Trade Practices Amendment Act (No. 1) 2002

Administered by Department of the Treasury

Legislation au C2004A01065 In force Act

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No. 128, 2002

An Act to amend the Trade Practices Act 1974, and for related purposes

Contents

1 Short title...................................

2 Commencement...............................

3 Schedule(s)..................................

Schedule 1—Amendment of the Trade Practices Act 1974

Trade Practices Amendment Act (No. 1) 2002

No. 128, 2002

An Act to amend the Trade Practices Act 1974, and for related purposes

[Assented to 11 December 2002]

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Trade Practices Amendment Act (No. 1) 2002.

2 Commencement

This Act commences on the day on which it receives the Royal Assent.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Amendment of the Trade Practices Act 1974

1 Section 61

Repeal the section.

2 After Division 1 of Part V

Insert:

Division 1AAA—Pyramid selling

65AAA Overview

This Division sets out the meanings of a pyramid selling scheme and other related concepts. A corporation is prohibited from engaging in certain conduct in relation to a pyramid selling scheme (see sections 65AAC and 75AZO).

65AAB Definitions

In this Division:

new participant, in a pyramid selling scheme, includes a person who has applied, or been invited, to participate in the scheme.

participant, in a pyramid selling scheme, means a person who participates in the scheme.

participate, in a pyramid selling scheme, means:

(a) establish or promote the scheme (whether alone or together with another person); or

(b) take part in the scheme in any capacity (whether or not as an employee or agent of a person who establishes or promotes the scheme, or otherwise takes part in the scheme).

participation payment has the meaning given by paragraph (a) of the definition of pyramid selling scheme in subsection 65AAD(1).

payment, to a person or received by a person, means:

(a) the provision of a financial or non‑financial benefit to or for the benefit of the person; or

(b) the provision of a financial or non‑financial benefit partly to or for the benefit of the person, and partly to or for the benefit of someone else.

pyramid selling scheme has the meaning given by section 65AAD.

recruitment payment has the meaning given by paragraph (b) of the definition of pyramid selling scheme in subsection 65AAD(1).

65AAC Pyramid selling schemes—participation

(1) A corporation must not participate in a pyramid selling scheme.

(2) A corporation must not induce, or attempt to induce, a person to participate in a pyramid selling scheme.

65AAD What is a pyramid selling scheme?

(1) In this Act:

pyramid selling scheme means a scheme with both the following characteristics:

(a) to take part in the scheme, some or all new participants must make a payment (a participation payment) to another participant or participants in the scheme;

(b) the participation payments are entirely or substantially induced by the prospect held out to new participants that they will be entitled to a payment (a recruitment payment) in relation to the introduction to the scheme of further new participants.

(2) A scheme may be a pyramid selling scheme:

(a) no matter who holds out to new participants the prospect of entitlement to recruitment payments; and

(b) no matter who is to make recruitment payments to new participants; and

(3) A scheme may be a pyramid selling scheme even if it has any or all of the following characteristics:

(a) the participation payments may (or must) be made after the new participants begin to take part in the scheme;

(b) making a participation payment is not the only requirement for taking part in the scheme;

(c) the holding out of the prospect of entitlement to recruitment payments does not give any new participant a legally enforceable right;

(d) arrangements for the scheme are not recorded in writing (whether entirely or partly);

(e) the scheme involves the marketing of goods or services (or both).

65AAE Marketing schemes—are they pyramid selling schemes?

(1) To decide whether a scheme that involves the marketing of goods or services (or both) is a pyramid selling scheme, a court may have regard to the following matters in working out whether participation payments under the scheme are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments:

(a) the extent to which the participation payments bear a reasonable relationship to the value of the goods or services that participants are entitled to be supplied under the scheme (as assessed, if appropriate, by reference to the price of comparable goods or services available elsewhere);

(b) the emphasis given in the promotion of the scheme to the entitlement of participants to the supply of goods and services by comparison with the emphasis given to their entitlement to recruitment payments.

(2) Subsection (1) does not limit the matters to which the court may have regard in working out whether participation payments are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments.

3 Section 75AZO

Repeal the section, substitute:

75AZO Pyramid selling

(1) A corporation must not participate in a pyramid selling scheme.

Penalty: 10,000 penalty units.

(2) A corporation must not induce, or attempt to induce, a person to participate in a pyramid selling scheme.

Penalty: 10,000 penalty units.

(3) Subsections (1) and (2) are offences of strict liability.

Note 1: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

Note 2: For strict liability, see section 6.1 of the Criminal Code.

(4) In this section:

participate has the meaning given by section 65AAB.

pyramid selling scheme has the meaning given by sections 65AAD and 65AAE.

4 Application

The amendments made by items 1 to 3 apply only to conduct engaged in after the commencement of this Schedule.

