Pyramid Schemes

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Argentina
No legislation.

Australia
Pyramid selling is regulated at Federal, State and Territory levels. The Federal Trade Practices Act 1974 has the most contemporary treatment of the practice. Recently its provisions were judicially considered in a landmark case that also contains a lucid discussion of the distinction between pyramid selling and legitimate network marketing. is possibly the most lucid is defines define a pyramid scheme at Section 61. Basically, the legislation prohibits a person from joining a trading scheme on payment of a fee that is induced from a prospect of receiving benefits in respect of the introduction for a fee of other persons into the trading scheme.

Although there is a commitment to introducing these laws in all Australian jurisdictions, at this state only one State and the Australian Capital Territory have adopted the law. Other jurisdictions deal individually with pyramid selling schemes.

Austria
There is no special law prohibiting the promotion or operation of pyramid schemes but the courts may declare such schemes as immoral and fraudulent (contra bonas mores)

Belgium
Pyramid selling and assimilated schemes are prohibited by Article 83 of the law on commercial practices, consumer protection and information.

Chain Selling — A system establishing a network of sellers, professional or not, where each seller hopes for some benefit resulting from the expansion of this network rather than from the sale of products to the consumer.
Snowball Selling — A system of offering products to the consumer by having him think that he will obtain them free of charge or against an amount lower than their real value, on condition that third parties buy vouchers, coupons or the like, or to get memberships or subscriptions.

Brazil

The Federal Constitution assures the free exercise of any economic activity based on valorization of human work and free initiative.

The Penal Code (Decree number 2.848 of 12/07/40) imposes limits of commercialization by punishing frauds or illicit advantages, including, among them, the pyramidal systems or chain letters.
Pyramidal Schemes, Snow Ball, Chains are also considered crimes against popular economy and are punished with fines and prision.
Judicial analysis has been recognizing the illegality of the pyramidal system.

Canada
The federal and provincial governments have established legislation to regulate pyramid schemes. Generally, a pyramid scheme is a scheme for the distribution of goods or services in which a person pays a fee to acquire the right to distribute the goods or services and, at the same time, acquires the right or obligation to recruit further participants to the scheme for the recruitment of whom, and on the basis of whose sales performance the person receives commission, fees or other benefits.

Pyramid selling is prohibited in all jurisdictions of Canada. The federal act which prohibits pyramid sales is the Competition Act, R.S.C. 1985, as amended.

Chile

Pyramid schemes are those in which the potential earnings of a participant mainly come from the recruitment of other participants to certain plan or operation, instead of from the sale of products or services. Usually, in such schemes, the participants have to pay a very high starting fee in order to become a distributor or seller of the relevant company, the products do not have considerable value and/or are of low quality, and the relevant company does to repurchase stocks from its distributors or sellers.

Although there is not a specific legislation prohibiting the abovementioned pyramid schemes, in certain cases, such practice might be construed as a fraud under Chilean Criminal Code.

Columbia
No legislation.

Czech Republic
No specific law or regulation except that airplane games are prohibited.

Pyramid schemes prohibited as under EU law (UCPD).

Denmark
There is no specific anti-pyramid law. The chain letter system is considered to be a violation of the Fair Marketing Act.

European Union
Establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products is banned and are considered unfair in all circumstances by Item 14, Annex I of Directive 2005/29/EC.

How is a pyramid scheme defined? In order to answer, one has to look at the ECJ decision of ‘4finance’ (Case C 515/12):

In order to be recognized as pyramid the scheme has to meet two conditions:

1. The consumer is charged for participation (in any amount, no matter how small) in exchange for the possibility to receive remuneration for attracting new participants; and

2. The remuneration received by the consumer is derived mainly from subsequent contributions to the scheme from new joiners.

Finland
The Market Court has established that under the Unfair Competition Act, pyramid schemes based upon unlimited expansion, where profits are made on each new recruit, are contrary to good business practices.

France
The Law of 5 November 1953 prohibits ‘snowball sales’ but does not define the term, which may be said to describe a transaction in which people are invited to recruit other participants in the hope that they will obtain the product free of charge or at a lower price.

