Pyramid Schemes

A pyramid scheme is illegal for the purposes of the Criminal Code when a person participating in the scheme becomes entitled to receive more money than they invested in the scheme by reason of recruiting others. The money is made through recruitment, while the product or service has no real value.

The RCMP recommends that those who want an opinion on a particular company seek one from the Competition Bureau (Canada) and/or a law firm specializing in business practices.

Tips

Proceed with caution before deciding whether to participate in any multi-level marketing plan, and watch carefully for the following warning signs:

• Avoid or seriously reconsider joining any plan that offers commissions to recruit new distributors.
• Beware of "loading" plans that ask you to buy costly inventory.
• Beware of claims that you will make money by recruiting new members rather than by sales you make yourself.
• Beware of promises about high profits or claims about "miracle" products.
  Beware of "shills"- people paid by the operator to make grandiose claims about the success of the plan.
• Refuse to make a financial commitment or sign a contract in a high-pressure situation. Take time to review and re-evaluate the plan.
• Seek legal advice or consult relevant statutes (55.1) if you are unsure what constitutes a pyramid scheme.