Anti-Pyramid Promotional Scheme Act of 2016

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Anti-Pyramid Promotional Scheme Act 
of 2016''.

SEC. 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). The Federal Trade Commission shall 
enforce such subsection in the same manner, by the same means, and with 
the same jurisdiction, powers, and duties as though all applicable 
terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 
et seq.) were incorporated into and made a part of this Act.

SEC. 3. DEFINITIONS.

    As used in this Act:
            (1) Appropriate inventory repurchase agreement.--The term 
        ``appropriate inventory purchase agreement'' 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 in its recruiting literature, sales manual, and 
        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.--The term ``commercially 
        reasonable terms'' means the repurchase of current and 
        marketable inventory within 12 months from 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.
            (3) Compensation.--The term ``compensation'' means the 
        payment of any money, thing of value, financial benefits, or 
        position within the plan or operation;
            (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'', with respect to inventory--
                    (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'' means both goods and 
        services, including company produced promotional material, 
        sales aids, and sales kits that the plan or operation requires 
        participants to purchase.
            (7) Inventory loading.--The term ``inventory loading'' 
        means that the plan or operation requires or encourages its 
        participants to purchase inventory in an amount that 
        unreasonably exceeds that which the participant can expect to 
        resell to ultimate users, or to use or consume, in a reasonable 
        period of time.
            (8) Participant.--The term ``participant'' means a person 
        who joins the plan or operation.
            (9) Pyramid promotional scheme.--The term ``pyramid 
        promotional scheme'' means a plan or operation by which a 
        person gives consideration to a participant for the right to 
        receive compensation that is derived primarily from a 
        participant's introduction of another person into the plan or 
        operation rather than from the sale of products to ultimate 
        users.
            (10) Ultimate user.--The term ``ultimate user'' means a 
        non-participant in the plan or operation, or a participant who 
        purchases reasonable amounts of products, goods, services, or 
        intangible property for personal use and whose purchase is not 
        made solely for purposes of qualifying for increased 
        compensation.

SEC. 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.