By virtue of Article 4 of the Law of 23 June 1989, the ban on ‘snowball sales’ was extended to chain and, by extension, pyramid sales or offers of financial gain resulting from a collection of subscribers or enrolments to a chain, and of which the total amount depends upon the geometrical progression of the number of persons recruited or enrolled. The consequence of such a chain or pyramid is that on the one hand the market reaches saturation point and on the other incapacity to satisfy demand.

Since 1993, both the preceding laws are included into the Consumption Code with the Article L.122 6.

The legislator completed in 1995 the Article L.122 6 with the law of 1 February 1995 which states that:
“in selling networks constituted by the recruitment of members or affiliates, it is forbidden to obtain from a member or an affiliate in the network, the payment of money linked to an entry fee or to the acquisition of material or services of a pedagogic nature, relating to training, demonstration or selling, or any other material or service, when this payment induces money or the attribution or an advantage profiting to one or more members or affiliates in the network”
It is also forbidden in those networks, to propose to acquire an inventory of merchandise destined for re sale, without buy back guarantee at the moment of purchasing, with the eventual deduction of a sum not exceeding 10% of the corresponding price. This buy back guarantee may however by limited to a period of one year following the purchase.
In 2008, after the integration in French law of the Unfair commercial practices directive, the term “geometrical” in the expression “geometrical progression was deleted of the article L. 122-6.”

Germany
The second Act on Fighting Economic Criminality came into force on 1 August 1986. The law includes a regulation for combating the so-called ‘progressive canvassing of clients’ (pyramid selling) in the Law Prohibiting Unfair Competition.

Under this law, it is an offence to ‘promote one’s own sales by using a progressive sales system which makes claims of receiving advantages which become progressively more uncertain, more hazardous and a matter of chance’. The element of progression appears in the ‘special advantages being granted, as determined by the system, whereby ‘others are to be induced to conclude similar transactions’, who, in turn, ‘are to be granted advantages for a corresponding canvassing of further purchasers’.

Irrespective of this criminal provision, pyramid schemes in this sense are regarded as misleading advertisements and thus prohibited.

Guatemala
No legislation

Hong Kong
The only legislation specifically affecting direct-selling is the Pyramid Schemes Prohibition Ordinance (Ch. 617) of 2012.

In this, a pyramid selling scheme is defined as a scheme whereby:

(1) A pyramid scheme is a scheme with all of the following characteristics—

(a) to participate in the scheme, any or all new participants must provide either of the following (participation payment)—
- (i) a financial or non-financial benefit to, or for the benefit of, any participant or any promoter of the scheme;
- (ii) a financial or non-financial benefit partly to, or for the benefit of, any participant or any promoter of the scheme and partly to, or for the benefit of, another person;
(b) the making of the participation payment is entirely or substantially induced by the prospect held out to the new participant that the new participant will be entitled to either of the following (recruitment payment)—
- (i) a financial or non-financial benefit to, or for the benefit of, the new participant;
- (ii) a financial or non-financial benefit partly to, or for the benefit of, the new participant and partly to, or for the benefit of, another person;
(c) the recruitment payment referred to in paragraph (b) is entirely or substantially derived from the introduction to the scheme of a further new participant.

(2) A scheme may be a pyramid scheme regardless of—

(a) who holds out to a new participant the prospect of entitlement to a recruitment payment;
(b) who is to make a recruitment payment to a new participant; and
(c) who is to introduce a further new participant to the scheme.

(3) A scheme may be a pyramid scheme even if it has any or all of the following characteristics—

(a) the scheme involves the marketing of goods or services (or both);
(b) a participation payment may or must be made after a new participant begins to participate in the scheme;
(c) making a participation payment is not the only requirement in order to be eligible to participate in the scheme;
(d) making a participation payment is not the only requirement in order to be eligible to receive a recruitment payment under the scheme;
(e) the holding out of the prospect of entitlement to a recruitment payment does not give any new participant a legally enforceable right;
(f) the arrangement for the scheme is not recorded in writing (whether entirely or partly).

