SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
Senate Bill No. 1676 
) 
) 
) 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
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'13 
SEP 16 P3 :21 
Pyramiding is one of the growing schemes in the sale and marketing of 
goods and services. However, the operating scheme of pyramiding proves that it 
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 often 
emphasize quick and sizable profits and yet, investors are not informed of the 
declining or diminishing profit as one enters the bottom of the pyramid. 
Pyramid promotional schemes, chain letters, and related schemes 
constitute a threat in Philippine commerce, and to the financial well-being of the 
Filipino citizens. Hence, there is an immediate need for a legislation that will 
address this problem. 
This proposed measure seeks to prohibit pyramid promotional schemes, 
It provides for rules to prevent operating such scheme and penalties for those 
who will engage in it.' 
. 
. 
Immediate approval of this bill is earnestly sought. 
Senator 


· , 
SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
I 
'13 
SEP 16 P 3 :21 
SENATE 
Senate Bill No. 1676 
INTRODUCED BY SEN. JINGGOY 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 2013". 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the 
State to protect the consumer from misleading advertisements and fraudulent 
pyramid promotional schemes, chain letters, and related schemes. 
SEC. 3. Definition 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 twelve (12) months from date of 
purchase at not less than ninety percent (90%) 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 furnished 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 reasonably 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) "Person" 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 after 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 violates any provision of this Act or 
who otherwise engages in pyramid promotional scheme shall be punished by 
imprisonment of not less than six (6) years 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 decree or issuance, 
executive order, letter of instruction, administrative order, rule or regulation 
contrary to or inconsistent with the provisions of this Act is hereby repealed, 
modified or amended accordingly 


SEC. 9. Separability Clause. - Any law, presidential decree or issuance, 
executive order, letter of instruction, administrative order, rule or regulation 
contrary to or inconsistent with the provisions of this Act is hereby repealed, 
modified, or amended accordingly. 
SEC. 10. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in at least two (2) newspapers of general circulation. 
Approved,