Published: July 2017

Consumer groups call on House to oppose pyramid scheme promotion amendment

A broad coalition of consumer advocacy organizations is calling on the House of Representatives to oppose efforts to weaken the Federal Trade Commission’s ability to protect consumers from fraudulent pyramid schemes. An amendment offered by Congressman John Moolenaar (R-MI) was added to the House Financial Services and General Government Appropriations bill, which would eliminate long-standing requirements that direct selling companies establish a viable retail business instead of relying on a churning base of new recruits.

Instead of empowering the Federal Trade Commission (FTC) to protect consumers, an amendment offered by Congressman John Moolenaar intends to blur the lines between legitimate business opportunities and illegal pyramid schemes. The courts have consistently stated that the critical difference between a legitimate multi-level marketing (MLM) business and a pyramid scheme is that a MLM’s revenues must come primarily from the sale of products and services to retail customers unaffiliated with the business opportunity. By contrast, a pyramid scheme generates its revenue primarily from the recruitment of new members into an endless chain business opportunity. The Moolenaar amendment would undermine this understanding and provide numerous carve-outs and exemptions that would prevent the FTC from prosecuting all but the most blatantly fraudulent pyramid schemes.

Lead Organization

National Consumer League (NCL)

Other Organizations

Consumer Action | Consumers Union | Consumer Federation of America | Consumer Watchdog | League of United Latin American Citizens | National Association of Consumer Advocates | National Consumer Law Center (on behalf of its low income clients) | National Consumers League | Public Citizen | U.S. PIRG

More Information

To read the full coalition letter, please click here.

For more information, visit NCL's website.

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