National Consumers League

NCL blasts house vote to embolden pyramid schemes

September 14, 2017

Contact: John Breyault, NCL, (202) 207-2819, johnb@nclnet.org or Cindy Hoang, (202) 207-2832, cindyh@nclnet.org

Washington, DC—The National Consumers League (NCL) is deeply disappointed at the inclusion of language in an appropriations bill approved today by the U.S. House of Representatives that will enable pyramid schemes to proliferate, putting millions of consumers at increased risk of financial harm.

The amendment, sponsored by Congressman John Moolenaar (R-MI), purports to create a federal definition of pyramid schemes and protect consumers. In fact, the language is a thinly-veiled attack on the Federal Trade Commission’s ability to protect consumers from fraudulent direct selling business opportunities. Disregarding vocal opposition from consumer and Latino advocacy groupspyramid scheme expertsFTC Commissioner Terrell McSweenyformer senior FTC officials, and members of the direct selling industry itself, the House has voted to enable pyramidal business practices that the FTC and the courts have consistently found to be illegal.

“This amendment, inserted into must-pass legislation in the dead of night at the behest of some the nation’s largest direct selling companies, will make millions of consumers more vulnerable to pyramid schemes,” said NCL Executive Director Sally Greenberg. “It is incredibly important that the Senate recognizes the true, destructive nature of this amendment, ensures that such language does not make it into its appropriations bill, and works to delete it from any conference report that receives consideration.”

The Moolenaar amendment language, through definitional trickery and numerous carve-outs, weakens the core precedents that the FTC has relied on for decades to shut down fraudulent business opportunities and discipline an industry with a long history of pyramid scheme behavior.

The federal courts have consistently stated that the critical difference between a legitimate direct selling business and a pyramid scheme is that the revenue must come primarily from the sale of products and services to retail customers unaffiliated with the business opportunity. Unfortunately, the Moolenaar amendment will undermine this critical tenet prevent the FTC from prosecuting all but the most blatantly fraudulent pyramid schemes.

“Today’s vote is disappointing, but is not the end of the fight,” said John Breyault, NCL vice President, public policy, telecommunications, and fraud. “We will continue to expose the direct selling industry’s campaign to sneak this destructive bill through Congress and work with consumer champions in the Senate to protect consumers from fraudulent pyramid schemes.”

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About the National Consumers League

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.