National Consumers League

Consumer groups call on House to oppose pyramid scheme promotion amendment


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July 18, 2017

Contact: Cindy Hoang, National Consumers League, (202) 207-2832, cindyh@nclnet.org

Washington, DC—A broad coalition of consumer and Hispanic advocacy organizations is calling on the United States House of Representatives to oppose efforts to weaken the Federal Trade Commission’s (FTC) ability to protect consumers from fraudulent pyramid schemes. On Thursday, July 13, an amendment offered by Congressman John Moolenaar (R-MI) was added to the House Financial Services and General Government Appropriations bill which would eliminate long-standing requirements that direct selling companies establish a viable retail business instead of relying on a churning base of new recruits.

“The courts have consistently stated that the critical difference between a legitimate MLM business and a pyramid scheme is that a MLM’s revenues must come primarily from the sale of products and services to retail customers unaffiliated with the business opportunity,” wrote the groups. “Unfortunately, the Moolenaar amendment would undermine this critical tenet and create numerous carve-outs and exemptions that would prevent the FTC from prosecuting all but the most blatantly fraudulent pyramid schemes.”

While the Moolenaar amendment purports to establish a federal definition for “pyramid promotional schemes,” the language in fact blurs the line between legitimate business opportunities and illegal pyramid schemes. The groups urged Speaker Paul Ryan (R-WI) and Minority Leader Nancy Pelosi (D-CA) to support removing the Moolenaar amendment from the financial services appropriations bill when it comes to the House floor for a vote. 

“The Moolenaar amendment was slipped into the appropriations bill in the dead of night,” said John Breyault, Vice President, Public Policy, Telecommunications, and Fraud at the National Consumers League, which organized the letter. “This direct selling industry knows that this bill stands little chance of becoming law on its own, so instead they are trying to hide it in must-pass legislation. If the bill is as pro-consumer as they would like us to believe, why are they trying to sneak it through at the last minute? The answer is that they know it is a gift to an industry with a long history of pyramid scheme behavior that would relieve it of any meaningful oversight by the FTC.”

Signatories on the letter included Consumer Action, Consumers Union, Consumer Federation of America, Consumer Watchdog, League of United Latin American Citizens, National Association of Consumer Advocates, National Consumer Law Center (on behalf of its low income clients), National Consumers League, Public Citizen, U.S. PIRG, William W. Keep, PhD, and Peter J. Vander Nat, ​PhD.

To view the full letter, click here.

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The National Consumers League, founded in 1899, is America's pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.