Direct Sales MLM License in Malaysia: Direct Sales and Anti-Pyramid Scheme – Part 3/3

FEATURES OF PYRAMID SCHEME OR ARRANGEMENT

[Section 27A]

1. The promotion of a scheme or the payment of bonus or other benefits is solely or primarily through recruitment or introduction of participants, into the pyramid scheme, plan, operation or chain process rather than the sale of goods, services or intangible property by the participants.
2. The bonus is paid to the participants or the other benefits are received by the participants solely or primarily through the recruitment or introduction of other persons into the pyramid scheme, plan, operation or chain process rather than the sale of goods, services or intangible property by the participants or other persons.
3. A written contract or statement which describes the material terms of the agreement is not provided to participants who join the pyramid scheme, plan, operation or chain process.
4. A mandatory purchase of goods, services or intangible property or a minimum payment or sale requirement is imposed as a condition to satisfy the eligibility or start-up requirement for participation or payment of bonus or other benefits in the pyramid scheme, plan, operation or chain process.
5. The participants are required to purchase goods, services or intangible property in unreasonable amount which exceeds the expectation to be resold or consumed within a reasonable period of time. The participants may not be given full liberty in buying but they are pressured to purchase selected goods packages to meet sales requirements to qualify them for position or bonus in the pyramid scheme, plan, operation or chain process.
6. The refund policy for goods, services or intangible property purchased by participants or consumers is not provided.
7. The buy-back policy by the operator of the pyramid scheme, plan, operation or chain process for currently marketable goods, services or intangible property upon the request of participants within reasonable terms or agreement is not allowed or provided for.
8. A strict or unreasonable structural requirements of the pyramid scheme, plan, operation or chain process for the eligibility of participants to be paid bonus or other benefits.
9. Withdrawal by participants from the pyramid scheme, plan, operation or chain process is not allowed.
10. The participants are allowed or encouraged to buy up more than one position or right to participate in the pyramid scheme, plan, operation or chain process.

Explanation 1 – A reference to the word “bonus or other benefits” shall relate to return or profit gains from a pyramid scheme, plan, operation or chain process.

Explanation 2 – A reference to the words “material terms” shall include buy-back policy, cooling-off period, warranty and refund policy.

Explanation 3 – The goods or services shall not be considered as currently marketable and shall not be subject to the specified features if the goods or services
are seasonal, discontinued or special promotional items which are disclosed to the participants at the time of sales.