5 Paragraphs 85(1)(a) and (b)

Repeal the paragraphs, substitute:

(a) that the contravention in respect of which the proceedings were instituted was caused by a reasonable mistake of fact, including a mistake of fact caused by reasonable reliance on information supplied by another person; or

6 Subsection 85(1A)

Omit “(1)(b)”, substitute “(1)(a)”.

7 Application

The amendments made by items 5 and 6 apply only to a contravention of a provision of Part VC of the Trade Practices Act 1974 that occurs after the commencement of this Schedule.

8 Subsection 155(6A)

After “20 penalty units”, insert “or imprisonment for 12 months”.

9 Application

The amendment made by item 8 applies only to a contravention of subsection 155(5) or (6) of the Trade Practices Act 1974 that occurs after the commencement of this Schedule.

(207/02)

[Minister’s second reading speech made in—

House of Representatives on 26 September 2002

Senate on 5 December 2002]

Overview

The Trade Practices Amendment Act (No. 1) 2002 was enacted by the Parliament of Australia to address the issue of pyramid selling schemes, which were seen as deceptive and misleading practices that could potentially harm consumers and disrupt fair trade. This legislation was introduced to amend the Trade Practices Act 1974 by specifically prohibiting corporations from engaging in pyramid selling schemes, which are defined as schemes where new participants must make payments to existing participants, with the primary incentive being the prospect of future recruitment payments rather than the actual goods or services provided. The policy objective of this amendment is to protect consumers from being exploited by such schemes and to maintain the integrity of the marketplace by ensuring that trade practices are conducted fairly and transparently. The Act not only introduces strict liability offences for corporations found participating in or inducing others to participate in pyramid selling schemes, with penalties of up to 10,000 penalty units, but also includes provisions to adjust the penalties for other contraventions under the Trade Practices Act 1974. The amendments made by this Act apply to conduct engaged in after its commencement, ensuring that the new legal framework is effectively implemented and enforced.

Scope and Application

The Trade Practices Amendment Act (No. 1) 2002 amends the Trade Practices Act 1974 by introducing new provisions to address pyramid selling schemes. This Act applies to corporations that engage in or induce participation in pyramid selling schemes, which are defined as schemes where new participants must make payments to existing participants, and these payments are largely motivated by the promise of future payments from new recruits. This Act applies nationally and is a Commonwealth Act. The penalties for engaging in such schemes are significant, with strict liability offences and penalties of up to 10,000 penalty units for corporations. Additionally, this Act introduces amendments to the defences available in proceedings for contraventions, altering the conditions under which a reasonable mistake of fact can be a defence. The amendments introduced by this Act apply only to conduct occurring after the commencement of the relevant sections of the Schedule, ensuring that businesses have a clear understanding of the new legal obligations and consequences associated with pyramid selling schemes.

Key Provisions

The Trade Practices Amendment Act (No. 1) 2002 primarily amends the Trade Practices Act 1974 by introducing new provisions against pyramid selling schemes. Section 65AAA (section 1) establishes a new Division 1AAA in Part V of the Trade Practices Act 1974, which outlines the meanings of pyramid selling schemes and related concepts, and prohibits corporations from engaging in such schemes. Section 65AAD (section 2) defines what constitutes a pyramid selling scheme and specifies the circumstances under which a scheme may be deemed a pyramid selling scheme. Section 65AAE (section 3) provides guidance to courts in determining whether a marketing scheme involving goods or services is a pyramid selling scheme. Section 75AZO (section 3) imposes strict liability offences on corporations that participate in or induce participation in pyramid selling schemes, with penalties of up to 10,000 penalty units for each offence. The obligations imposed by the Act on corporations include a strict prohibition against participating in any pyramid selling scheme and against inducing or attempting to induce any person to participate in such schemes. These obligations apply to all corporations and are not limited to those that are already aware of the prohibition. Compliance with these provisions requires corporations to actively avoid engaging in any conduct that could be construed as participating in or promoting pyramid selling schemes, and to take reasonable steps to ensure that their employees, agents, and other representatives are also not involved in such activities. The Act imposes significant penalties and consequences for breaches of its provisions. Section 75AZO (section 3) establishes strict liability offences for corporations that participate in or induce participation in pyramid selling schemes, with each offence carrying a maximum penalty of 10,000 penalty units. Additionally, subsection 155(6A) (section 8) allows for imprisonment for up to 12 months for certain contraventions under the Trade Practices Act 1974, indicating the seriousness with which the law regards violations of these provisions. These penalties are designed to deter corporations from engaging in pyramid selling schemes and to ensure compliance with the Act's prohibitions.

Area of Law: Commercial Law
Instrument: Act
Concepts: Definitions & Interpretation; Offence Provisions; Enforcement Powers; Prohibited Conduct

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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