|
Saturday, December 18, 2004
DTI warns v. pyramiding scams
REGIONAL Director Carmelita Usman of the Department of Trade and Industry (DTI) has urged the public to exercise prudence and carefully study companies involved in networking before joining their programs.
This developed as the DTI announced that investigations are under way at their head office to verify that validity of the marketing strategies employed by various companies in eliciting members.
Pyramiding is a scheme where a person, after paying a fee to a company or establishment, is made to recruit endorse, refer or otherwise introduce another person to participate in the program or scheme in order to gain commissions or other benefits.
The activity is prohibited by law under Article 52 of the Consumer Act of the Philippines, and in pertinent provisions of the Securities Regulation Code. It is prohibited because it is based on the false representation that all participants will receive dividends, or return on their investment.
DTI said in truth, only the first participants, and the perpetuators themselves will receive benefits; those that are in the lower levels stand to lose their money in varying degrees, because by then it will highly improbable that they will be able to introduce more participants into the scheme.
The scheme has become increasingly complex over the years because of the variations introduced by the persons who perpetuate the scam. However, the public is advised to ask the following questions before entering into a program that involves some form of enlistment or recruitment.
1. Are you required to pay registration fee? How much does it cost? Legitimate networking does not entail exorbitant fees in order for a person to participate. Pyramiding operators require significant registration or entrance fees, which they use to pay the "uplines" their recruitment commissions. Only a small percentage is actually used, if at all, for products.
2. What exactly are you paying for when you pay the registration fee? Are you buying something tangible? If the registration fee includes a package of products, is the price you pay commensurate, or worth the products that you receive? Pyramiding operators will usually demand a fee, for which the participant will receive a product package. The package, however, will only be worth a small percentage (Between 5 to 40 percent) of the amount a participant has paid. No one no one would be willing to pay P8,800 for goods worth P2,000 only - that would be unreasonable, unless the company offers some other way of recouping the other P6,800.
3. Are the products marketed by the company exclusive only to them, or are the products available in retail outlets? Pyramiding companies of late have been claiming that their companies are legitimate because their program has products, and is therefore not illegal. This claim is misleading. The lifeblood of legitimate networking is to distribute to the public products, which would not otherwise be available in other establishments. It would be illogical for manufacturers to employ direct marketing schemes, and then use traditional marketing strategies to sell their products, because the strategies do not compliment each other.
4. If the recruitment activities were not used, would an investor or participant still be able to recoup his expenses? A legitimate networking company gives incentives, benefits or bonuses to participants who are able to sell a certain volume of products, notwithstanding the fact that the participant did not introduce a new entrant to the program. Pyramiding companies give benefits based on the number of recruits or participants they introduce to the company. The rule is that recruitment for benefits is a prima facie indication of pyramiding.
The public is also encouraged to call the nearest DTI office before making a commitment. Legitimate sales promotions or contest always require government approval, and the agency can help you validate the authenticity of the contest.
(December 18, 2004 issue)
Write letter to the editor.Click here.
Join the Sun.Star message board.Click here. |
|
[return to top]
[home]
[network page]
|
LOCAL NEWS
BUSINESS
OPINION
SPORTS
LIFESTYLE
FEATURE
|
