To prohibit pyramid promotional schemes, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Anti-Pyramid Promotional Scheme Act 
of 2002''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Pyramid promotional schemes, chain letters, and related 
        schemes are enterprises--
                    (A) that finance returns to participants through 
                sums taken from newly attracted participants;
                    (B) in which new participants are promised large 
                returns for their investments; and
                    (C) involve fraud and deceptive sales tactics, and 
                lead to the victimization of unwitting individuals of 
                limited means.
            (2) Pyramid promotional schemes, chain letters, and related 
        schemes constitute a threat in interstate commerce and to the 
        financial well-being of the citizens of the United States.
            (3) The advent of the global Internet makes pyramid 
        promotional schemes international threats.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Compensation.--The term ``compensation''--
                    (A) subject to subparagraph (B), means a payment of 
                any money, thing of value, or financial benefit 
                conferred in return for inducing another person to 
                become a participant in a pyramid promotional scheme; 
                and
                    (B) does not include payments that are based on 
                sales of goods or services by a person to others, 
                including anyone who is purchasing the goods or 
                services for actual use or consumption.
            (2) Consideration.--The term ``consideration''--
                    (A) subject to subparagraph (B), means the payment 
                of cash or the purchase of goods, services, or 
                intangible property; and
                    (B) does not include--
                            (i) the purchase of goods or services 
                        furnished at cost to be used in making sales 
                        and not for resale; or
                            (ii) time and effort spent in pursuit of 
                        sales or recruiting activities.
            (3) Participant.--The term ``participant'' means a person 
        who gives consideration for the opportunity to receive 
        compensation in return for inducing others to join a pyramid 
        promotional scheme.
            (4) Person.--The term ``person'' means an individual, a 
        corporation, a partnership, or any association or 
        unincorporated organization.
            (5) Promote.--The term ``promote'' means to contrive, 
        prepare, establish, plan, operate, advertise, or to otherwise 
        induce or attempt to induce another person to be a participant 
        in a pyramid promotional scheme.
            (6) Pyramid promotional scheme.--The term ``pyramid 
        promotional scheme''--
                    (A) means any plan or operation by which a 
                participant gives consideration for the opportunity to 
                receive compensation that is derived primarily from the 
                introduction of other persons into the plan or 
                operation rather than from the sale and consumption of 
                goods, services, or intangible property by a 
                participant or other persons introduced into the plan 
                or operation; and
                    (B) includes such a plan or operation under which--
                            (i) the number of persons who may 
                        participate is limited either expressly or by 
                        the application of conditions affecting the 
                        eligibility of a person to receive compensation 
                        under the plan or operation; or
                            (ii) a participant, on giving any 
                        consideration, obtains any goods, services, or 
                        intangible property in addition to the right to 
                        receive compensation.

SEC. 4. RULES TO PROHIBIT OPERATING PYRAMID PROMOTIONAL SCHEME.

    Not later than one year after the date of the enactment of this 
Act, the Federal Trade Commission shall promulgate a rule under section 
18(a) of the Federal Trade Commission Act (15 U.S.C. 57a(a)) providing 
that it shall be an unfair or deceptive act or practice under section 5 
of such Act (15 U.S.C. 45) for any person, by the use of any means or 
instrumentality of transportation or communication in interstate or 
foreign commerce, to promote, offer, sell, or attempt to sell a 
participation or the right to participate in a pyramid promotional 
scheme.

SEC. 5. STATE ENFORCEMENT.

    (a) Actions Under State Law.--Nothing in this Act or the Federal 
Trade Commission Act prohibits an authorized State official from 
proceeding in State court on the basis of an alleged violation of any 
civil or criminal statute of such State.
    (b) Actions Under Federal Law.--The attorney general of any State 
or territory of the United States may, upon finding any person is 
engaged or is about to engage in any act or practice that constitutes a 
pyramid promotional scheme in violation of the rule promulgated under 
section 4, bring an action in the appropriate district court of the 
United States to enjoin such act or practice and to obtain other 
appropriate relief on behalf of residents of such State. Such court may 
grant a temporary restraining order, or a preliminary or permanent 
injunction.

Summary: Anti-Pyramid Promotional Scheme Act of 2002 - Directs the Federal Trade Commission to promulgate a rule declaring that it is an unfair or deceptive act or practice for any person to use any means or instrumentality of transportation or communication in interstate or foreign commerce in order to promote, offer, sell, or attempt to sell a participation or the right to participate in a pyramid promotional scheme. Provides for civil and criminal enforcement under both State and Federal law.