PEOPLE of the State of Illinois ex rel. Neil F. HARTIGAN, Attorney General of

Illinois, Plaintiff-Appellant,

v.

UNIMAX INC., an Illinois corporation; and Tim Dern, individually and as

President of Unimax, Inc., Defendants-Appellees.

No. 87-1751.

Appellate Court of Illinois,

First District, Second Division.

March 29, 1988.

Rehearing Denied April 22, 1988.

**27 ***559 Presiding Justice HARTMAN delivered the opinion of the court:

Plaintiff appeals from entry of summary judgment (Ill.Rev.Stat.1985, ch. 110, par. 2-1005) in favor of defendants. Defendant Unimax, Inc. ("Unimax") is an Illinois corporation with its principal place of business in Schaumburg, Illinois. Co-defendant Tim Dern ("Dern") is president and a co-founder of Unimax. It is comprised of two separate spheres of activity: Unimax Buyers' Service ("Buyers' Service") and Unimax Matrix ("Matrix"), a multi-level marketing plan.

In approximately April 1986, Unimax instituted the Buyers' Service, which enables consumers to purchase products and services at a discount from 13 suppliers which have vendor agreements with Unimax. To participate in the Buyers' Service, a consumer must complete a subscriber application, submit it with an initial payment of $36 and pay thereafter a $36 monthly fee and a $14 annual literature fee. Subscribers are not obligated to buy any merchandise or services, and may withdraw from the Buyers' Service at any time and receive a refund of any unused, prepaid fees.

Matrix is designed to sell memberships in the Buyers' Service. One becomes a Matrix "marketer" by signing an "Independent Marketer's Agreement," receiving Unimax training and viewing training tapes, or reading company approved training materials. A marketer need not purchase any merchandise in order to earn commissions, but earns commissions on the $36 monthly subscription fees paid by new subscribers he sponsors. He must recruit at least three new subscribers and they, as well as the marketer, must be "active," or up to date on their fee payments. A marketer's monthly commission check increases according to a commission schedule on nine levels: the greater the number of subscribers in a marketer's "down-line" organization, the higher the commission the marketer will receive on monthly fee payments made by "his" subscribers. For example, at *721 Level 1, which involves only 3 subscribers in his down- line organization, the marketer earns only 1% of the $36 monthly fee paid by each of the subscribers or $1.08. At Level 9, however, the marketer earns 6% of the $36 fee paid by each of the 19,683 down-line subscribers in his down- line organization, entitling him to earn $42,515.28 per month. The marketer is paid an additional 5% bonus in the ninth level which could raise the amount payable to $77,944.68 per month.

There is no explicit requirement that an individual must be a subscriber in order to be a marketer or vice versa, although all 10,874 subscribers to the Buyers' Service have also signed marketer agreements, and no one currently participates solely as a marketer in the Unimax scheme. Approximately ten percent of the signatories to marketer agreements are "active." Furthermore, a subscriber need not pay an additional fee to become a marketer, but anyone wishing to join Unimax as a marketer alone must pay a $52 "set-up charge."

The State's two-count complaint against Unimax and Dern, individually and as president of Unimax, alleged in count I, that Matrix, as part of the Unimax "plan," constituted a "pyramid sales scheme," in contravention of section 2A(2) of the Consumer Fraud and Deceptive Business Practices Act ("the Act") (Ill.Rev.Stat.1985, ch. 121 1/2 , pars. 261 et seq., 262A(2).) In count II, the State alleged that Matrix also violated section 2A(1) of the Act as a "chain referral sales technique." Ill.Rev.Stat.1985, ch. 121 1/2 , par. 262A(1). Appointment of a receiver was sought and the court was asked that defendants: be enjoined from selling the right to participate in the plan; provide an accounting; be forced to disgorge all profits obtained in connection with the plan; and be required to pay a $50,000 penalty for violating the Act. See Ill.Rev.Stat.1985, ch. 121 1/2 , par. 267.

In their answer, defendants denied these allegations and raised "affirmative defenses" that: the State failed to state a cause of action upon which relief could be granted; and the method by which Unimax conducts its business does not constitute a pyramid sales scheme or a chain referral **28 ***560 sales technique as those terms are defined by the Act.

Defendants also filed, on March 31, 1987, a motion for summary judgment supported by affidavits, asserting that a "pyramid sales scheme" involves the sale of the right to sell new memberships in the pyramid, "so that investors must make their return not through the sale of products or services, but by encouraging others to invest" in the scheme. Unimax commissions, however, are based solely on the sale of subscriptions and are a percentage of the subscription fee and, unlike a traditional pyramid scheme, Unimax does not require its subscribers to retain inventories of merchandise for purposes of resale to *722 consumers. Defendants further argued that Unimax is not a "chain referral sales technique." Ill.Rev.Stat.1985, ch. 121 1/2 , par. 262A(1).

The State filed a brief in opposition to defendants' motion for summary judgment on May 1, 1987, and moved the circuit court to strike: (1) all of a Unimax attorney's affidavit; and (2) portions of Unimax' president's affidavit, as well as the motion for summary judgment as immaterial, conclusory and inadmissible for lack of foundation and as hearsay. Defendants filed a response thereto, accompanied by additional affidavits.

On May 7, 1987, the circuit court granted defendants' motion for summary judgment, finding that: "the benefit * * * received by a person in the Unimax multi-level marketing plan is the membership in the Unimax [B]uyers' [S]ervice, not the commission received on the sale of buyers club memberships by a person to subscribers"; and "this benefit is not primarily based on the inducement of additional subscribers." The court further ordered any opinions of law contained in defendants' affidavits stricken. On May 8, 1987, the court entered an order striking portions of certain affidavits, and the attorney's affidavit in its entirety.

The State appeals the order entered May 7, 1987. [FN1]

FN1. The court's order disposed of the entire two-count complaint. The briefs, however, are devoted to count I of the complaint and whether Matrix constitutes an illegal pyramid scheme; neither party addresses the issue of whether defendants operate a "chain referral sales technique." Under Supreme Court Rule 341(e)(7), points not argued in the briefs are waived. 107 Ill.2d R. 341(e)(7); see also Jenkins v. Wu (1984), 102 Ill.2d 468, 483, 82 Ill.Dec. 382, 468 N.E.2d 1162.

Summary judgment will be granted where the pleadings, depositions, admissions and affidavits demonstrate that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law (Wogelius v. Dallas (1987), 152 Ill.App.3d 614, 619, 105 Ill.Dec. 506, 504 N.E.2d 791; Ill.Rev.Stat.1985, ch. 110, par. 2-1005); however, where reasonable persons may fairly draw differing inferences from facts not in dispute, summary judgment must be denied and the question resolved at trial. (Aspegren v. Howmedica, Inc. (1984), 129 Ill.App.3d 402, 404, 84 Ill.Dec. 685, 472 N.E.2d 822.) The movant must show that his right to summary judgment is clear and free from doubt. Frazier v. Smith & Wesson (1986), 140 Ill.App.3d 963, 967, 95 Ill.Dec. 274, 489 N.E.2d 495.

The State contends the circuit court erred in finding the undisputed facts in this case capable of only one inference and insists the facts presented in the pleadings and affidavits raise the inference of an illegal pyramid scheme in the guise of Matrix.

*723 Matrix easily can be viewed as a "plan or operation" whereby the marketer exchanges a "thing of value" by signing the marketer's agreement, which is a form of consideration. Section 1(g) of the Act defines a "pyramid sales scheme" as (Ill.Rev.Stat.1985, ch. 121 1/2 , par. 261(g)): " * * * any plan or operation whereby a person in exchange for money or other thing of value acquires the opportunity to receive a benefit or thing of value, which is primarily based upon the inducement of additional persons, by himself or others, regardless of number, to participate in the same plan or operation and is not primarily contingent on the volume **29 ***561 or quantity of goods, services, or other property sold or distributed or to be sold or distributed to persons for purposes of resale to consumers. For purposes of this subsection, 'money or other thing of value' shall not include payments made for sales demonstration equipment and materials furnished on a nonprofit basis for use in making sales and not for resale." The marketer acquires "the opportunity to receive a benefit or thing of value" by way of commissions, which are themselves "primarily based on the inducement of additional persons" to buy into the Unimax system. Marketers' commissions, therefore, are "not primarily contingent on the volume of goods, services or other property sold or distributed * * * to persons for purposes of resale to consumers," but are entirely unrelated to the sale of goods or services available through the Buyers' Service and are obtained only by recruiting more persons into Unimax. See Ill.Rev.Stat.1985, ch. 121 1/2 , par. 261(g).

Nevertheless, defendants maintain that the commissions are "primarily contingent" upon the sale of a service, i.e., the Unimax system, and that marketers are not paid "for the mere act of recruiting people to recruit"; therefore, they urge, the system lacks elements which the Federal Trade Commission ("FTC") finds fundamental to an illegal pyramid scheme: payment by participants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive in return for recruiting other participants into the program rewards unrelated to the sale of the product to ultimate users. (In re Koscot Interplanetary, Inc. (1975), 86 F.T.C. 1106, 1180 aff'd sub nom. (D.C.Cir.1978), 580 F.2d 701; (State ex rel. Corbin v. Challenge, Inc. (App.1986), 151 Ariz. 20, 24, 725 P.2d 727, 731 ("Corbin ").) FTC decisions identify other characteristics typical of pyramid schemes, such as: (1) requiring a recruit to pay a large sum of money, either as an entry fee ("headhunting fee") or for the purchase of a significant amount of non- *724 refundable inventory ("inventory loading") (State ex rel. Edmisten v. Challenge, Inc. (1981), 54 N.C.App. 513, 284 S.E.2d 333, 338); (2) pressuring members to recruit more participants; and (3) "endless chains," or downlines envisioning an infinite number of members (State ex rel. Sanborn v. Koscot Interplanetary, Inc. (1973), 212 Kan. 668, 512 P.2d 416, 422-23; Dare to Be Great, Inc. v. Commonwealth ex rel. Hancock (Ky.App.1974), 511 S.W.2d 224, 225-26; Schrader v. State (1986), 69 Md.App. 377, 517 A.2d 1139, 1141-43; Koscot Interplanetary, Inc. v. Draney (1974), 90 Nev. 450, 530 P.2d 108, 110.) Defendants maintain that Unimax employs none of these techniques.

