I
107TH CONGRESS
2D SESSION
H. R. 4881
To prohibit pyramid promotional schemes, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 6, 2002
Mr. BARTON of Texas (for himself and Mr. HALL of Texas) introduced the
following bill; which was referred to the Committee on Energy and Commerce
A BILL
To prohibit pyramid promotional schemes, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Anti-Pyramid Pro-
motional Scheme Act of 2002’’.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Pyramid promotional schemes, chain letters,
and related schemes are enterprises—
(A) that finance returns to participants
through sums taken from newly attracted par-
ticipants;
(B) in which new participants are prom-
ised large returns for their investments; and
(C) involve fraud and deceptive sales tac-
tics, and lead to the victimization of unwitting
individuals of limited means.
(2) Pyramid promotional schemes, chain letters,
and related schemes constitute a threat in interstate
commerce and to the financial well-being of the citi-
zens of the United States.
(3) The advent of the global Internet makes
pyramid promotional schemes international threats.
SEC. 3. DEFINITIONS.
In this Act:
(1) 
COMPENSATION.—The 
term
‘‘compensation’’—
(A) subject to subparagraph (B), means a
payment of any money, thing of value, or finan-
cial benefit conferred in return for inducing an-
other person to become a participant in a pyr-
amid promotional scheme; and
(B) does not include payments that are
based on sales of goods or services by a person
to others, including anyone who is purchasing
the goods or services for actual use or consump-
tion.
(2) 
CONSIDERATION.—The 
term
‘‘consideration’’—
(A) subject to subparagraph (B), means
the payment of cash or the purchase of goods,
services, or intangible property; and
(B) does not include—
(i) the purchase of goods or services
furnished at cost to be used in making
sales and not for resale; or
(ii) time and effort spent in pursuit of
sales or recruiting activities.
(3) PARTICIPANT.—The term ‘‘participant’’
means a person who gives consideration for the op-
portunity to receive compensation in return for in-
ducing others to join a pyramid promotional scheme.
(4) PERSON.—The term ‘‘person’’ means an in-
dividual, a corporation, a partnership, or any asso-
ciation or unincorporated organization.
(5) PROMOTE.—The term ‘‘promote’’ means to
contrive, prepare, establish, plan, operate, advertise,
or to otherwise induce or attempt to induce another
person to be a participant in a pyramid promotional
scheme.
(6) PYRAMID
PROMOTIONAL
SCHEME.—The
term ‘‘pyramid promotional scheme’’—
(A) means any plan or operation by which
a participant gives consideration for the oppor-
tunity to receive compensation that is derived
primarily from the introduction of other persons
into the plan or operation rather than from the
sale and consumption of goods, services, or in-
tangible property by a participant or other per-
sons introduced into the plan or operation; and
(B) includes such a plan or operation
under which—
(i) the number of persons who may
participate is limited either expressly or by
the application of conditions affecting the
eligibility of a person to receive compensa-
tion under the plan or operation; or
(ii) a participant, on giving any con-
sideration, obtains any goods, services, or
intangible property in addition to the right
to receive compensation.
SEC. 4. RULES TO PROHIBIT OPERATING PYRAMID PRO-
MOTIONAL SCHEME.
Not later than one year after the date of the enact-
ment of this Act, the Federal Trade Commission shall pro-
mulgate a rule under section 18(a) of the Federal Trade
Commission Act (15 U.S.C. 57a(a)) providing that it shall
be an unfair or deceptive act or practice under section 5
of such Act (15 U.S.C. 45) for any person, by the use
of any means or instrumentality of transportation or com-
munication in interstate or foreign commerce, to promote,
offer, sell, or attempt to sell a participation or the right
to participate in a pyramid promotional scheme.
SEC. 5. STATE ENFORCEMENT.
(a) ACTIONS UNDER STATE LAW.—Nothing in this
Act or the Federal Trade Commission Act prohibits an
authorized State official from proceeding in State court
on the basis of an alleged violation of any civil or criminal
statute of such State.
(b) ACTIONS UNDER FEDERAL LAW.—The attorney
general of any State or territory of the United States may,
upon finding any person is engaged or is about to engage
in any act or practice that constitutes a pyramid pro-
motional scheme in violation of the rule promulgated
under section 4, bring an action in the appropriate district
court of the United States to enjoin such act or practice
and to obtain other appropriate relief on behalf of resi-
dents of such State. Such court may grant a temporary
restraining order, or a preliminary or permanent injunc-
tion.
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