The Anti-Pyramid Promotional Scheme Act

Despite hundreds of past cases and mountains of evidence to suggest pyramid schemes are still alive and well, there is remarkably still no clear federal standard that defines a pyramid scheme American consumers are protected and small business entrepreneurs have the clarity that they deserve. This is a gaping loophole in federal law that should be closed immediately so that innocent Americans are protected and those who break the law prosecuted.

Fortunately, bipartisan legislation has been introduced in Congress to do just that. The Anti-Pyramid Promotional Scheme Act of 2017, sponsored by Reps. Marsha Blackburn (R-TN) and Marc Veasey (D-TX), defines a pyramid scheme for the first time in federal law using the same definition that has been adopted by more than 20 states across the country and that is also used as a model around the world, including in the European Union. In short, this bill simply takes what is already working at the state level and codifies it at the federal level.

In addition, contrary to the misleading claims by some special interest organizations, this bipartisan legislation is built on federal case law and mirrors precedent on the key elements of a “pyramid scheme” set out in defining cases, including Koscot (1974), Amway (1979), and BurnLounge (2012).

Importantly, the bill would not impact the the Federal Trade Commission’s existing enforcement authority to combat pyramid schemes and would not pre-empt any similar consumer protection laws in the states.

In addition to protecting consumers, this legislation will also help protect a valued income earning opportunity for millions of American families. There are more than 20 million Americans in the direct selling industry across every state and congressional district in the country.  Collectively, these men and women contribute more than $35 billion to the American economy every year and help form the backbone of many local communities.

For most Americans involved in direct sales, the revenue they earn is usually not their primary income. Rather, they are seeking a way to pay bills, provide a little bit more for their kids or contribute towards their retirement fund. In fact, most direct sellers only work part time in direct sales.

Direct selling is also one the most available routes to entrepreneurship for many minorities. Congress should do everything in its power to protect and promote these smallest of small businesses. Direct selling offers Americans from all races and neighborhoods a low-cost, low-risk opportunity.

Reputable direct selling companies have clear, written contracts with independent distributors about their pay structure, products and services, and what training will be available.

The Anti-Pyramid Promotional Scheme Act would close this loophole on the federal level and will help crack down pyramid schemes, making the marketplace safer for consumers, and helping preserve the integrity of the 20 million income-earning opportunities represented by the direct selling industry.