[1][2] Although the criteria enunciated by the FTC for identifying an illegal pyramid scheme is entitled to consideration (People ex rel. Fahner v. Walsh (1984), 122 Ill.App.3d 481, 484, 77 Ill.Dec. 691, 461 N.E.2d 78), they are not controlling. (Corbin, 151 Ariz. at 24-25, 725 P.2d at 731-32; Ill.Rev.Stat.1985, ch. 121 1/2 , par. 262.) This court, moreover, has already approved section 1(g) of the Act as the operative definition of a "pyramid sales scheme" in Illinois. (See People ex rel. Hartigan v. Dynasty System Corp. (1984), 128 Ill.App.3d 874, 879, 83 Ill.Dec. 937, 471 N.E.2d 236 ("Dynasty" ).) Furthermore, a pyramid sales scheme need not include an "endless chain" (see Dynasty, 128 Ill.App.3d at 877, 83 Ill.Dec. 937, 471 N.E.2d 236; Ill.Rev.Stat.1985, ch. 121 1/2 , par. 261(g)), inventory loading or headhunting fees to violate the terms of the Act. Ill.Rev.Stat.1985, ch. 121 1/2 , par. 261(g).

Here, the commissions earned by marketers are contingent not on the sale of any goods or services offered by Unimax: only on bringing new individuals into the Unimax plan. The greater the number of subscribers a marketer sponsors, the greater his monthly commission check will be. The maximum commission available at each of the nine Matrix levels is conditioned upon full and timely payment by the marketer-sponsor and all of "his" subscribers of their subscription fees. Together, these uncontradicted facts demonstrate as much an opportunity for marketers to earn money "primarily based upon the inducement of additional persons * * * to participate in **30 ***562 the same plan or operation" (Ill.Rev.Stat.1985, ch. 121 1/2 , par. 261(g)), as they do an opportunity to earn commissions based on the sale of a service.

[3] Defendants admit that all subscribers have signed marketing agreements and that there are no marketers who are not also subscribers, although they insist subscribers aren't required to become marketers and are encouraged to do so only to broaden the membership base and thereby "[afford] purchasers the benefits of [the] buying power of a large group of consumers * * *." The fact that an individual *725 wishing to sell subscriptions alone must pay a start-up fee, however, while a subscriber can become a marketer at no extra cost, demonstrates an emphasis by Unimax on drawing more individuals into the organization. Several courts interpret greater pressure on members to sponsor new recruits than to market company merchandise as evidence of an illegal pyramid. (Dynasty, 128 Ill.App.3d at 881, 83 Ill.Dec. 937, 471 N.E.2d 236; Dare to Be Great, Inc. v. Commonwealth ex rel. Hancock, 511 S.W.2d at 226; State v. Solem (1974), 301 Minn. 282, 222 N.W.2d 98, 100; State ex rel. Edmisten v. Challenge, Inc., 284 S.E.2d at 337, 338.) Because these material, uncontradicted facts reasonably yield more than one possible inference, the circuit court erred in granting defendants' motion and the summary judgment entered in favor of defendants must be reversed.

The circuit court erroneously found that the "benefit or thing of value received by a person in the Unimax multi-level marketing plan is the membership in the * * * [B]uyers [S]ervice, not the commission received on the sale of buyers club memberships." The only means by which a marketer may gain a "benefit" through Matrix, however, is to sponsor Unimax subscribers and obtain commissions on their membership fees; membership in the Buyers' Service is obtained separate and apart from a marketer's activities in Matrix. This misunderstanding of Unimax operations further supports the conclusion that the court erred in determining that, as a matter of law, Matrix does not violate the Act.

Accordingly, the circuit court's order of May 7, 1987, granting defendants' motion for summary judgment must be reversed and the cause remanded for further proceedings consistent with this opinion.

Reversed and remanded.

STAMOS and BILANDIC, JJ., concur.

Copr. (C) West 1996 No claim to orig. U.S. govt. works

471 N.E.2d 236

(Cite as: 128 Ill.App.3d 874, 471 N.E.2d 236, 83 Ill.Dec. 937)

The PEOPLE of the State of Illinois ex rel. Neil F. HARTIGAN, Attorney General,

State of Illinois, Plaintiff-Appellee,

v.

The DYNASTY SYSTEM CORPORATION, a foreign corporation; R. Keith Julian,

Individually, as an officer of and d/b/a the Dynasty System Corporation; Pat

Julian, Individually, as an officer of and d/b/a the Dynasty System

Corporation; Rachel McClelland, Individually, as Agent of and d/b/a the

Dynasty System Corporation; and Other Unknown Owner or Owners as Officers,

Agents, and d/b/a the Dynasty System Corporation, Defendants-Appellants.