Any person who knowingly promoting a pyramid selling scheme commits offences defined in the Ordinance on indictment to a fine of HK$1,000,000 and to imprisonment for 7 years.

Hungary
The Act on the Prohibition of Unfair Commercial Practices entails a black list of the actual unfair commercial practices: pyramid schemes are indicated on the said list and are defined as promotional schemes where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.

India
There is no legislation in India dealing with such schemes. However, if under any such scheme the benefit to be received by the consumer were to depend on a chance then such schemes are controlled by the State Legislation by making it compulsory to get a licence for the same from the concerned State Government Authority.

Indonesia
No legislation.

Ireland
The earlier Pyramid Selling Act 1980 was repealed by the Consumer Protection Act 2007. Sections 64-66 of the Consumer Protection Act 2007 make it an indictable criminal offence to establish, operate or promote (or to induce another person to participate in) a pyramid promotional scheme. A pyramid promotional scheme is defined as “a scheme by which a person gives consideration in money or money’s worth, or gives a gift in money or money’s worth, for an opportunity to receive compensation derived primarily from the introduction of other persons into the scheme rather than from the supply or consumption of a product.”

This definition is derived from item 14 in the blacklist in the Unfair Commercial Practices Directive of the EU. In one respect, however, it is wider than the ban stated in the Directive. Whereas the Directive bans the introduction of a “consumer” to a pyramid promotional scheme, the Irish legislation bans the introduction of a “person” to a pyramid selling scheme, irrespective of whether that person is a consumer.

Italy
The promotion and the organization of pyramid schemes and fraudulent operations, such as money games, developing plans, snow balls, chain selling, etc., are precisely forbidden by law 173/05. The law provides also the description of those alleged elements and circumstances the recurrence of which indicates the existence of the forbidden scheme or operation. Failure to comply with the law results in criminal offence and substantial penalties.

Japan
Pyramid schemes which are based upon ‘head-hunting’, ie, paying primarily for the introduction of participants into the scheme rather than the sale of products to consumers, are prohibited under Act on Prevention of Pyramid Sales. It is clear that successive additions of ‘children’ or ‘grandchildren’ cannot be maintained without limitless growth. The organisation will come to a halt eventually and the great majority of members will suffer financial loss.

To start a pyramid scheme or induce other persons to join one is prohibited for violation of the law.

Lithuania
It is forbidden by EU law.

Currently there is no valid local legal act that would forbid pyramid schemes. However there is a draft of law on unfair commercial practice towards consumers that forbids such schemes- article 5 specifically indicates that “Establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products“. It is planned to come into force starting with 1 July 2007.

Malaysia
Pyramid schemes are banned under Section 7 of the Direct Sales Act 1993 (DSA 1993).

Section 7 states:

‘no licence shall be granted to a person who intends to carry on a direct sales business which involves any scheme or arrangement for the sale or distribution of goods or services where such person, for a consideration, acquires the opportunity to receive a pecuniary benefit which is not dependent on the volume or quantity of goods or services sold or distributed or to be sold or distributed for purposes of resale but which is based, to any extent, upon the inducement, by himself or others, of additional persons to participate in such a scheme or arrangement.’

Mexico
There is no specific commercial regulation; nevertheless, under the provisions of Mexican criminal legislation the pyramid system continues to be regarded as fraudulent. Penalties include imprisonment and fines, which vary according to the amount defrauded.

Netherlands
The legislation that forbids pyramid money games is incorporated in the legislation on lotteries. The government has explicitly explained the differences between legitimate multilevel marketing and pyramid money games (i.e., the selling of real products to real consumer at realistic prices, versus paying to obtain the right to hopefully reclaim the investment by recruiting others into the system).

New Zealand
Pyramid schemes are illegal in New Zealand under the Fair Trading Act 1986 with fines running at $200,000 (NZ) per offence and also provide for imprisonment for serious offenders. Prosecutions can be brought by the Commerce Commission, the Police or as a civil case by any individual. All such cases will go through the High Court.

Interim injunctions can and are sought by the Commerce Commission to freeze assets while the case goes through the court system. These can freeze not only company but personal bank accounts and personal assets identified as forming part of the Pyramid operation.

