Pyramid Selling

Abstract

The wake of the recession has witnessed a boom in direct selling schemes also known as pyramid selling, multi‐level marketing or network marketing. Boasting annual sales of £200m, they provide ‘gct‐rich‐quick’ opportunities for thousands of potential entrepreneurs. Alternatively, recent court judgments have labelled such schemes ‘a swindle on the public’, and ‘an illegal lottery relying on misleading literature to obtain subscriptions’. This highlights how loopholes in Part XI of the Fair Trading Act 1973, regulating pyramid selling, have been flagrantly abused by unscrupulous promoters to the financial detriment of an unsuspecting public. In a belated attempt to curb further exploitation, the Department of Trade and Industry (DTI) has published a consultation document outlining amendments to the 1973 Act. However, it is debatable whether the new controls offer the public effective long‐term protection, or in fact, merely shut the gate long after the horse has bolted.

Citation

Sarker, R. (1996), "Pyramid Selling", Journal of Financial Crime, Vol. 3 No. 3, pp. 266-268. https://doi.org/10.1108/eb025718