THJRTEENTH CONGRESS OF THE REPUBLIC ) 
FIRST REGULAR SESSION 
OF THE PHILIPPINE 
1 
S E N A T E  
S.B. No. 
JP:? 
Introduced by SENATOR LUISA “LOI” P. EJERCITO ESTRADA 
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EXPLANATORY NOTE 
The Constitution, Article 2, provides that: 
Section 5. The maintenance of peace and order, the protection of 
life, liberty, and property, and the promotion of the general welfare are 
essential for the enjoyment by all the people of the blessings of 
democracy. 
Pyramiding is basically deceptive because it is premised on the false assumption 
that all participants could recoup their large investments in the plan simply by recruiting 
additional participants. 
Representations used to promote pyramid schemes oRen 
emphasize the quick and sizable profits but what is not disclosed is ultimately, as the 
universe of potential recruits diminishes or exhausted or the point of rejection is reached 
the scheme collapses with many late entrants losing their investments. 
Pyramid promotional schemes, chain letters, and related schemes constitute a 
threat in Philippine commerce, and to the financial well-being of the Filipino citizens. 
This bill seeks to prohibit the pyramid promotional schemes. 
Hence, immediate approval of this bill is earnestly requested. 
LUISA 6 6 ~ o ~ 9 9  
P. ~JERGITO ESTRADA 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC ) 
OF THEPHILPPINES 
) 
FIRST REGULAR SESSION 
) 
S E N A T E  
S.B. No. !):! 
... 
Introduced by SENATOR LUISA “LOI” P, EJERCITO ESTRADA 
AN ACT 
TO PROHIBIT PYRAMID PROMOTIONAL SCHEMES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Short Title. -- This Act shall be known as the “Anti-Pyramid 
Promotional Scheme Act of 2004” 
SEC. 2. Declaration of Policy. - It is hereby the policy of the State to protect the 
consumer from misleading advertisements and fraudulent pyramid promotional schemes, 
chain letters, and related schemes. 
SEC. 3. Defrrrition Of Terms. - For purposes of this Act, the following terms are 
defined as: 
(1) “Appropriate inventory repurchase program” means a program by which a 
plan or operation repurchases, upon request at the termination of a participant’s business 
relationship with the plan or operation and based upon commercially reasonable terms, 
current and marketable inventory purchased and maintained by the participant for -resale, 
use, or consumption, and such plan or operation clearly describes the program in its 
recruiting literature, sales manual, or contracts with participants, including the manner in 
which the repurchase is exercised, and disclosure of any inventory that is not eligible for 
repurchase under the program. 


(2) “Commercially reasonable terms” means the repurchase of current and 
marketable inventory within 12 months fiom date of purchase at not less than 90 percent 
of the original net cost to the participant, less appropriate set-offs and legal claims, if any. 
In the case of service products, the repurchase of such service products must be on a pro 
rata basis (unless clearly disclosed otherwise to the participant) to be within the meaning 
of “commercially reasonable terms”. 
(3) “Compensation” means a payment of any money, thing of value, or financial 
benefit. 
(4) “Consideration” means the payment of cash or the purchase of goods, 
services, or intangible property, and does not include-- 
(A) the purchase of goods or services fbrnished at cost to be used in 
making sales and not for resale; or 
(B) time and effort spent in pursuit of sales or recruiting activities. 
(5) Current and Marketable- 
(A) The term “current and marketable” includes inventory that-- 
(i) in the case of consumable or durable goods, is unopened, 
unused, and within its commercially reasonable use or shelf-life period; 
and 
(ii) in the case of services and intangible property, including 
Internet sites, represents the unexpired portion of any contract or 
agreement. 


(B) The term “current and marketable” does not include inventory that has 
been clearly described to the participant prior to purchase as seasonal, 
discontinued, or special promotion products not subject to the plan or operation’s 
inventory repurchase program. 
(6) “Inventory” includes both goods and services, including company-produced 
promotional materials, sales aids, and sales kits that the plan or operation requires 
independent salespersons to purchase. 
(7) “Inventory loading” means that the plan or operation requires or encourages 
its independent salespersons to purchase inventory in an amount that unreasonably 
exceeds that which the salesperson can expect to resell for ultimate consumption, or to 
use or consume, in a reasonable time period. 
(8) “Participant” means a person who joins a plan or operation. 
(9) “Person77 means an individual, a corporation, a partnership, or any association 
or unincorporated organization. 
(10) “Promote” means to contrive, prepare, establish, plan, operate, advertise, or 
to otherwise induce or attempt to induce another person to be a participant. 
(11) “Pyramid promotional scheme” means any plan or operation in which a 
participant gives consideration for the right to receive compensation that is derived 
primarily from the recruitment of other persons as participants in the plan or operation, 
rather than from the sales of goods, services, or intangible property to participants or by 
participants to others. 


SEC. 4. Rules to prohibit operating pyramid promotional scheme. 
(a) In General- It shall be unlawful for any person, by the use of any means or 
instrumentality of transportation or communication within the Philippines, to promote, 
offer, sell, or attempt to sell a participation or the right to participate in a pyramid 
promotional scheme. 
Not later than One (1) year afier the enactment of this Act, the Secretary of the 
Department of Trade and Industry, in coordination with the Chairman of the Securities 
and Exchange Commission, and the Secretary of the Department of Justice, shall 
promulgate the necessary rules and regulations to implement this Act. 
(b) Limitation- Nothing in this Act or in the rule to be promulgated pursuant to 
this Act shall be construed to prohibit a plan or operation, or to define such plan or 
operation as a “pyramid promotional scheme”, based upon the fact that participants in the 
plan or operation give consideration in return for the right to receive compensation based 
upon purchases of goods, services, or intangible property by participants for personal use, 
consumption, or resale, and the plan or operation does not promote inventory loading and 
implements an appropriate inventory repurchase program. 
SEC. 5. Penalties. -- Any person who violate the provision of this Act or who 
otherwise engage in pyramid promotional scheme shall be punished by imprisonment of 
not less than six (6) year and a fine of not less than One Million Pesos (P1,000,000.00) 
SEC. 6. Enforcement. -- Nothing in this Act prohibits an authorized government 
official from proceeding in any court on the basis of an alleged violation of any civil or 
criminal statute. 
The Secretary of the Department of Justice, or its representative, upon finding that 
any person is engaged or is about to engage in any act or practice that constitutes a 


pyramid promotional scheme in violation of the provision of this Act, or the rule 
promulgated under this Act, may bring an action in the appropriate court to enjoin such 
act or practice and to obtain other appropriate relief. Such court may grant a temporary 
restraining order, or a preliminary or permanent injunction, or other appropriate relief 
SEC. 7. No limitation on other claims. - Nothing in this Act or the rule 
promulgated shall limit the authority of any government official from proceeding against 
pyramid promotional schemes for other violations of the law. 
SEC. 8. Repealing Clause. - Any law, presidential decreed, issuance, executive 
order, letter of instruction, administrative order, rule and regulation contrary to or 
inconsistent with the provisions of this Act is hereby repealed, modified, or amended 
accordingly. 
SEC. 9. Separability Clause. - If any provision of this Act is held invalid or 
unconstitutional, the other provisions not affected thereby shall remain valid and 
subsisting . 
SEC. 10. Effectivity Clause. - This Act shall take effect fifteen (15) days 
following its complete publication in two (2) newspapers of general circulation or in the 
official Gazette. 
Approved,