The Commerce Commission works with the DSA in shutting down such schemes.

Norway
Pyramid selling is prohibited under section 16 of The Lottery Law.

Peru
No legislation, only agressive selling in CODE OF CONSUMER PROTECTION AND DEFENSE (CPDC), Art.59.

Philippines

DEPARTMENT ADMINISTRATIVE ORDER NO. ____

Series of 2002

SUBJECT: Rules and Regulations Implementing Article 53 of the Consumer Act of the Philippines (R.A. 7394) in Relation to Section 8 Rule II, Chapter I, Title III of Department Administrative Order No. 2, Series of 1993 Prohibiting Chain Distribution Plans or Pyramid Sales Schemes in the Sale of Consumer Products.

WHEREAS, Republic Act No. 7394 otherwise known as Consumer Act of the Philippines states that it is the policy of the State to protect the interests of the consumer, promote his general welfare and to establish standards of conduct for business and industry;

WHEREAS, the Act provides that the State shall implement measures to achieve the objective of protecting consumers against deceptive, unfair sales and unconscionable sales acts and practices;

WHEREAS, the Act further provides that chain distribution plans or pyramid sales schemes shall not be employed in the sale of consumer products;

WHEREAS,the DTI has received numerous complaints and queries regarding sale of products using pyramid sales scheme and such sales scheme have been used in the guise of legitimate multi level marketing, thus depriving consumers of their savings and hard-earned money;

WHEREAS, it becomes imperative to define the instances constituting chain distribution or pyramid sales scheme practices to prevent the public from being victimized;

WHEREAS, the Act provides the procedures under which a consumer, a natural person, may file his complaint;

WHEREAS, Executive Order No. 913 as amended by Ministry Order No. 69 strengthens the rule-making and adjudicatory powers of the Minister (Secretary) of DTI by providing the procedures under which juridical person and DTI initiated complaint may be availed of;

NOW, THEREFORE, the following rules and regulations are hereby prescribed for the information, guidance and compliance of all concerned:

Section 1. Scope

This Order shall apply to any person, natural or juridical, who shall establish, operate,
advertise or promote a chain distribution plan or pyramid sales scheme as defined under the Consumer Act and reiterated in Section 2.1 of the Order.

Section 2. Definition of Terms

1. “Chain Distribution Plans or Pyramid Sales Scheme” means sales devices whereby a person, upon condition that he makes an investment, is granted by the manufacturer or his representative a right to recruit for profit one or more additional persons who will also be granted such right to recruit upon condition of

making similar investments: Provided, That, the profits of the person employing such a plan are derived primarily from the recruitment of other persons into the plan rather than from the sale of consumer products, services and credit: Provided further, That limitation on the number of participants does not change the nature of the plan.

1. 1. Other Forms of Chain Distribution Plan/Pyramid Sales Scheme. – Without limiting the coverage of the term “chain distribution plan or pyramid sales scheme” above, business, sales or marketing plan or scheme is considered as Chain Distribution Plan or Pyramid Sales Scheme if:
  2. A promoter persuades recruits to purchase products, services, credit, title or rank whereby the recruits can receive income primarily from the mere introduction, recruitment or sponsorship of other participants into the scheme rather than from the marketing and sale of products; or
  3. Where the profits of the person employing such are derived primarily from the recruitment of the other persons into the plan or scheme rather than from the sale of consumer products, services and credit and said plan/scheme includes, but not limited to, one or more of the following attributes:

b.1. revenues or income are derived from participants’ entry fees;

b.2. in order to earn income, participants must sponsor a fixed number of other participants, each of whom must in turn sponsor a fixed number of participants as in a plan compensating participants balancing number of recruits than number of sales volumes;

b.3. a participant’s income is dependent primarily upon the participant’s slot or position within the organization as determined by the time, date and order of participation;

b.4. participants are not allowed to return marketable and unused products for refund within a reasonable period of time or the conditions for such product return are contrary to the provisions of the Consumer Act and/or its Implementing Rules and Regulation (DAO No. 2, s. of 1993).

b.5. there is no fair market value for the goods received (Fair market value is a price determined an open market system. An indicator would be that

consumers would still be willing to buy a product at its quoted price even without participating in the compensation plan).

