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AUS: Internet Pyramid Scheme Stopped

An Internet service provider FreeNet2000, will stop promoting an aspect of its service that the Australian Competition and Consumer Commission believes breached the pyramid and referral selling provisions of the Trade Practices Act 1974. The service provider has offered court-enforceable undertakings.

"The ACCC was not concerned with FreeNet2000's ISP business," Acting ACCC Chairman, Mr Allan Asher, said today. "But it was concerned about the FreeNet income generation scheme where participants were rewarded financially for introducing new members to the ISP. It believed the scheme contravened the pyramid and referral selling provisions of the Act.

"Referral and pyramid selling schemes involve inducing consumers to acquire goods or services by offering them certain contingent benefits following their purchase. Such schemes were declared illegal because the benefits offered by promoters to potential participants in order to induce them to pay a joining fee may not be realised.

"The reality of pyramid selling is that it tends to heavily reward the very top of the pyramid at the expense of everyone else in the scheme. The great majority who join the scheme 'too late' are led to believe that they will also benefit financially. Instead, their expectations are likely to be disappointed and their money lost.

"Once the ACCC drew its concerns to FreeNet2000's attention, Mr Alan Tame, the proprietor of FreeNet2000, acted quickly to stop advertising the FreeNet income generation scheme and is cooperating with the ACCC in offering court-enforceable undertakings that he will:

cease promotion of the FreeNet income generation scheme and will not recommence such promotion; notify all participants and subscribers in the FreeNet income generation scheme that it is no longer being offered and that they are entitled to refunds should they choose to discontinue subscription to FreeNet2000's Internet service; and refrain from engaging in similar conduct in the future.

"The ACCC is concerned that such schemes are becoming more prevalent on the Internet. Unsolicited e-mails, commonly called SPAM, are the common vehicle for pyramid schemes and other Internet scams. Consumers should beware of unsolicited e-mail promoting get rich quick schemes, chain letters or requests for cash to be sent through the mail".

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