Nos. 4-84-0337, 4-84-0414.

Appellate Court of Illinois,

Fourth District.

Nov. 15, 1984.

Rehearing Denied Dec. 12, 1984.

Attorney General brought action against organization alleged to be a pyramid sales scheme. The Circuit Court, Adams County, Robert W. Cook, J., entered order temporarily restraining organization's activities, and organization brought interlocutory appeal from denial of motion to vacate order and from preliminary injunction. The Appellate Court, Mills, P.J., held that: (1) activities of the organization constituted a pyramid sales scheme in violation of statute; (2) definition of pyramid sales scheme was not unconstitutionally vague for use of the word "primarily"; (3) the statute did not violate the commerce clause; and (4) Attorney General was not required to prove common-law requirements in order to obtain an injunction since it was specifically authorized by statute.

Affirmed.

[1] CONSUMER PROTECTION k12

92Hk12

Whenever a person exchanges money for a right to benefit in a pyramid sales plan, it is irrelevant, in determining whether plan is prohibited by statute, whether he is required to do so. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2).

[2] CONSUMER PROTECTION k12

92Hk12

Where distributors paid money to obtain the benefits of a plan of which otherwise met the definition of a pyramid sales plan prohibited under a statute, activities of the plan constitute a prohibited "pyramid sales scheme," even though a person could participate in the plan without purchase of products. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2).

See publication Words and Phrases for other judicial constructions and definitions.

[3] CONSUMER PROTECTION k12

92Hk12

Statute prohibiting pyramid sales schemes does not provide any dispensation for start-up activities of an organization to relax requirement that profits not be based primarily on inducement of others to participate and not primarily contingent on volume of goods sold to persons for purposes of resale to consumers. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2).

[4] CONSUMER PROTECTION k39

92Hk39

Evidence that motivational tapes and management computer services sold by organization, which otherwise qualified as pyramid sales organization, had not been sold to individuals who were not "distributors" of the organization, was sufficient to establish that the organization fell within definition of a pyramid sales scheme prohibited under statute because benefits received by participants were primarily based upon inducement of others to participate and not contingent on the volume of goods sold to ultimate consumers, even though organization claimed it was in its infancy and that sales to ultimate consumers would be made eventually. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2).

[5] CONSUMER PROTECTION k12

92Hk12

Organization's activities constituted an illegal pyramid scheme in violation of statute, even though distributors may have had misconceptions about its policies fostered by misrepresentations of other distributors in the organization, since statute prohibits actions of persons acting themselves, or through others, in an illegal scheme where organization's activities were otherwise prohibited by statute. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2).

[6] CONSUMER PROTECTION k12

92Hk12

"Primarily" as used in statute defining prohibited pyramid sales schemes, requiring that in such schemes the right to benefit received in exchange for money or other value must be, "primarily" based on recruiting others to participate and not, "primarily" contingent upon volume of goods sold for purposes of resale, means preeminently or fundamentally. S.H.A. ch. 121 1/2 , P 261(g).

See publication Words and Phrases for other judicial constructions and definitions.

[7] CONSUMER PROTECTION k2.1

92Hk2.1

Formerly 92Hk2

"Primarily" as used in statute prohibiting pyramid sales schemes is not unconstitutionally vague, it provides fair notice to those who are subject to the act of schemes and ventures which are prohibited. S.H.A. ch. 121 1/2 , P 261(g).

[8] COMMERCE k13.5

83k13.5

Tests for determining whether state statute which affects interstate commerce violates commerce clause is if the statue regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to putative local benefits. U.S.C.A. Const. Art. 1, s 8, cl. 3.

[9] COMMERCE k56

83k56

Statute prohibiting pyramid marketing schemes did not violate commerce clause, even though organization alleged that requiring it to obtain data concerning retail sales of distributors would be extremely difficult, if not impossible, because eradication of fraudulent pyramid sales schemes was a legitimate and important state interest exceeding the burden on interstate commerce, particularly where the majority of distributors placed an order each month for either products or computer services from organization and organization, through its computer service, extensively monitored activities of its distributors. S.H.A. ch. 121 1/2 , P 261(g); U.S.C.A. Const. Art. 1, s 8 cl. 3.

[10] APPEAL AND ERROR k781(4)

30k781(4)

Any issue regarding a temporary restraining order is moot when the order has expired and the record does not indicate any possibility of damages.

[11] STATES k79

360k79

Public officials who brought action against alleged pyramid sales scheme, seeking a temporary restraining order against its activities, could not be liable for damages, under doctrines of sovereign immunity and public officials' immunity. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2); ch. 127, P 801.

[11] STATES k191.10

360k191.10

Formerly 360k191(2)

Public officials who brought action against alleged pyramid sales scheme, seeking a temporary restraining order against its activities, could not be liable for damages, under doctrines of sovereign immunity and public officials' immunity. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2); ch. 127, P 801.