Section 3. Administrative Proceedings

There are two Administrative procedures whereby complainants may seek to avail for themselves, to wit;

R.A. 7394 otherwise known as the Consumer Act provides the procedures whereby a consumer, a natural person, may seek redress.

E.O. 913 as amended by M.O. 69 provides the procedures whereby juridical persons and DTI initiated complaint may be adjudicated accordingly.

3.1 Administrative Proceedings under R.A. 7394

3.1.1 Who May File a complaint

“Consumer” is defined by the Consumer Act as a natural person who is a purchaser, lessee, recipient or prospective buyer, lessee or recipient of consumer products, services or credit.

3.1.2 When to file complaint

The complaint shall be filed within two (2) years from the time the consumer transaction was consummated or the deceptive or unfair and unconscionable act or practice was committed and in case of hidden defects, from disarray thereof. (sec. 169, Consumer Act)

3.1.3 Venue of Actions

Pursuant to Department Order No. 4, s. of 1997 the complainant may file the complaint in duplicate with the Provincial Offices, or in an area where there is no Provincial Office, with the Regional Offices, in any of these places, at his option:

1. 1. place where the offense was committed wholly or partially;
  2. place where an essential ingredient of the offense was committed;
  3. place specified by the parties by means of a written agreement;
  4. place where transaction was consummated;
  5. place of the execution of the contract sued upon as appears therefrom;
  6. place of residence of the complainant;
  7. place of the residence of the respondent.

The option of the complainant shall be limited to the venues as enumerated. The choice however shall not be such as to restrict the speedy resolution of the case.

By written agreement of the parties, the venue of an action may be changed or transferred from one province to another

1. 1. Procedure.

1. 1. Commencement of Action

a.1. An action under the Consumer Act is commenced only by the
filing of a complaint by a “consumer” (as this term is defined in Section 3.1.1 hereof) in any of the places listed in Section 3.1.3 hereof. In those instances where there is a violation of the Consumer Act but there is no consumer complainant, the action may be commenced motu proprio by the proper DTI office, but the procedure that shall govern is M.O. No. 69, S. 1983.

1. 1. Mediation Stage:

b.1. The Arbitration Officer (AO) schedules a date (anytime within 15 working days from the time a complaint is filed) for a mediation conference where concerned parties are ordered to attend. The purpose of this is to provide opportunity to settle the case amicably.

b.2. If the parties agree on an amicable settlement of the complaint, they shall sign an agreement indicating the terms and conditions thereof. The agreement shall not be contrary to law, morals, good customs, public order and policy. The Arbitration Officer shall render a decision based on the compromise agreement.

1. 1. Pre-Hearing Stage (No Compromise/Amicable Settlement has been reached by the parties):

c.1 Summons and schedule of Hearing are sent to the respondent who is required to file his Answer to the complaint. Complainant is also notified of such summons and schedule.

c.2 If respondent fails to file an Answer within 10 days from receipt of summons, he is declared in default. Such declaration will enable Arbitration Officer to receive the evidence of the complainant .
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1. 1. Hearing Stage

d.1 The Arbitration Officer shall have the discretion to conduct a Preliminary Conference on the first day of hearing in which the AO will clarify the issues, allow stipulation of facts, and/or provide a last opportunity for amicable settlement of the case.

d.2 If the complainant fails to appear, the case shall be dismissed for failure to prosecute.

If respondent fails to appear, he shall be declared in default.

d.3. Hearing Proper – presentation of witness and documentary evidences

1. 1. Rendition of Decision

Within fifteen (15) days after the end of hearing or upon submission of required document/memoranda.

F.) Decision on Appeal – The Secretary shall decide the appeal within thirty (30) days from receipt thereof. The decision becomes final after fifteen (15) days from receipt thereof unless a petition for certiorari is filed with the Court of Appeals under Section 4, Rule 65 of the Rules of Court.

