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Pyramid Schemes According to Australian Law

Pyramid Schemes According to Australian Law

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Published by Aditya Trivedi
Definition of Pyramid schemes

Trade Practices Amendment (Australian
Consumer Law) Act (No. 2) 2010
No. 103, 2010




Definition of Pyramid schemes

Trade Practices Amendment (Australian
Consumer Law) Act (No. 2) 2010
No. 103, 2010




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Published by: Aditya Trivedi on Sep 28, 2010
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05/06/2013

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The Australian Consumer Law
Schedule 1
Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 No. 103, 201067 
Division 3—Pyramid schemes
44 Participation in pyramid schemes
(1) A person must not participate in a pyramid scheme.
Note: A pecuniary penalty may be imposed for a contravention of thissubsection.
(2) A person must not induce, or attempt to induce, another person toparticipate in a pyramid scheme.
Note: A pecuniary penalty may be imposed for a contravention of thissubsection.
(3) To
 participate
in a pyramid scheme is:(a) to establish or promote the scheme (whether alone or togetherwith another person); or(b) to take part in the scheme in any capacity (whether or not asan employee or agent of a person who establishes orpromotes the scheme, or who otherwise takes part in thescheme).
45 Meaning of 
 pyramid scheme
(1) A
 pyramid scheme
is a scheme with both of the followingcharacteristics:(a) to take part in the scheme, some or all new participants mustprovide, to another participant or participants in the scheme,either of the following (a
 participation payment
):(i) a financial or non-financial benefit to, or for the benefitof, the other participant or participants;(ii) a financial or non-financial benefit partly to, or for thebenefit of, the other participant or participants and partlyto, or for the benefit of, other persons;(b) the participation payments are entirely or substantiallyinduced by the prospect held out to new participants that theywill be entitled, in relation to the introduction to the schemeof further new participants, to be provided with either of thefollowing (a
recruitment payment
):
 
Schedule 1
The Australian Consumer Law
68 Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 No. 103,2010
(i) a financial or non-financial benefit to, or for the benefitof, new participants;(ii) a financial or non-financial benefit partly to, or for thebenefit of, new participants and partly to, or for thebenefit of, other persons.(2) A
 new participant
includes a person who has applied, or beeninvited, to participate in the scheme.(3) A scheme may be a pyramid 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 newparticipants; and(c) no matter who is to make introductions to the scheme of further new participants.(4) A scheme may be a pyramid scheme even if it has any or all of thefollowing characteristics:(a) the participation payments may (or must) be made after thenew participants begin to take part in the scheme;(b) making a participation payment is not the only requirementfor taking part in the scheme;(c) the holding out of the prospect of entitlement to recruitmentpayments does not give any new participant a legallyenforceable 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 (orboth).
46 Marketing schemes as pyramid schemes
(1) To decide, for the purpose of this Schedule, whether a scheme thatinvolves the marketing of goods or services (or both) is a pyramidscheme, a court must have regard to the following matters inworking out whether participation payments under the scheme areentirely or substantially induced by the prospect held out to newparticipants of entitlement to recruitment payments:(a) whether the participation payments bear a reasonablerelationship to the value of the goods or services that

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