[12] APPEAL AND ERROR k843(2)

30k843(2)

Question of whether trial court abused its discretion in granting a temporary restraining order in action by Attorney General against alleged pyramid sales scheme was moot, since organization was barred by doctrines of public officials' immunity and sovereign immunity from recovering money damages. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2); ch. 127, P 801.

[13] CONSUMER PROTECTION k41

92Hk41

Attorney General was not required to prove common-law requirements for injunctive relief in order to obtain such relief against organization alleged to be pyramid sales scheme in violation of statute but only needed to show violation of statute, since statute specifically allowed Attorney General to seek injunctive relief. S.H.A. ch. 121 1/2 , PP 261(g), 262A(2), 267.

**238 *876 ***939 Stine & Wolter, P.C., Springfield, Thayer C. Lindauer, Phoenix, *877 Ariz., for defendants-appellants.

Neil F. Hartigan, Atty. Gen., John G. Abrell, Scott D. Spooner, Asst. Attys. Gen., Springfield, for plaintiff-appellee.

MILLS, Presiding Justice:

Pyramid sales scheme.

TRO and preliminary injunction issued.

Interlocutory appeal.

We affirm.

The Dynasty System Corporation, (TDSC), R. Keith Julian, Pat Julian, and Rachel McClelland--defendants here--bring this interlocutory appeal from denial of their motion to vacate a temporary restraining order and to vacate a preliminary injunction enjoining them from marketing TDSC's products and services.

We affirm.

I. FACTS

The record discloses that TDSC is a Texas corporation, R. Keith Julian and Pat Julian are the founders and sole shareholders of TDSC, and Rachel McClelland is a TDSC distributor who resides in Quincy, Illinois.

TDSC is a multi-level sales corporation which markets its products and services throughout the United States. Its sales program is designed both to sell its products and services and to recruit new distributors. A TDSC distributor may purchase the products and services for personal consumption or for resale to third parties. A distributor earns commissions on products and services purchased by other TDSC distributors he recruits into the "Dynasty System" and by those his recruits in turn recruit.

Each distributor is thus encouraged to develop a "down-line" organization by sponsoring other distributors into the System. Ideally, each distributor would recruit four individuals into the System and each of them would recruit four additional persons, until the original distributor has a **239 ***940 down- line organization consisting of seven levels and comprising 16,384 persons. A distributor only receives commissions on purchases of products and services by those distributors within his down-line organization.

TDSC's marketing operation consists of five programs. Under the first program, a person becomes a "Dynasty distributor" and may sponsor other distributors. Under a second program--Dynasty System I--"free enterprise"--a person becomes a distributor in other multi- *878 level sales companies recommended by TDSC. One of the two companies presently recommended by TDSC is a company wholly owned and operated by the Julians. These companies also pay commissions on products purchased by persons in the distributor's down-line organization.

A third program--Dynasty System II "The Master Achiever's Club"--offers a personal development course consisting of a series of 12 motivational tapes. The cost of this program is $70 per year. The fourth program--"Executive Management Information Service"--offers a monthly computer report of the recruitments and purchases of distributors in a participant's down-line organization. The fee for this service is $80 per month.

Upon sponsoring one additional participant, a distributor gains entry into the fifth program--Dynasty III, the Millionaire's Circle. This entitles the entrant to enlist the aid of a computer service in filling their down-line organization with the System's extra recruits.

On April 24, 1984, the Attorney General of Illinois filed a multi-count complaint against the defendants alleging that TDSC's multi-level sales program constituted common-law fraud, an illegal lottery, a pyramid sales scheme, and a chain referral sales technique. The Attorney General requested a temporary restraining order (TRO), a preliminary injunction, a permanent injunction, and civil penalties.

After an ex parte hearing at which the court heard the testimony of the Attorney General's witness, the trial court issued a TRO enjoining the defendants from "advertising for sale, offering for sale, or selling multi- level goods and services, by or through the Defendant 'The Dynasty System Corporation'." The TRO was to be effective for nine days and the court set a hearing on the Attorney General's motion for a preliminary injunction on the day the TRO was to expire. On May 2, 1984, the defendants filed a motion to vacate the TRO.

An evidentiary hearing regarding the defendants' motion to vacate the TRO and the Attorney General's motion for a preliminary injunction was held on May 2, 1984. The evidence offered by the Attorney General indicated that the various programs offered by TDSC were marketed as an entire system. Each witness who testified had participated in all of the programs and had made an initial investment of $256. Several of the products ordered and paid for by the distributors had never been received. Testimony also indicated that some of the products were of inferior quality and that others were not competitively priced.

The primary emphasis in the Dynasty System was placed upon recruiting other participants into the System in order to build a down- *879 line organization and little emphasis was placed upon retail sales of the products and services. None of the distributors testifying for the Attorney General had recruited an additional participant, nor had any of them made a retail sale of the products or services they had purchased.