3.1.5 Administrative Penalties. – After formal hearing, the Consumer Arbitration Officer may impose one or more of the following administrative sanctions/penalties, even if not prayed for in the complaint, when warranted:

1. 1. the issuance of a cease and desist order;

1. 1. the acceptance of a voluntary assurance of compliance or discontinuance from the respondent which may include terms and conditions set forth in Article 164 of RA 7394;
2. 1. the restitution or rescission of the contract without damages;

1. 1. condemnation and seizure of the consumer product found to be hazardous to health and safety unless the respondent files a bond to answer for any damage or injury arising from the continued use of the product; and
  2. the imposition of administrative fine in an amount which shall in no case be less than Five hundred pesos (P500.00) nor more than Three hundred thousand pesos (P300,000.00) depending on the gravity of the offense and an additional fine of not more than One thousand pesos (P1,000.00) for each day of continuing violation.

A schedule of fines contained in Annex “A” which is made an integral part of this Order shall be the basis in the imposition of administrative fine for the violation of the Consumer Act involving provisions on chain distribution plans and pyramid sales scheme.

The filing of an administrative case does not bar the complainant from filing a criminal case under Section 60 of the Consumer Act or under other applicable laws.

The procedure provided in this Section 3 shall be supplemented by DTI-DOH-DA Joint Administrative Order No. 1, Series of 1993 and other existing rules.

Section 4. Administrative Proceedings under E.O. 913 and M.O. 69

a) Who May File a Complaint

1. 1. DTI on its own initiative (motu propio)
  2. juridical person

b) When to file a Complaint.

The Complaint shall be filed within three (3) years from the day of the commission of the offense or if such date is unknown at the time, from the discovery thereof. After the said period of three years, the filing thereof shall be barred.

Procedure – The following procedures shall be undertaken in the enforcement of this Order.

DTI Provincial Directors shall undertake to do and perform the following acts, for and on behalf of the Secretary of DTI:

c.1. To file and institute a formal charge against any person, company or entity who is found, upon verified complaint/reports supported with documents and other papers committing any act or activity in violation of trade and industry laws.

c.2. To designate any employee, under his/her supervision or control to act as the investigation/mediation/prosecution officer where the services of said officers are necessary.

c.3. If during mediation, respondent admits the violation, the Provincial Director shall issue the decision and impose such administrative penalties as may be provided under E.O. 913. If respondent does not admit the violation, the Provincial Director shall file statement of violation with the Regional Office concerned.

c.4. The Regional Director shall conduct a formal investigation and render a decision in accordance with E.O. 913.

c.5. Formal Hearing – The Provincial Director who instituted the formal charge/statement of violation shall prosecute the case himself or through his duly authorized representative.

c.6. Decision – Within fifteen (15) days from the termination of the administrative proceedings, a written decision shall be served on the complainant and the respondent either by mail or personal service

c.7. Execution – Unless a motion for reconsideration is filed within fifteen (15) days from receipt of the decision by the party adversely affected or an appeal is made to the undersigned within said period, the decision shall become final and executory after fifteen (15) days from receipt of such decision.

d) Administrative Penalties. After formal hearing, the proper DTI Office may impose one or more of the following administrative penalties, even if not prayed for in the complaint, when warranted: (M.O. 69 , E.O. 913)

d.1. the issuance of a cease and desist order;

d.2. the acceptance of a voluntary assurance of compliance or discontinuance under such terms and conditions may be imposed.

d.3. the condemnation or seizure of products which are the subject of the offense;

d.4. the forfeiture of the products subject of the offense, the paraphernalia and all properties, real or personal, which have been used in the commission of the offense;

d.5. the imposition of administrative fines in such amount as deemed reasonable by the proper DTI office which shall in no case be less than five hundred pesos nor more than one hundred fifty thousand pesos plus not more than one thousand pesos for each day of continuing violation. The fine imposed under this Section shall be regardless of the limits of the criminal fine fixed in the “trade and industry law” violated;

d.6. the cancellation of any permit, license, authority, or registration which may have been granted by the Department, or the suspension of the validity thereof for such period of time as the proper DTI office may deem reasonable which shall not, however, exceed one year;

d.7. the withholding of any permit, license, authority or registration which was obtained by the respondent from the Department;

d.8. the assessment of damages;

d.9. censure; and

d.10. other analogous penalties or sanctions, such as closure for a period not exceeding one (1) year

e. The procedure provided in this Section shall be supplemented by M.O. No. 69, S. 1983 as amended.

