Issue Date:  -  Friday, 23 April 1999

Fair Trading issues Pyramid Warning

Commissioner for Fair Trading, Patrick Walker, today warned consumers about the danger of investing in pyramid schemes.

The warning followed an increase in the number of inquiries received by the Ministry about pyramid schemes.

Mr Walker said pyramid schemes were often disguised as legitimate business or investment opportunities.

Promoters of these schemes make money or receive some other benefit mainly by recruiting others into their schemes and selling them distributorship rights which entitle them to recruit even more people.

"Pyramid schemes do not work because they are based on the idea that there are an unlimited number of people available to be recruited," Mr Walker said.

"All pyramid schemes eventually collapse and, as a result, people lose money," he said.

Under the Fair Trading Act it is illegal to promote or even participate in a pyramid trading scheme. The maximum penalty is $20,000 for individuals and $100,000 for corporations.

Mr Walker said people who suffered losses because of the actions of someone who was contravening the Fair Trading Act could also take private legal action against that person to recover their money.