Public warned on pyramiding scams

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Public warned on pyramiding scams

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The Department of Trade and Industry (DTI) warned anew yesterday the  public on the proliferation of pyramiding scams purporting to be networking companies now infiltrating the province, and some even operating inside shopping malls.

In an advisory, DTI differentiates network marketing or multi-level marketing, a legitimate marketing approach, from pyramiding, an illegal recruitment technique designed to dupe and divest people of their hard-earned money.

The pyramid scheme is essentially a business variation of the familiar “chain letters”, DTI describes. It is called “pyramid” because the promoters are always at the top of the pyramid-shaped flow of money. Money coming from the later investors flows upward to the top. Being at the top may result in receiving a lot of money quickly.

DTI underscores that there are three elements to a pyramid scheme, namely: a) a participant pays money to the promoters; b) that payment entitles participant to recruit others to the scheme; c) the other participants are induced to make payment because they are told they will receive a benefit in respect of the introduction of those others to the scheme.

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As defined under the Consumer Act of the Philippines or Republic Act No. 7394, a pyramiding scheme is basically deceptive because it is premised on the false assumption that all participants could recoup their large investments in the plan simply by recruiting additional participants. Representations used to promote pyramid schemes often emphasize the quick and sizable profits but what is not disclosed is ultimately, as the universe of potential recruits diminishes or exhausted, or the point of rejection is reached, the scheme collapses with many late entrants losing their investments.

“What the law prohibits is the use of the pyramid scheme in the sale of consumer goods where recruitment is the main source of earnings”, DTI emphasizes.

To increase the public’s awareness of their rights and responsibilities under the law, the trade department through its provincial offices is regularly conducting free seminars on Fair Trade Laws ((FTL) including Price Act of the Philippines, Product Standards Law,  Business Name Registration Law, and the Consumer Act of the Philippines.

To inquire on the schedule of the FTL seminars, interested persons may call the nearest DTI Office.  In Central Visayas, those interested may call DTI Cebu at (032) 255-7082, DTI Bohol (038) 412-3302, DTI Negros Oriental (035) 255-4781, DTI Siquijor (035) 344-2238.

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