The trial court denied the defendants' motion to vacate the TRO and issued a preliminary injunction enjoining the defendants in the same manner as the TRO.

In issuing the preliminary injunction, the court stated that the Attorney General had shown that the defendants' activities may constitute a pyramid sales scheme. The defendants then filed interlocutory appeals from both orders. The cases were consolidated on appeal.

II. ANALYSIS

The defendants raise the following issues on appeal: (1) Whether their activities may **240 ***941 constitute a pyramid sales scheme; (2) whether they were erroneously held liable for the acts of other TDSC distributors; (3) whether the pyramid sales scheme statute is unconstitutional; and (4) whether the Attorney General was required to prove the traditional common law requirements for an injunction.

PYRAMID SALES SCHEME

The first issue to be considered on appeal is whether the evidence presented at the hearing on the Attorney General's motion for a preliminary injunction established that TDSC's activities may constitute a pyramid sales scheme in violation of the Consumer Fraud and Deceptive Business Practices Act (the Act). Ill.Rev.Stat.1983, ch. 121 1/2 , par. 262A(2).

Section 1(g) of the Act (Ill.Rev.Stat.1983, ch. 121 1/2 , par. 261(g)) defines a pyramid sales scheme to include: "[A]ny plan or operation whereby a person in exchange for money or other thing of value acquires the opportunity to receive a benefit or thing of value, which is primarily based upon the inducement of additional persons, by himself or others, regardless of number, to participate in the same plan or operation and is not primarily contingent on the volume or quantity of goods, services, or other property sold or distributed or to be sold or distributed to persons for purposes of resale to consumers."

TDSC contends that its activities do not constitute a pyramid sales scheme because the Act requires that a person exchange money or other value for the right to benefit. TDSC argues that under its *880 programs, a person may become a "dynasty distributor" without purchasing any products or services. TDSC points out that, due to a change in its policies effective April 1, 1984, a dynasty distributor earns maximum commissions from purchases of products by distributors in his down-line organization without regard to his participation in the System. Prior to this change, a participant would not earn the full amount of the commission unless he purchased a minimum amount of products from the affiliated companies, the tapes and the computer reports each month. We do not, however, find this change in policy to be determinative.

An argument similar to that made by the defendants here was considered and rejected by the North Carolina Court of Appeals in State ex rel. Edmisten v. Challenge, Inc. (1981), 54 N.C.App. 513, 284 S.E.2d 333. The North Carolina statute defined a pyramid distribution plan as " 'any program utilizing a pyramid or chain process by which a participant gives a valuable consideration for the opportunity to receive compensation or things of value in return for inducing other persons to become participants in the program.' " (54 N.C.App. 513, 516-17, 284 S.E.2d 333, 336.) The defendants argued that their activities did not constitute an unlawful plan because an "Independent Sales Agent" need not purchase any products or services in order to earn commissions from the recruitment of new sales agents. In rejecting the defendants' argument, the court held that the statute is violated if an individual pays consideration, whether or not he is required to pay it.

[1][2] Following the rationale of the court in Edmisten, we hold that whenever a person exchanges money for a right to benefit in a pyramid sales plan, it is irrelevant whether he is required to do so. All of the TDSC distributors who testified at the hearing had paid money to participate in TDSC's programs. Testimony also indicated that almost all of 269 distributors in Illinois had paid money to TDSC or its affiliated companies.

Thus, in view of our interpretation of the statute, TDSC's change in policy does not affect its liability under the Act. It is apparent that the success of the Dynasty System is incumbent upon the continued participation by all of its members. The upward flow of commissions would come to an abrupt halt if the participants failed to make their monthly purchases. Active recruitment and continued participation were portrayed as the "Dynasty Way."

**241 ***942 The defendants also argue that the evidence fails to show that the benefits received by TDSC distributors are primarily based upon the inducement of others to participate and are not primarily *881 contingent on the volume of goods sold to persons for purposes of resale to consumers. We disagree.

The evidence overwhelmingly demonstrates that the primary emphasis is on commissions earned by building a down-line organization. Testimony established that TDSC was represented as a consuming organization and not as a selling organization. Commissions are not dependent upon retail sales to ultimate consumers, but are paid solely upon purchases made by distributors in the participant's down-line organization.

Although TDSC maintains that the Dynasty II tapes and the Executive Management Computer Reports are marketable products, none of the distributors testifying at the hearing had made a single sale of either item. A similar situation was before the court in Dare To Be Great, Inc. v. Commonwealth ex rel. Hancock (Ky.Ct.App.1974), 511 S.W.2d 224, where the court considered a scheme involving the sale of a series of motivational tapes through distributorships. The court stated that the scheme constituted a fraudulent and deceptive trade practice and that the purpose of the tapes was to provide the defendant with "a flimsy and transparent claim of legitimacy for their fraudulent enterprise." 511 S.W.2d 224, 226.

[3][4] In their brief, the defendants acknowledge the current lack of retail sales but argue that the System's operation cannot fairly be judged in its infancy. The defendants claim that as the distributorship network expands, retail sales will also expand. The statute, however, does not provide any dispensation for start-up activities, and we decline to create one.