Section 5 A schedule of fines contained in Annex “A” which is made an integral part of this Order shall be the basis in the imposition of administrative fine for the violation of the Consumer Act involving provisions on chain distribution plans or pyramid sales schemes. The circumstances such as mitigating, aggravating, alternative, set forth in DAO No. 7, s. 1999, shall be taken into account to arrive at an appropriate fine.

Section 6 The filing of an administrative case does not bar the complainant from filing a criminal case under Section 60 of the Consumer Act or under applicable law.

Section 7. Separability Clause. – If for any reason these rules and regulations or any of this provision or provisions or the application of such provision or provisions or portions thereof is declared invalid, all other provisions unaffected thereby shall continue to remain in full force and effect.

Section 8. Effectivity. This Order shall take effect 15 days after publication in two newspapers of general circulation.

Done in Makati City, this ____day of ________ 2002.

MAR ROXAS

Secretary

Recommending Approval by:

JESUS L. MOTOOMULL ADRIAN S. CRISTOBAL, JR.
Caretaker, BTRCP Undersecretary, DTI-CWTRG

Poland
No legislation.

Portugal
Cross selling is forbidden, unless there exists a complementary relation between the products according to article 27th of Decree-Law 24/2014. Pyramid selling is forbidden under the provision of article 27th Decree Law 143/2001. Also Snowball selling, or chain network, considering as such any method that consists in proposing to the consumer, any products or services for free or at a reduced price, depending on the number of new clients, or sales value obtained by the consumer directly or through third persons in the benefit of the seller, or promoting agent. Forced sales is also forbidden and the silence of the prospective consumer as never no meaning as a deal accepted.

Russia
No legislation.

Singapore
The applicable law is the Multi-level Marketing and Pyramid Selling (Prohibition) Act 1973 which prohibits multi-level marketing or pyramid selling schemes or arrangements in relation to the distribution and sale of all goods, services, rights or other property. The incorporation or registration of companies which propose to promote multi-level marketing schemes or pyramid selling schemes is also prohibited.

Pursuant to the Multi-Level Marketing & Pyramid Selling (Prohibition) (Amendment) Act, multi-level marketing (MLM) and pyramid selling is, as a general rule, prohibited in Singapore.

However, the Multi-Level Marketing & Pyramid Selling (Excluded Schemes and Arrangements) (Amendment) Order 2001, which came into effect from Jan 1, 2002, provides that MLM schemes or arrangements that satisfy certain conditions are permitted in Singapore.

Please refer to MTI (Ministry of Trade & Industry) website: http://www.mti.gov.sg for full text of the Multi-Level Marketing & Pyramid Selling (Excluded Schemes & Arrangements / order).

Slovak Republic
Pyramid schemes prohibited as under EU law (UCPD).

Slovenia
No legislation

South Africa
The Consumer Protection Act legislates against the operations of such schemes. Multilevel schemes are accepted as being legal but certain regulations apply when an operation, such as offering a reward (e.g. payment, supply of cheaper products or any other disguised benefit) for doing something totally unrelated to the sale of the basic product or service with which the scheme is involved.

South Korea
A violation of the Act is defined as unlawfulness and it is regulated by the act. Generally, a pyramid scheme is a system establishing a network of sellers, professional or not, where each seller hopes for some benefit resulting from the expansion of this network rather than from the sale of products to the consumer.

Spain

Pyramid selling is forbidden under article 23 of the Law on Retail Trade and article 28 of Law 3/1991 on Unfair Competition.

The regional trade laws of Aragon and Catalonia also forbid pyramid selling.

Sweden
Will be regulated through the implementation of the EU Directive on Unfair Commercial Practices to follow the definition of the directive. It has been proposed by among others the Swedish DSA, to include C2C in the definition. The directive has not yet been implemented.

