Australian Competition and Consumer Commission (ACCC) v Jutsen (No 3): Internet Pyramid selling

In the recent Federal Court decision Australian Competition and Consumer Commission v Jutsen (No 3) [2011] FCA 1352 (28 November 2011) Nicholas J found that the respondents as members of “TVI Express System” participated in a pyramid selling scheme in contravention of the Trade Practices Act 1974 (Cth) s 65AAC and that the respondents engaged in misleading and deceptive conduct and made false or misleading representations.

Essentially the respondents ran an internet based pyramid selling scheme(s) where new participants where required to make a one off membership payment to participate in the scheme and where prospective members were induced into the scheme by the prospect of making money by recruiting new members.

At issue in the case where whether services (such as travel and business opportunities) purportedly offered to members were of little or no value and whether or not the respondents participated in the scheme. Further it was argued by the ACCC that the association formed by the respondents which promoted and supported membership of the scheme (by way of its internet sites) was for the purposes of the Trade Practices Act 1974 (Cth) s 65AAD a scheme in itself. In contention was also the question of whether the misleading and deceptive conduct and false representations provisions of the Trade Practices Act 1974 (Cth) applied to natural persons and whether the conduct of respondents involved the use of the internet and thereby a telegraphic service within the meaning of the Trade Practices Act 1974 (Cth) s 6(3)(a).

In responding to these issues Nicholas J said:

“I am satisfied that the vacation representation was made by each of the respondents and that it was misleading or deceptive or likely to mislead or deceive. I am also satisfied that the vacation representation was made by the respondents in trade or commerce and by means of telegraphic services within the meaning of s 6(3)(a) of the Act. I am therefore satisfied that each of the respondents has contravened s 52(1) of the Act.”

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