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In 1973, the Multi-Level Marketing and Pyramid Selling (Prohibition) Act was enacted to prohibit objectionable features of pyramid selling. These are schemes whereby participants are required to pay a fixed sum upfront to join, and to recruit new members in order to recoup their upfront payment. Usually the typical pyramid selling scheme does not involve the transfer of physical goods or services as the marketers would mostly emphasize on the recruitment of new members instead of the sale of goods. Such schemes may eventually collapse due to the limited supply of willing recruits. When that happens, many participants will lose their upfront payments.
In June 2000, the Act was amended, with changes made to the definition of pyramid selling schemes. In addition, the Act exempted certain classes of schemes, such as insurance-related schemes, master franchises and schemes that adopt direct selling and network marketing methods, provided they satisfy certain conditions. The exempted schemes and the conditions are set out in the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order. The Exemption Order was amended in 2001 and came into effect on 1 January 2002.
The Ministry of Trade (MTI) administers the Multi-Level Marketing and Pyramid Selling (Prohibition) Act while the Commercial Affairs Department ("CAD") of the Singapore Police Force investigates into offences under the said Act. Both MTI and the Singapore Police Force do not grant endorsement to companies or businesses operating as exempted schemes. The Singapore Police Force also does not advise on the legality of such business schemes.
Members of the public who wish to operate or participate in any marketing schemes are advised to acquaint themselves with the relevant laws and to seek proper legal advice, where necessary. The definition of illegal pyramid selling schemes and the conditions for exempted schemes can be found in the Multi-Level Marketing and Pyramid Selling (Prohibition) Act.
Members of the public and consumers should not succumb to high-pressure sales tactics that call for immediate payment or execution of an agreement. Insist on taking your time to think over your decision. Talk it over with a family member, friend or lawyer. Ask the promoter to substantiate any claims or representations he/she has made in respect of the product and the purported earnings.
For more information, you can visit the FAQs section in MTI website at www.mti.gov.sg.
To lodge a complaint, please click here.
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| Last updated on 18 May 2007 |
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