent Distributors within a 90-day period of each other, it becomes impossible for the company to reverse unearned commissions by the removal of Business Volume. Usually there are competitive motives involved when an event like this occurs. Often the Distributors who earned commissions on downline group Business Volume are leaving the business within the same period of time as their downline Distributors who are requesting refunds are leaving the business. It is not unusual for the terminating upline Distributors to encourage or instruct the downline Distributors to leave the business or request refunds in concert. Regardless of the reasons, the company must reverse unearned commissions in order to make an equitable distribution of refunds to groups of Distributors leaving the business. With the rights under the Independent Distributor Application and Agreement to earn commissions, accrue group Business Volume, and sponsor other individuals as Distributors come certain contractual obligations, responsibilities, and liabilities.

(A)     Seventy Percent Rule: Each Executive Coordinator is contractually obligated to ensure that 70 percent of all products purchased are sold to the end consumer.

(B)     Breaches Of Contract: In the case where groups of Distributors in the same line of sponsorship are leaving the business and dollar amounts of refund request exceed 30 percent of product orders, sales, volume or deposits, there are obvious breaches of contract by Distributors receiving commissions. Or, there was obvious manipulation of the Management Performance Compensation Plan and/or misrepresentation on the part of participants requesting refunds as a group.

(C)     Executive Coordinator Responsibilities: Regardless of delivery issues, back orders, or disputes, the Executive Coordinator (remaining in the business) accepted the commissions which now must be reversed.

(D)     Buy-Back Guarantee: Under the 1979 FTC vs. Amway decision, it was stated that Multi-Level Marketing companies are permitted to advance commissions to participants on wholesale purchases intended to be resold or consumed only if there are protectionary provisions in the form of buy-back guarantees, refund policies, retailing requirements, and performance requirements, to which the participants are obligated to adhere.

(E)     Basis For Commissions: The company pays commissions on the basis of Distributors’ and Executive Coordinators’ contractual obligations to comply with Market America’s policies, procedures, rules and regulations. These provisions are clearly stated repeatedly in all Market America literature and communications.

(1)     The same consumer protection and anti-pyramid statutes apply to the Distributors as well as Market America.

(2)     The company has gone to great lengths to ensure compliance with the 1979 FTC vs. Amway decision by implementing contractual requirements. Therefore, when group refunds are requested, the company must execute the contractual provisions which were entered into by all parties to protect against receiving commissions on undelivered product to the end consumer.

(F)     Refund/Return Process: The company reserves the right to handle refunds or product returns for a group of Distributors leaving the business within the same 90-day period or in concert with each other in the following manner:

(1)     The company will hold all returns and refunds for a period of 60 days until all adjustments are made.

(2)     The company may identify who is involved and reverse all unearned commissions by the removal of Business Volume and the Commission Reversal Process.

(3)     The company may demand enforcement of the 70 percent Rule on the Executive Coordinator who violated the policies, procedures, rules, regulations and anti-pyramid laws.

(4)     The company may enforce a payment schedule releasing funds to the appropriate parties in payments until all unearned commissions are reversed. If the Executive Coordinator accepted the commissions and is contractually responsible for compliance in his/her organization, then he/she is obligated to refund the unearned commissions to his/her downline group.

(5)     The company may take enforcement action against any individual who refuses to return or refund unearned commissions, or who refuses to buy back products.

(6)     If the company is unable to collect unearned commissions from the involved Executive Coordinator, and if both the terminating Distributors and the Executive Coordinator fail to comply with the requirements under the marketing plan and policies and procedures, the company will then refund the portion it owes and assign the collection rights of unearned commission by the Executive Coordinator to the participant requesting a refund. The company may, at its discretion, provide legal assistance to the parties receiving the assignment to collect from the Executive Coordinator.

SEC. 12              Form 1099

At the end of each calendar year, Market America is obliged by law to provide each United States Independent Distributor and the Internal Revenue Service with a 1099 form reporting his/her commission payments and other remuneration from the company for that year. This is required for those United States Distributors earning in excess of $600 for that calendar year and for those who have purchased over $5,000 worth of product. Market America is not obligated to provide income information to Distributors who reside in Canada.

SEC. 13              Cut-off on Commission Claims and Adjustments

No claims submitted more than 45 days from the end of a commission week will be accepted. The absolute deadline for commission claims for adjustments is 45 days following the Friday of the close of the commission week. The company will not adjust commissions going back more than 45 days. The 45-day period allows three to four weeks from the time a commission check is disbursed to contact or notify the company and make a claim. If a Distributor believes he/she should have received a check and did not, he/she must notify the company prior to the expiration of the 45-day period. No exceptions will be made.

 

 

Last Modified :09/16/2014 5:41:19 PM EDT