Illegal selling methods

Certain methods of selling are illegal.

Referral selling

It is illegal to persuade customers to buy a product by making promises about:

• rebates
• commissions
• other benefits they will get once they introduce other buyers to the product.

It is not referral selling if you promise a benefit:

• for providing names of potential customers
• if the customer helps to supply goods.

Examples of referral selling

You sell a mattress claiming it promotes good health, while convincing customers to become part of a club where they receive commissions if they get other people to join the club or buy mattresses.

You sell expensive metal alloy roofing for homes, while telling customers they can get a rebate by sending interested neighbours to the business.

Pyramid schemes

Pyramid schemes make money by recruiting people rather than by selling a legitimate product or service.

In a typical pyramid scheme, members pay to join. The only way they make money is to get other people to join.

It is illegal to promote or participate in a pyramid scheme.

Pyramid schemes will sometimes disguise themselves by offering a product or service. However, it will be excessively priced or of inferior quality. The main method of making money from the scheme is still recruitment, rather than the sale of goods or services.

Pyramid schemes are different to multi-level marketing where people make money selling a genuine product or service, rather than from the recruitment of other people.