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CONSUMER RIGHTS AND MULTILEVEL MARKETING (PYRAMID) SCHEMES

Source: www.maine.gov
Topic: Multilevel Marketing

Sort Desciption: prohibiting many forms of multi-level marketing businesses such as pyramid clubs. If a multi-level. marketing scheme is in violation of this statute ...

Content Inside: Last Revised 03/03/04 22 CONSUMER RIGHTS AND MULTILEVEL MARKETING (PYRAMID) SCHEMES 22. 1. Introduction This consumer rights chapter describes the possible civil and criminal penalties for entering into a pyramid scheme. It contains the following sections: 22. 2. Pyramid Schemes Are Illegal 22. 3. The Maine Statute Prohibiting Pyramid Schemes 22. 4 Why Gifting Pyramids Are Illegal 22. 2. Pyramid Schemes Are Illegal The Maine Legislature at 17 M.R.S.A. 2305 has enacted a very strict civil and criminal statute prohibiting many forms of multi-level marketing businesses such as pyramid clubs. If a multi-level marketing scheme is in violation of this statute it is illegal for that company to do business in the State of Maine. Violation of this statute can be a civil Unfair Trade Practice and a Class E crime. Pyramid schemes are inherently deceptive and contrary to public policy. The deception arises because the market can quickly become saturated and the seemingly endless chain can rapidly end. Consequently many participants will never even recoup their investments let alone make a profit. (See In re Holiday Magic Inc. 84 F.T.C. 748) (Oct. 15 1974). For example the chart below shows what happens when the first seller sells six memberships and in turn each of the six buyers sells six more and the cycle is repeated: 22 - 2 MAINE CONSUMER LAW GUIDE Participants 1 6 36 216 1296 7776 46656 279936 1679616 10077696 60466176 362797056 (Exceeds U. S. Population) 2176782336 13060694016 (Exceeds World Population) Even if the pyramid scheme involves the sale of a specific consumer product (e.g. motivational tapes) if this product is sold to persons who are also purchasing the right to membership in the pyramid then Maine law can still be violated. 1 In general be very leery of any multi-level marketing scheme in which you must purchase the product being sold in order to become a seller in the organization. Pyramid schemes in general have been ...

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