Pyramid Scheme

For the purpose of Section 206(1)(e) of the Criminal Code a pyramid scheme is illegal when a person participating in the scheme becomes entitled to receive more money than they invested in the scheme by reason of recruiting others. The money is made through recruitment only, while the product or service has no real value. Schemes of pyramid selling are also prohibited under the Canada’s Competition Act in Canada.

Tips

Proceed with caution before deciding whether to participate in any multi-level marketing plan, and watch carefully for the following warning signs:

• Avoid or seriously reconsider joining any plan that offers commissions to recruit new distributors.
• Beware of "loading" plans that ask you to buy costly inventory.
• Beware of claims that you will make money by recruiting new members rather than by sales you make yourself.
• Beware of promises about high profits or claims about "miracle" products.
• Beware of people secretly paid by the operator to make grandiose claims about the success of the plan.
• Refuse to make a financial commitment or sign a contract in a high-pressure situation. Take time to review and re-evaluate the plan.

Seek legal advice or consult Section 55.1 of the Competition Act and Section 206(1)(e) of the Criminal Code if you are unsure what constitutes a pyramid scheme.

To obtain more information concerning the Competition Act , please visit the Competition Bureau’s website .