[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.
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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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