Pyramid-scheme bill deserves veto

SB182 (Direct Sales Amendments) deserves a veto because:

1. The purpose of the bill was misrepresented by its sponsors and promoter, the Direct Selling Association, which is dominated by the multi-level marketing industry and seeks to weaken laws against pyramid schemes. DSA membership has included Equinox and Trek Alliance, found by the Federal Trade Commission to be pyramid schemes.

The DSA claims SB182 will strengthen law enforcement in protecting consumers against the worst scams. The opposite is true. SB182 removes protection against product-based (MLM) schemes that do the most harm. Four investigations have shown that 99 percent of participants in these programs lose money, after subtracting necessary purchases.

In fact, tax studies show the odds of profiting are much greater at Nevada's gaming tables than in these MLMs — Utah's version of legalized gambling.

Apparently, the real purpose of SB182 is to exempt MLMs like PrePaid Legal, Amway/Quixtar, and Nu Skin from prosecution as illegal pyramid schemes. This exemption would apply even where no real customer base is established and compensation comes primarily from building a downline — which makes an MLM illegal in most other states.

2. In the House committee hearing, questions of legal interpretation were directed to Attorney General Mark Shurtleff, who supports the bill. However, an online search reveals the receipt of $50,000 from his largest corporate campaign contributor (and DSA member), PrePaid Legal, which would directly benefit from SB182. PPL has been sued as a pyramid scheme more than any other recent MLM and is under sweeping investigation for pyramid-scheme abuse by the state of Connecticut.

3. In the hearing, DSA's Misty Fallock misrepresented the position of the FTC, claiming the agency considers compensation paid on purchases by participants in the plan to be "perfectly legal and not within the definition of a pyramid scheme." Wrong. In the case of Equinox, which was shut down by the cooperative efforts of the FTC and eight states, FTC investigators made clear that "sale of products or services to ultimate users does not include sale to other participants or recruits in the multilevel marketing program or to participants' own accounts."