[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3409 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 3409

     To amend the Federal Trade Commission Act to prohibit pyramid 
 promotional schemes and to ensure that compensation is not based upon 
 recruitment of participants into a plan or operation, but on sales to 
individuals who use and consume the products or services sold, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 26, 2017

  Mrs. Blackburn (for herself, Mr. Veasey, Mr. Lance, Mr. Thompson of 
 Mississippi, Mr. Bishop of Utah, Mrs. Beatty, Mr. Bishop of Michigan, 
and Ms. Eddie Bernice Johnson of Texas) introduced the following bill; 
       which was referred to the Committee on Energy and Commerce

_______________________________________________________________________

                                 A BILL


 
     To amend the Federal Trade Commission Act to prohibit pyramid 
 promotional schemes and to ensure that compensation is not based upon 
 recruitment of participants into a plan or operation, but on sales to 
individuals who use and consume the products or services sold, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Anti-Pyramid Promotional Scheme Act 
of 2017''.

SEC. 2. PROHIBITION ON PYRAMID PROMOTIONAL SCHEMES; OTHER REQUIREMENTS.

    The Federal Trade Commission Act (15 U.S.C. 41 et seq.) is amended 
by inserting after section 5 the following:
    ``Sec. 5A. (a) It shall be unlawful for any person to establish, 
operate, promote, or cause to be promoted a pyramid promotional scheme.
    ``(b) Any person who establishes, operates, promotes, or causes to 
be promoted any plan or operation which sells or solicits the sale of 
consumer products or services in the home or otherwise than in a 
permanent retail establishment, and which sells products or services 
directly or indirectly to independent salespeople, shall have a bona 
fide inventory repurchase agreement.
    ``(c) Nothing in this Act may be construed to prohibit a plan or 
operation, or to define a plan or operation as a pyramid promotional 
scheme, based upon the fact that participants in the plan or operation 
give consideration in return for the right to receive compensation 
based upon purchases of goods or services or intangible property by 
participants for personal use, consumption, or resale so long as the 
plan or operation does not require inventory loading and the plan or 
operation implements a bona fide inventory repurchase agreement.
    ``(d) A violation of subsection (a) or (b) shall be treated as an 
unfair or deceptive act or practice in or affecting commerce under 
section 5.''.

SEC. 3. DEFINITIONS.

    Section 4 of the Federal Trade Commission Act (15 U.S.C. 44) is 
amended by adding at the end the following:
    ```Bona fide inventory repurchase agreement' means a program by 
which a plan or operation--
            ``(1) promises to repurchase, on commercially reasonable 
        terms, current and marketable inventory purchased and 
        maintained by a participant for use, consumption, or resale, 
        upon request at the termination of the participant's business 
        relationship with the plan or operation; and
            ``(2) clearly communicates such terms in its recruiting 
        literature, sales manual, or contracts with participants, 
        including the manner in which the repurchase is to be exercised 
        and disclosure of any inventory not eligible for repurchase 
        under the program.
    ```Commercially reasonable' means, with respect to the terms of 
repurchase by a plan or operation of current and marketable inventory 
from a participant, that the inventory is repurchased not later than 12 
months after the date of purchase at not less than 90 percent of the 
original net cost to the participant, less appropriate set-offs and 
legal claims, if any.
    ```Compensation' means the payment of any money, thing of value, or 
financial benefit.
    ```Consideration'--
            ``(1) means the payment of money or another thing of value 
        or the purchase of a product, good, service, or intangible 
        property; and
            ``(2) does not include--
                    ``(A) the purchase of a product or service 
                furnished at cost to be used in making a sale and not 
                for resale; or
                    ``(B) any time and effort spent in pursuit of sales 
                or recruiting activities.
    ```Current and marketable'--
            ``(1) means, with respect to inventory, that the 
        inventory--
                    ``(A) in the case of consumable or durable goods, 
                is unopened, unused, and within its commercially 
                reasonable use or shelf-life period; and
                    ``(B) in the case of services and intangible 
                property, including internet sites, represents the 
                unexpired portion of any contract or agreement; and
            ``(2) does not include inventory that has been clearly 
        described by a plan or operation to a participant prior to 
        purchase as discounted, seasonal, a special promotion item, or 
        not subject to the plan or operation's inventory repurchase 
        program.
    ```Inventory' means both goods and services, including company-
produced promotional material, sales aids, and sales kits that a plan 
or operation requires participants to purchase.
    ```Inventory loading' means a practice in which a plan or operation 
requires or encourages its participants to purchase inventory in an 
amount exceeding that which the participant can reasonably expect to 
use, consume, or resell to ultimate users, and that is not subject to a 
bona fide repurchase agreement.
    ```Participant' means a person who joins a plan or operation.
    ```Pyramid promotional scheme' means any plan or operation in which 
individuals pay consideration for the right to receive compensation 
that is based upon recruiting other individuals into the plan or 
operation rather than primarily related to the sale of products or 
services to ultimate users.
    ```Ultimate user' means, with respect to a product or service sold 
by a plan or operation, an individual who consumes or uses the product 
or service, whether or not the individual is a participant in the plan 
or operation.''.

SEC. 4. LIMITATIONS.

    (a) Other Violations of Federal Law.--Nothing in this Act or the 
amendments made by this Act shall be construed to limit the authority 
of any Federal official from proceeding against pyramid promotional 
schemes (as defined in section 4 of the Federal Trade Commission Act 
(15 U.S.C. 44)) for other violations of Federal law, including the 
Federal Trade Commission Act.
    (b) State Law.--Nothing in this Act or the amendments made by this 
Act prohibits an authorized State official from proceeding in a State 
court of competent jurisdiction on the basis of an alleged violation of 
any civil or criminal statute of such State.
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