Sales Gone Wild: Will the FTC's Business Opportunity Rule Put an End to Pyramid Marketing Schemes?

51 Pages Posted: 29 Jan 2009 Last revised: 6 Jul 2010

See all articles by Sergio Pareja

Sergio Pareja

University of New Mexico - School of Law

Abstract

This article analyzes the anticipated effect of the FTC's Business Opportunity Rule on pyramid marketing schemes. Pyramid marketing schemes consistently rank in the top ten lists of consumer complaints received by the FTC and state consumer protection divisions, victimizing 1.5 million Americans a year. One recent class action settlement demonstrated that the victims, who are often relatively poor and uneducated, had an average loss of approximately $8,000 each. The FTC has promulgated a new Business Opportunity Rule in an effort to end these abuses. Promotors of business opportunities will be required to comply with the new rule beginning on July 1, 2008. This article carefully analyzes the rule and concludes that it will not be effective at stopping these schemes. The article suggests several key changes to the rule and recommends congressional legislation to stop the abuses.

Keywords: Ponzi, business, opportunity, pyramid, mlm, FTC, scheme

Suggested Citation

Pareja, Sergio, Sales Gone Wild: Will the FTC's Business Opportunity Rule Put an End to Pyramid Marketing Schemes?. McGeorge Law Review, Vol. 39, No. 83, 2008. Available at SSRN: https://ssrn.com/abstract=1092188

Sergio Pareja (Contact Author)

University of New Mexico - School of Law ( email )

1117 Stanford, N.E.
Albuquerque, NM 87131
United States

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