I 

114TH CONGRESS 

2D SESSION H. R. 5230 

To prohibit pyramid promotional schemes, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 13, 2016 

Mrs. BLACKBURN (for herself and Mr. VEASEY) introduced the following bill; 

which was referred to the Committee on Energy and Commerce 

A BILL 

To prohibit pyramid promotional schemes, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Anti-Pyramid Pro5 motional Scheme Act of 2016’’. 

6 SEC. 2. PROHIBITION ON PYRAMID PROMOTIONAL 

7 SCHEMES. 

8 (a) IN GENERAL.—It shall be unlawful for any per9 son to establish, operate, promote or cause to be promoted 

10 a pyramid promotional scheme. 


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1 (b) ENFORCEMENT BY THE FEDERAL TRADE COM2 MISSION.—A violation of subsection (a) shall be treated 

3 as an unfair or deceptive act or practice in or affecting 

4 commerce under section 5 of the Federal Trade Commis5 sion Act (15 U.S.C. 45). The Federal Trade Commission 

6 shall enforce such subsection in the same manner, by the 

7 same means, and with the same jurisdiction, powers, and 

8 duties as though all applicable terms and provisions of the 

9 Federal Trade Commission Act (15 U.S.C. 41 et seq.) 

10 were incorporated into and made a part of this Act. 

11 SEC. 3. DEFINITIONS. 

12 As used in this Act: 

13 (1) APPROPRIATE INVENTORY REPURCHASE

14 AGREEMENT.—The term ‘‘appropriate inventory 

15 purchase agreement’’ means a program by which a 

16 plan or operation repurchases, upon request at the 

17 termination of a participant’s business relationship 

18 with the plan or operation and based upon commer19 cially reasonable terms, current and marketable in20 ventory purchased and maintained by the participant 

21 for resale, use, or consumption, and such plan or op22 eration in its recruiting literature, sales manual, and 

23 contracts with participants, including the manner in 

24 which the repurchase is exercised, and disclosure of 


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1 any inventory that is not eligible for repurchase 

2 under the program. 

3 (2) COMMERCIALLY REASONABLE TERMS.—The 

4 term ‘‘commercially reasonable terms’’ means the re5 purchase of current and marketable inventory within 

6 12 months from the date of purchase at not less 

7 than 90 percent of the original net cost to the par8 ticipant, less appropriate set-offs and legal claims, if 

9 any. 

10 (3) COMPENSATION.—The term ‘‘compensa11 tion’’ means the payment of any money, thing of 

12 value, financial benefits, or position within the plan 

13 or operation; 

14 (4) CONSIDERATION.—The term ‘‘consider15 ation’’— 

16 (A) means the payment of money or an17 other thing of value or the purchase of a prod18 uct, good, service, intangible property; and 

19 (B) does not include— 

20 (i) the purchase of a product fur21 nished at cost to be used in making a sale 

22 and not for resale; or 

23 (ii) any time and effort spent in pur24 suit of sales or recruiting activities. 


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1 (5) CURRENT AND MARKETABLE.—The term 

2 ‘‘current and marketable’’, with respect to inven3 tory— 

4 (A) means inventory that— 

5 (i) in the case of consumable or dura6 ble goods, is unopened, unused, and within 

7 its commercially reasonable use or shelf-life 

8 period; and 

9 (ii) in the case services and intangible 

10 property, including Internet sites, rep11 resents the unexpired portion of any con12 tract or agreement; and 

13 (B) does not include inventory that has 

14 been clearly described to the participant prior 

15 to purchase as discounted, seasonal, special pro16 motion item, or not subject to the plan or oper17 ation’s inventory repurchase program. 

18 (6) INVENTORY.—The term ‘‘inventory’’ means 

19 both goods and services, including company pro20 duced promotional material, sales aids, and sales 

21 kits that the plan or operation requires participants 

22 to purchase. 

23 (7) INVENTORY LOADING.—The term ‘‘inven24 tory loading’’ means that the plan or operation re25 quires or encourages its participants to purchase inVerDate Sep 11 2014 02:42 May 17, 2016 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5230.IH H5230

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1 ventory in an amount that unreasonably exceeds 

2 that which the participant can expect to resell to ul3 timate users, or to use or consume, in a reasonable 

4 period of time. 

5 (8) PARTICIPANT.—The term ‘‘participant’’ 

6 means a person who joins the plan or operation. 

7 (9) PYRAMID PROMOTIONAL SCHEME.—The 

8 term ‘‘pyramid promotional scheme’’ means a plan 

9 or operation by which a person gives consideration 

10 to a participant for the right to receive compensation 

11 that is derived primarily from a participant’s intro12 duction of another person into the plan or operation 

13 rather than from the sale of products to ultimate 

14 users. 

15 (10) ULTIMATE USER.—The term ‘‘ultimate 

16 user’’ means a non-participant in the plan or oper17 ation, or a participant who purchases reasonable 

18 amounts of products, goods, services, or intangible 

19 property for personal use and whose purchase is not 

20 made solely for purposes of qualifying for increased 

21 compensation. 

22 SEC. 4. LIMITATIONS. 

23 Nothing in this Act shall be construed to— 

24 (1) limit the authority of any Federal official 

25 from proceeding against pyramid promotional 


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1 schemes for other violations of Federal law, includ2 ing the Federal Trade Commission Act; 

3 (2) allow for a defense to an enforcement action 

4 under section 2 of this Act that the alleged pyramid 

5 promotional scheme involved both a franchise to sell 

6 a product and the authority to sell additional fran7 chises if the emphasis of the alleged pyramid pro8 motional scheme is on the sale of additional fran9 chises; or 

10 (3) allow for a defense to an enforcement action 

11 under section 2 of this Act that the alleged pyramid 

12 promotional scheme included repurchase agreement 

13 inventory loading programs if the emphasis of the 

14 alleged pyramid promotional scheme is on the sale of 

15 additional franchises. 

Æ 


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