CONSUMER ALERT!

Consumer Protection Division
(208) 334-2424 or
Toll-free at (800) 432-3545

Media Contact: Bob Cooper
(208) 334-4112

Date: January 28, 2003

Be Wary of e–mail Pyramid Schemes

(Boise) - Attorney General Lawrence Wasden today warned Idaho consumers to avoid what appear to be illegal pyramid and chain letter schemes being promoted primarily through e–mail "spam."

"Consumers continue to inquire of my office about e–mail solicitations to participate in various schemes," Attorney General Wasden said. "As described by consumers, it appears that most of the offers are pyramids and/or chain letters. Pyramids and chain letters come with only one guarantee: They will collapse and people will lose money."

A pyramid is a program in which a person makes money primarily by bringing other people into the scheme, rather than from selling goods or services. Idaho law prohibits pyramid schemes and provides that "[A]ny person... who willfully and knowingly promotes, offers, advertises, or grants participation in a chain or pyramid distributor scheme shall be guilty of a felony." The sale of a product does not exempt an otherwise illegal pyramid scheme from liability under Idaho's pyramid statute.

Idaho's pyramid statute also provides that pyramid violations are unfair and deceptive practices in violation of the Idaho Consumer Protection Act. The Attorney General has authority to bring civil lawsuits against violators of the Consumer Protection Act.

Among the factors considered in determining whether a marketing program violates Idaho's pyramid law are:

  • Whether goods or services are being offered for sale, and, if so, whether these goods or services are being sold at an inflated price;
  • Whether consumers are induced to make purchases primarily because of the income which they are led to believe they can earn by facilitating similar purchases by other consumers;
  • Whether a person receives money primarily from the introduction of other people into the scheme rather than from the sale of goods or services; and
  • Whether, overall, the program's true emphasis is on making money by expanding the pool of participants, rather than on purchasing the goods or services for their own sake.

More information is available on the Consumer Protection section of the Attorney General's web site.

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