New South Wales Consolidated Acts

FAIR TRADING ACT 1987 - SECT 60T

60T Meaning of “pyramid selling scheme”

(1) For the purposes of this Part, a "pyramid selling scheme" is a scheme that has both of the following characteristics:

(a) to take part in the scheme, some or all new participants must make a payment (a "participation payment") to another participant or participants in the scheme,

(b) the participation payments are entirely or substantially induced by the prospect held out to new participants that they will be entitled to a payment (a "recruitment payment") in relation to the introduction to the scheme of further new participants.

(2) A scheme may be a pyramid selling scheme:

(a) no matter who holds out to new participants the prospect of entitlement to recruitment payments, and

(b) no matter who is to make recruitment payments to new participants, and

(c) no matter who is to make introductions to the scheme of further new participants.

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

(a) the participation payments may (or must) be made after the new participants begin to take part in the scheme,

(b) making a participation payment is not the only requirement for taking part in the scheme,

(c) the holding out of the prospect of entitlement to recruitment payments does not give any new participant a legally enforceable right,

(d) arrangements for the scheme are not recorded in writing (whether entirely or partly),

(e) the scheme involves the marketing of goods or services (or both).

(4) In deciding whether a scheme that involves the marketing of goods or services (or both) is a pyramid selling scheme, a court may have regard to the following matters in working out whether participation payments under the scheme are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments:

(a) the extent to which the participation payments bear a reasonable relationship to the value of the goods or services that participants are entitled to be supplied under the scheme (as assessed, if appropriate, by reference to the price of comparable goods or services available elsewhere),

(b) the emphasis given in the promotion of the scheme to the entitlement of participants to the supply of goods and services by comparison with the emphasis given to their entitlement to recruitment payments.

(5) Subsection (4) does not limit the matters to which the court may have regard in deciding whether participation payments are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments.