Multi-Level Marketing and Pyramid Schemes
Multi-level marketing is a system for selling products whereby participants are paid for selling products to other participants who, in turn, are paid for selling the same products to yet more participants. This type of marketing must comply with the Competition Act.
Pyramid selling is a type of multi-level marketing that is a criminal offence under the Competition Act due to the following deceptive practices:
- paying money to those who recruit new members (who also pay money for the same right);
- requiring new recruits to buy products as a condition of participation;
- selling unreasonable amounts of inventory to participants; and
- having an unreasonable product return policy.
Pyramid selling is also a criminal offence under the Criminal Code of Canada.
Learning More About Multi-level Marketing and Pyramid Selling Schemes
Depending on the legislation that the multi-level marketing scheme has broken, you may wish to contact the Competition Bureau (Competition Act) or the Royal Canadian Mounted Police.
If you are unsure about any aspects of the multi-level marketing scheme you are considering, or what legislation is being broken, contact the Canadian Anti-Fraud Centre (CAFC) for advice.
The CAFC is jointly managed by the RCMP, the Ontario Provincial Police, and the Competition Bureau of Canada.
The Canadian Consumer Handbook provides tips, contacts, and other information for consumers, including information on multi-level marketing and pyramid selling schemes. The Handbook is produced as a partnership by the Consumer Measures Committee, a group of senior federal, provincial, and territorial government consumer affairs officials.