In sum, we believe that the Attorney General established that TDSC's activities may constitute a pyramid sales scheme as defined by the Act.

[5] Because of this conclusion, we also reject the defendants' contention that they were erroneously held responsible for the acts and omissions of other TDSC distributors. TDSC contends that the witnesses' misconceptions of TDSC policy, fostered by the misrepresentations of other TDSC distributors, led the trial court to conclude that its activities fall within the ambit of the Act.

As we have previously stated, TDSC's activities constitute a pyramid sales scheme under the Act, and its new policy does not change this result. Under the Act, it is unlawful "for any person, by himself or through others, to sell, offer to sell, or attempt to sell the right to participate in a pyramid sales scheme." (Emphasis added.) (Ill.Rev.Stat.1983, ch. 121 1/2 , par. 262A(2).) Under the facts at bar, TDSC's liability under the Act is inescapable. The evidence also demonstrates *882 an effort to continue the scheme within the State. According to the testimony of TDSC's witnesses, a TDSC field instructor training program was to be held in Quincy on April 28 and 29, but was canceled after the issuance of the TRO.

CONSTITUTIONALITY OF SECTION 1(g)

The next argument raised by the defendants is that section 1(g) of the Act setting forth the definition of a pyramid sales scheme is void for vagueness. That section provides that the right to benefit received in exchange for money or other value must be "primarily" based on recruiting others to participate and must not be "primarily" contingent upon the volume of goods sold for purposes of resale to consumers. (Ill.Rev.Stat.1983, ch. 121 1/2 , par. 261(g).) The defendants contend that the word "primarily" does not inform a person of reasonable intelligence of what conduct is prohibited by the Act. We disagree.

[6][7] "Primarily" means "pre-eminently" or "fundamentally." (See Mid- South Chemical Corp. v. Carpentier (1958), 14 Ill.2d 514, 153 N.E.2d 72.) This term is certainly less broad than other terms contained in the Act which have withstood void for vagueness challenges. In Scott v. Association **242 ***943 for Childbirth at Home (1981), 88 Ill.2d 279, 289, 58 Ill.Dec. 761, 766, 430 N.E.2d 1012, 1017, the court held that the terms "deception," "false pretense," "misrepresentation," and "fraud" are " 'sufficiently explicit to inform those who are subject to [the Act] of the conduct on their part to which it applies' (Stein v. Howlett (1972), 52 Ill.2d 570, 580, 289 N.E.2d 409, 414), and therefore cannot be said to be unconstitutionally vague." The court further stated that "greater leeway in definition is allowed the legislature in the context of regulatory statutes governing business activities." (88 Ill.2d 279, 290, 58 Ill.Dec. 761, 767, 430 N.E.2d 1012, 1018.) We hold that the term "primarily" provides fair notice to those who are subject to the act of the schemes and ventures which are prohibited.

We also reject the defendants' contention that the statute is unconstitutional because it places an undue burden on interstate commerce. TDSC argues that the cost of requiring it to monitor the retail sales of its distributors to insure that the benefit they receive is primarily from retail sales would be prohibitive.

[8] In Pike v. Bruce Church, Inc. (1970), 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174, 178, the United States Supreme Court set out the test for determining whether a state statute which affects interstate commerce violates the commerce clause: "Where the statute regulates evenhandedly to effectuate a legitimate *883 local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. [Citation.] If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities."

Section 1(g) of the Act applies indiscriminately to all sales schemes, whether they involve business transactions within or outside of Illinois. The stated purpose of the Act is to protect consumers, borrowers, and businessmen from fraud, unfair or deceptive acts or practices, and business transactions. Frahm v. Urkovich (1983), 113 Ill.App.3d 580, 69 Ill.Dec. 572, 447 N.E.2d 1007.

The inherently fraudulent nature of pyramid sales schemes was recognized and discussed in People ex rel. Fahner v. Walsh (1984), 122 Ill.App.3d 481, 486- 87, 77 Ill.Dec. 691, 695-696, 461 N.E.2d 78, 82-83: "Pyramid programs * * * which induce a person to participate on the representation that he or she cannot only regain the purchase price, but also reap profits by selling the plan to others, are inherently deceptive and contrary to public policy. (Twentieth Century Co. v. Quilling (1907), 130 Wis. 318, 324-25, 110 N.W. 174, 176; Kugler v. Koscot Interplanetary, Inc. (1972), 120 N.J.Super. 216, 232, 293 A.2d 682, 690- 91; State by Lefkowitz v. ITM, Inc. (1966), 52 Misc.2d 39, 275 N.Y.S.2d 303; In re Holiday Magic, Inc. (Oct. 15, 1974), 84 F.T.C. 748.) The deception arises because the market eventually becomes saturated and the seemingly endless chain must end; consequently, many participants cannot even recoup their investments, let alone make a profit. (State ex rel. Sanborn v. Koscot Interplanetary, Inc. (1973), 212 Kan. 668, 675-76, 512 P.2d 416, 423; 52 Misc.2d 39, 275 N.Y.S.2d 303; In re Holiday Magic, Inc. (Oct. 15, 1974), 84 F.T.C. 748.)" The eradication of such fraudulent schemes is clearly a legitimate and important state interest.

