The Competition Act is a federal law governing most business conduct in Canada. It contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace.
The Competition Act explains the differences between multi-level marketing plans and schemes of pyramid selling, and sets out the responsibilities for operators and participants in these types of plans. Multi-level marketing, when it operates within the limits set by the Competition Act, is a legal business activity, while a scheme of pyramid selling is illegal as defined by the law.
Multi-level marketing is a plan for the distribution of products whereby participants earn money by supplying products to other participants in the same plan. They, in turn, make their money by supplying the same products to other participants.
Although multi-level marketing plans, as defined in the Competition Act, are a legal business activity, there are certain things you should be aware of before joining such a plan.
It is illegal for operators or participants in a multi-level marketing plan to make representations relating to compensation or earnings under the plan unless they include the amount of compensation actually or likely to be received by a typical participant of the plan. Such representations can mislead potential recruits to believe that it will be easy to make large amounts of money.
As well, operators of, and participants in, a multi-level marketing plan should ensure that any representations made about the plan are - or include information that is - fair, reasonable and timely as the plan relates to:
A scheme of pyramid selling is a multi-level marketing plan that incorporates any one of a number of specified marketing practices that make it a criminal offence under the Competition Act.
It is illegal if:
For a copy of the pamphlet Multi-level Marketing and Pyramid Selling visit the Web site.
DISCLAIMER
Information contained in this section is of a general nature only and is not intended to constitute advice for any specific fact situation. For particular questions, the users are invited to contact their lawyer. For additional information, see contact(s) listed below.
Quebec Contact(s):
See National Contact.