Anti-Pyramid Promotional Scheme Act of 2016

To prohibit pyramid promotional schemes, and for other purposes. 1. Short title This Act may be cited as the “ Anti-Pyramid Promotional Scheme Act of 2016 2. Prohibition on pyramid promotional schemes (a) In general It shall be unlawful for any person to establish, operate, promote or cause to be promoted a pyramid promotional scheme. (b) Enforcement by the Federal Trade Commission A violation of subsection (a) shall be treated as an unfair or deceptive act or practice in or affecting commerce under section 5 of the Federal Trade Commission Act ( 15 U.S.C. 45 15 U.S.C. 41 et seq. 3. Definitions As used in this Act: (1) Appropriate inventory repurchase agreement The term appropriate inventory purchase agreement (2) Commercially reasonable terms The term commercially reasonable terms (3) Compensation The term compensation (4) Consideration The term consideration (A) means the payment of money or another thing of value or the purchase of a product, good, service, intangible property; and (B) does not include— (i) the purchase of a product furnished at cost to be used in making a sale and not for resale; or (ii) any time and effort spent in pursuit of sales or recruiting activities. (5) Current and marketable The term current and marketable (A) means 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 services and intangible property, including Internet sites, represents the unexpired portion of any contract or agreement; and (B) does not include inventory that has been clearly described to the participant prior to purchase as discounted, seasonal, special promotion item, or not subject to the plan or operation’s inventory repurchase program. (6) Inventory The term inventory (7) Inventory loading The term inventory loading (8) Participant The term participant (9) Pyramid promotional scheme The term pyramid promotional scheme (10) Ultimate user The term ultimate user 4. Limitations Nothing in this Act shall be construed to— (1) limit the authority of any Federal official from proceeding against pyramid promotional schemes for other violations of Federal law, including the Federal Trade Commission Act; (2) allow for a defense to an enforcement action under section 2 of this Act that the alleged pyramid promotional scheme involved both a franchise to sell a product and the authority to sell additional franchises if the emphasis of the alleged pyramid promotional scheme is on the sale of additional franchises; or (3) allow for a defense to an enforcement action under section 2 of this Act that the alleged pyramid promotional scheme included repurchase agreement inventory loading programs if the emphasis of the alleged pyramid promotional scheme is on the sale of additional franchises.

Summary: Anti-Pyramid Promotional Scheme Act of 2016 This bill prohibits the establishment, operation, or promotion of a pyramid promotional scheme, which is defined as a plan or operation by which a person gives consideration (money or other thing of value) to a participant in the scheme for the right to receive compensation derived primarily from the participant's introduction of another person into the plan or operation rather than from the sale of products to ultimate users. The bill grants enforcement authority to the Federal Trade Commission and requires violations to be treated as unfair or deceptive acts or practices under the Federal Trade Commission Act.