I 
115TH CONGRESS 
1ST SESSION H. R. 3409 
To amend the Federal Trade Commission Act to prohibit pyramid promotional 
schemes and to ensure that compensation is not based upon recruitment 
of participants into a plan or operation, but on sales to individuals 
who use and consume the products or services sold, and for other pur-
poses. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 26, 2017 
Mrs. BLACKBURN (for herself, Mr. VEASEY, Mr. LANCE, Mr. THOMPSON of 
Mississippi, Mr. BISHOP of Utah, Mrs. BEATTY, Mr. BISHOP of Michi-
gan, and Ms. EDDIE BERNICE JOHNSON of Texas) introduced the fol-
lowing bill; which was referred to the Committee on Energy and Com-
merce 
A BILL 
To amend the Federal Trade Commission Act to prohibit 
pyramid promotional schemes and to ensure that com-
pensation is not based upon recruitment of participants 
into a plan or operation, but on sales to individuals 
who use and consume the products or services sold, and 
for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Anti-Pyramid Pro-
motional Scheme Act of 2017’’. 
SEC. 
2. 
PROHIBITION 
ON 
PYRAMID 
PROMOTIONAL 
SCHEMES; OTHER REQUIREMENTS. 
The Federal Trade Commission Act (15 U.S.C. 41 
et seq.) is amended by inserting after section 5 the fol-
lowing: 
‘‘SEC. 5A. (a) It shall be unlawful for any person to 
establish, operate, promote, or cause to be promoted a pyr-
amid promotional scheme. 
‘‘(b) Any person who establishes, operates, promotes, 
or causes to be promoted any plan or operation which sells 
or solicits the sale of consumer products or services in the 
home or otherwise than in a permanent retail establish-
ment, and which sells products or services directly or indi-
rectly to independent salespeople, shall have a bona fide 
inventory repurchase agreement. 
‘‘(c) Nothing in this Act may be construed to prohibit 
a plan or operation, or to define a 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 or services or intangible property by 
participants for personal use, consumption, or resale so 
long as the plan or operation does not require inventory 
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loading and the plan or operation implements a bona fide 
inventory repurchase agreement. 
‘‘(d) A violation of subsection (a) or (b) shall be treat-
ed as an unfair or deceptive act or practice in or affecting 
commerce under section 5.’’. 
SEC. 3. DEFINITIONS. 
Section 4 of the Federal Trade Commission Act (15 
U.S.C. 44) is amended by adding at the end the following: 
‘‘ ‘Bona fide inventory repurchase agreement’ means 
a program by which a plan or operation— 
‘‘(1) promises to repurchase, on commercially 
reasonable terms, current and marketable inventory 
purchased and maintained by a participant for use, 
consumption, or resale, upon request at the termi-
nation of the participant’s business relationship with 
the plan or operation; and 
‘‘(2) clearly communicates such terms in its re-
cruiting literature, sales manual, or contracts with 
participants, including the manner in which the re-
purchase is to be exercised and disclosure of any in-
ventory not eligible for repurchase under the pro-
gram. 
‘‘ ‘Commercially reasonable’ means, with respect to 
the terms of repurchase by a plan or operation of current 
and marketable inventory from a participant, that the in-
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ventory is repurchased not later than 12 months after the 
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. 
‘‘ ‘Compensation’ means the payment of any money, 
thing of value, or financial benefit. 
‘‘ ‘Consideration’— 
‘‘(1) means the payment of money or another 
thing of value or the purchase of a product, good, 
service, or intangible property; and 
‘‘(2) does not include— 
‘‘(A) the purchase of a product or service 
furnished at cost to be used in making a sale 
and not for resale; or 
‘‘(B) any time and effort spent in pursuit 
of sales or recruiting activities. 
‘‘ ‘Current and marketable’— 
‘‘(1) means, with respect to inventory, that the 
inventory— 
‘‘(A) in the case of consumable or durable 
goods, is unopened, unused, and within its com-
mercially reasonable use or shelf-life period; and 
‘‘(B) in the case of services and intangible 
property, including internet sites, represents the 
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unexpired portion of any contract or agreement; 
and 
‘‘(2) does not include inventory that has been 
clearly described by a plan or operation to a partici-
pant prior to purchase as discounted, seasonal, a 
special promotion item, or not subject to the plan or 
operation’s inventory repurchase program. 
‘‘ ‘Inventory’ means both goods and services, includ-
ing company-produced promotional material, sales aids, 
and sales kits that a plan or operation requires partici-
pants to purchase. 
‘‘ ‘Inventory loading’ means a practice in which a plan 
or operation requires or encourages its participants to pur-
chase inventory in an amount exceeding that which the 
participant can reasonably expect to use, consume, or re-
sell to ultimate users, and that is not subject to a bona 
fide repurchase agreement. 
‘‘ ‘Participant’ means a person who joins a plan or 
operation. 
‘‘ ‘Pyramid promotional scheme’ means any plan or 
operation in which individuals pay consideration for the 
right to receive compensation that is based upon recruiting 
other individuals into the plan or operation rather than 
primarily related to the sale of products or services to ulti-
mate users. 
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‘‘ ‘Ultimate user’ means, with respect to a product or 
service sold by a plan or operation, an individual who con-
sumes or uses the product or service, whether or not the 
individual is a participant in the plan or operation.’’. 
SEC. 4. LIMITATIONS. 
(a) OTHER VIOLATIONS OF FEDERAL LAW.—Noth-
ing in this Act or the amendments made by this Act shall 
be construed to limit the authority of any Federal official 
from proceeding against pyramid promotional schemes (as 
defined in section 4 of the Federal Trade Commission Act 
(15 U.S.C. 44)) for other violations of Federal law, includ-
ing the Federal Trade Commission Act. 
(b) STATE LAW.—Nothing in this Act or the amend-
ments made by this Act prohibits an authorized State offi-
cial from proceeding in a State court of competent juris-
diction on the basis of an alleged violation of any civil or 
criminal statute of such State. 
Æ 
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