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Press Releases

Government Acts On Multi-Level Recruitment Scheme, 9 Nov 99

09 Nov 1999

1. The Ministry of Finance is taking steps to amend the Multi-Level Marketing and Pyramid Selling (Prohibition) Act Cap 190 ("the Act") to prohibit companies from adopting multi-level recruitment schemes like those of (S) Private Limited ("S888").

2. While the Ministry is strongly supportive of e-commerce activities and initiatives, it is of the view that S888's recruitment scheme has a substantially disproportionate element of multi-level or pyramid selling features that makes it contrary to the public interest.

3. Under the S888 scheme, it is far easier for participants to profit from their investment by recruiting participants than by engaging in bona fide e-commerce activities. Participants recruited by S888 pay a fee of $27,000 (or $33,000 by instalments) to join the scheme. They are required to use their best endeavours to recruit other participants to join the S888 scheme. The new participants will similarly have to pay S888 a joining fee of $27,000 (or $33,000 by instalments). Every participant who recruits another participant receives a fixed commission of $3,000 from S888. This right to receive the commission subsists down to 5 levels for each participant.

4. The Annex to this Press Release shows how the S888 scheme works. It can be seen that any participant would be able to more than recoup his "investment" by recruiting 3 participants who each in turn recruits 2 other participants. Any additional participant recruited represents a profit to that participant.

5. Since 1973, multi-level marketing and pyramid selling schemes have been made unlawful in Singapore under the Multi-Level Marketing and Pyramid Selling (Prohibition) Act. The Consumers Association of Singapore (CASE) has asked the Ministry of Finance if S888 will be charged under that Act. Although the S888 scheme contains multi-level marketing features, the Ministry has been advised by the Attorney General that S888 has not contravened the Act. The reason is that the High Court decided in 1994 that an essential feature of a prohibited multi-level marketing or pyramid selling scheme is that a participant shares his commission with another participant. S888 has structured its scheme such that no participant shares his commission with any other participant. Instead, each participant receives from S888 a fixed commission of $3,000.

6. Accordingly, the Ministry has decided to initiate amending legislation to prohibit multi-level recruitment schemes with features similar to those found in the S888 scheme.