[9] The defendants claim that in order to comply with the Act they would have to furnish forms to all TDSC distributors and require all distributors to provide the requested information concerning retail sales. They argue that this would be "extremely difficult, if not physically impossible."

**243 ***944 We note that the majority of TDSC distributors place an order *884 each month for either products or the computer report, or both, and that TDSC, through its Executive Management Information Service, extensively monitors the activities of its distributors. We do not consider the additional administrative burden imposed in monitoring its distributors' retail sales to be excessive or even significant when compared to the protection afforded by the Act to the residents of this state.

The defendants contend that the Illinois statute is unique in imposing such a restriction on multi-level sales companies. The defendants argue that this fact alone constitutes a violation of the commerce clause. This argument is without merit. Other states similarly prohibit only those sales schemes which place their primary emphasis on profits made by recruiting other participants. (Mo.Ann.Stat. sec. 407.400(5) (Vernon 1983); State v. Solem (1974), 301 Minn. 282, 222 N.W.2d 98.) Additionally, many states blanketly prohibit all pyramid schemes wherein participants receive value, other than payment based on the sales of goods and services to nonparticipants, for inducing other persons to become participants in the program. (See, e.g., Nev.Rev.Stat. sec. 598.100 (1983); N.C.Gen.Stat. sec. 14-291.2(b) (1983); Ohio Rev.Code Ann. sec. 1333.91 (Page 1983); Pa.Stat.Ann. tit. LXXIII, sec. 201-2(4)(xiii) (Purdon 1983).) Thus, the Illinois statute is not unique and-- in fact--is less restrictive than the acts in many states.

In conclusion, the pyramid sales scheme statute does not place an undue burden on interstate commerce.

REQUISITE SHOWING FOR INJUNCTIVE RELIEF

[10][11][12] Next, we consider the defendants' argument that the TRO was wrongfully issued. Any issue regarding a TRO is moot when the TRO has expired and the record does not indicate any possibility of damages. (Rotary Club of Chicago v. Harry F. Shea & Co. (1983), 120 Ill.App.3d 988, 76 Ill.Dec. 348, 458 N.E.2d 1002; City of Chicago v. Airline Canteen Services, Inc. (1978), 64 Ill.App.3d 417, 20 Ill.Dec. 897, 380 N.E.2d 1106.) Under the doctrines of sovereign immunity and public officials' immunity, the defendants are barred from recovering monetary damages. (Ill.Rev.Stat.1983, ch. 127, par. 801; People ex rel. Scott v. Briceland (1976), 65 Ill.2d 485, 3 Ill.Dec. 739, 359 N.E.2d 149.) Thus, the question of whether the trial court abused its discretion in granting the TRO is moot.

[13] The defendants also argue that the trial court erred in granting the preliminary injunction because the Attorney General failed to prove the common law requirements for injunctive relief. The Attorney General is specifically authorized to seek an injunction under *885 section 7 of the Act, which provides in pertinent part, as follows: "Whenever the Attorney General has reason to believe that any person is using, has used, or is about to use any method, act or practice declared by Sections 2 through 20 of this Act to be unlawful, and that proceedings would be in the public interest, he or she may bring an action * * * to restrain by preliminary or permanent injunction the use of such method, act or practice." Ill.Rev.Stat.1983, ch. 121 1/2 , par. 267.

In People ex rel. Edgar v. Miller (1982), 110 Ill.App.3d 264, 65 Ill.Dec. 814, 441 N.E.2d 1328, this court held that when an injunction is authorized by statute, the traditional common-law grounds for relief need not be established and that the requirements of the statute are controlling. This position is in accord with numerous other jurisdictions which hold that where an injunction is sought pursuant to a statute which provides a governmental agent with the means to enforce public policy, the common-law requirements for relief need not be proved as long as the statutory requirements are met. See State ex rel. Edmisten v. Challenge, Inc. (N.C.Ct.App.1981), 54 N.C.App. 513, 284 S.E.2d 333 and cases cited therein.

**244 ***945 The defendants rely upon Oscar George Electric Co. v. Metropolitan Fair & Exposition Authority (1982), 104 Ill.App.3d 957, 60 Ill.Dec. 720, 433 N.E.2d 958, as support for their position. There the statutory provision was not a regulatory scheme and merely authorized the injured party, an aggrieved bidder on a governmental contract, to "bring a suit in equity." Thus, Oscar George Electric is distinguishable and is not controlling here.

In conclusion, we find that the Attorney General, seeking an injunction pursuant to the Act, need only show a violation of the statute.

Accordingly, for the foregoing reasons, we affirm.

Affirmed.

GREEN and WEBBER, JJ., concur.