Taiwan
Article 5 of MLMSA states

The term “participants” as used in this Act means persons who may earn commissions, bonuses and other economic benefits by taking part in the plans of a multi-level marketing enterprise and promoting or selling goods or services, and who may earn commissions, bonuses and other economic benefits by introducing other persons to participate, to promote, sell goods or services or introduce more persons.

The persons who enter into contracts with multi-sale enterprises that after meeting specific conditions such persons may get the qualification to promote, sell goods or services, or to introduce other persons to participate shall be deemed as participants from the time such contracts are entered into.

Article 4 of the CPL states

With regard to goods or services provided by them, business operators shall pay attention to the health and safety of consumers, and shall explain to the consumers the methods of use for goods and services, ensure the fairness of transactions, provide consumers with adequate and accurate information, and implement other measures necessary to protect consumers.

Thailand
Pyramid Schemes are prohibited under

Section 19 The direct sales operator and the direct marketing operator shall not operate their businesses in a manner of inducing any person to join a direct sales or direct marketing network and promising to grant benefits which will be calculated from the number of persons joining the network.

Section 21 The direct sales operator shall operate its business in accordance with its remuneration payment plan submitted to the Registrar under Section 38.

The remuneration payment plan shall be in the following manner:

(1) It shall not confer benefit upon the independent distributor or self-employed direct sales representative which is received as its main income by means of recruiting any person or recommending any independent distributor or self-employed direct sales representative to join the direct sales network.

(2) The main income of the independent distributor or self-employed direct sales representative depends on the sales of goods or services to the consumer, including the purchase for personal consumption.

(3) It shall not require the independent distributor to purchase goods.

(4) It shall not encourage the independent distributor to purchase goods in unreasonably large amounts.

(5) It shall clearly demonstrate the actual or possible calculation of the payment of remuneration.

(6) Any other manners as specified by the Commission.

Any terms related to the remuneration payment plan other than those indicated in second paragraph shall be enforceable only to the extent that they are fair to the independent distributor or the self-employed direct sales representative.

Section 46 Any person violating Section 19 shall be subject to imprisonment for a period not more than five years and a fine not exceeding five hundred thousand Baht.

Section 48 Any person who violates the first paragraph of Section 21 shall be subject to a fine not exceeding three hundred thousand Baht.

Section 46 Any person violating Section 19 shall be subject to imprisonment for a period not more than five years and a fine not exceeding five hundred thousand Baht.

Section 48 Any person who violates the first paragraph of Section 21 shall be subject to a fine not exceeding three hundred thousand Baht.

Turkey
No anti-pyramid law exists in Turkey.

Ukraine
No legislation.

United Kingdom

i.e.

United States
All States prohibit the promotion or operation of ‘pyramid schemes’ through various forms of legislation. In general, a pyramid scheme is a plan or operation for the distribution of products, services or money, whereby a person gives consideration (payment) for the opportunity to receive compensation based primarily on the introduction of other participants into the plan, rather than on the sale of products to consumers. Some of these statutes are specifically drafted to combat pyramid schemes – other entities use a variety of means (e.g., lottery laws, endless chain scheme statutes), which do not specifically mention pyramid schemes but which are used to combat these frauds. These statutes can be civil or criminal in nature; some states use both civil and criminal statutes.

The USDSA has worked to pass model anti-pyramid legislation in 17 states, (Arizona, Georgia, Idaho, Illinois, Kentucky, Louisiana, Maryland, Nebraska, North Dakota, New Mexico, Oklahoma, South Dakota, Tennessee, Texas, Utah, Virginia and Washington) which clearly defines a pyramid scheme.

Additionally, recent court rulings have given more clarity to defining the “ultimate user” when determining if personal use of products (e.g. internal consumption) by distributors are to be considered legitimate sales. In 2014, FTC v. BurnLounge, BurnLounge was found to be a pyramid scheme. However, the Ninth Circuit Court of Appeals held that “in fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme. The critical question for the FTC is whether the revenues (that support the commissions) are generated from the purchases of goods and services that are not simply incidental to the purchase of the right to participate in the money-making venture.”

Uruguay

No legislation.