SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
Senate Bill No. 2341 
Introduced by SENATOR CYNTHIA A. VILLAR 
AN ACT 
'14 
AUG-4 P4:07 
AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT 7394, OTHERWISE 
KNOWN AS THE CONSUMER ACT OF THE PHILIPPINES, DEFINING FOR THE 
PURPOSE THE CRIME OF PSEUDO-INVESTMENTS, PROVIDING PENALTIES 
THEREFORE AND FOR OTHER PURPOSES 
EXPLANATORY NOTE 
Republic Act No. 7394, otherwise known as the "Consumer Act of the 
Philippines", which entered into law in 1992 aims to protect the interests of the 
consumer, promote his general welfare and to establish standards of conduct for 
business and industry.'1 Despite this, news of scams and schemes to defraud 
consumers are still prevalent. Particularly, several chain distribution plans and pyramid 
schemes still evade the eyes of the law. 
In the Philippines, multinational corporations and local companies have engaged 
in this scheme in the form of multi-level marketing. Pyramiding is deceptive because it is 
based on the premise that investments could be recouped by way of recruiting 
additional participants, with the money flowing upward to the top. Representations used 
to promote pyramid schemes often emphasize the quick and sizable profits but what is 
not disclosed is the fact that when potential recruits diminish and the point of saturation 
reached, many late entrants lose their investments. 
This bill therefore seeks to curb the still growing threat of pyramid schemes as a 
way of defrauding individuals and groups of their hard eamed money by amending RA 
No. 7394 to cover other variations of the pyramiding scheme and to increase the 
penalty for perpetrators of these schemes. 
Hence, the immediate approval of this measure is earnestly requested. 
1 Title I, Article 2 of Republic Act No. 7394, otherwise known as the "Consumer Act of the Philippines". 


SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
'14 
AUG -4 P 4 :07 
SENATE 
Senate Bill No, 
2341 
Introduced by SENATOR CYNTHIA A. VILLAR 
1 
AN ACT 
2 
AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT 7394, OTHERWISE 
3 
KNOWN AS THE CONSUMER ACT OF THE PHILIPPINES, DEFINING FOR THE 
4 
PURPOSE THE CRIME OF PSEUDO·INVESTMENTS, PROVIDING PENALTIES 
5 
THEREFORE AND FOR OTHER PURPOSES 
6 
Be it enacted by the Senate and the House of Representatives in Congress 
7 
assembled: 
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SECTION 1. Article 4 (k) of Republic Act No. 7394, otherwise known as the 
9 
"Consumer Act of the Philippines" is hereby amended to read as follows: 
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"(k) (1) "Chain distribution plans" or "pyramid sales schemes" 
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means REFERS TO sales devices whereby a person, upon condition that 
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he makes an investment BY WAY OF PURCHASING GOODS OR 
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PAYING A FEE, is granted by the manufacturer or his representative a 
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right to SELL PRODUCTS AND SERVICES AS WELL AS recruit for 
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profit one or more additional persons who will also be granted such right to 
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recruit upon condition of making similar investments. : Provided, That the 
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profits of the person employing sush a plan are derived primarily from the 
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rosruitment of other persons into the plan rather than from the sale of 
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sonsumer products, services and oredit: Provided, further, That the 
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limitation on the number of partioipants does not ohange the nature of the 
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f)Iafr. 
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"(2) PONZI SCHEMES" REFERS TO A BUSINESS STRUCTURE 
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SIMILAR TO THE PYRAMID SCHEME OPERATED BY A PERSON OR 
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GROUP, NATURAL OR JURIDICAL WHERE THERE IS NO TRUE 
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PRODUCT OR SERVICE BEING, OFFERED IN EXCHANGE FOR THE 
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INVESTMENT AND WHERE THE MONEY TENDERED BY NEW 
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INVESTORS ARE PAID TO EARLIER INVESTORS; 
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"(3) "TEL,EMARKETING FRAUD" REFERS TO A SCHEME 
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WHERE HIGH PRESSURE TACTICS ARE MADE OVER THE PHONE 
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WITH THE INTENT TO MAKE THE INVESTOR BUY INTO A 
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FRAUDULENT OR NON·EXISTENT INVESTMENT OFFERING; 
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"(4) 
"TECHNOLOGY FRAUD" REFERS 
TO 
A 
SCHEME 
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WHEREIN INVESTORS ARE LULLED INTO MAKING PURCHASES OR 
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INVESTMENTS OF NON·EXISTENT PRODUCTS THROUGH THE 
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INTERNET HOME OR CYBER SHOPPING." 
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SECTION 2. Article 53 of Republic Act No. 7394, otherwise known as the 
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"Consumer Act of the Philippines" is hereby amended to read as follows: 
38 
1 


· . 
"Article 53. PSEUDO-INVESTMENT SCHEMES. -
PSEUDO-
2 
INVESTMENT SCHEMES AS DEFINED IN TITLE I ARTICLE 4(K) OF 
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THIS ACT Chain Distribution Plans or Pyramid Sales Schemes. 
Chain 
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distribution plans or pyramid sales schemes shall not be employed in the 
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sale of consumer products AND SERVICES." 
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SECTION 3. Article 60 of Republic Act No. 7394, otherwise known as the 
7 
"Consumer Act of the Philippines" is hereby amended to read as follows: 
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"Article 60. Penalties.-
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a) Any person who shall violate the provisions of Title 
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III, Chapter I, shall upon conviction, be subject to a fine of 
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not less than ONE HUNDRED THOUSAND PESOS (P 
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100,000.00) Five Hundred Pesos (P500.00) but not more 
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than FIVE HUNDRED THOUSAND PESOS (P500,000.00) 
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Ten Thousand Pesos (P1Q,OOO.OO) or AND imprisonment of 
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not less than TWO (2) YEARS five (5) months but not more 
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than FOUR (4) YEARS one (1) year or both, upon the 
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discretion of the court. 
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b) x x x." 
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SECTION 4. Repealing Clause. - All laws, decrees, executive orders, rules and 
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regulations or parts thereof contrary to, or inconsistent with this act are hereby modified 
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or repealed 
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SECTION 5. Effectivity. - This Act shall take effect fifteen (15) days following the 
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completion of its publication in the Official Gazelle or in two (2) national newspapers of 
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general circulation. 
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Approved, 
2