S. 3Senate115th Congress (2017-2019)In Committee

Anti-Pyramid Promotional Scheme Act of 2018

Introduced December 3, 2018

AI-Generated Summary

Updated April 16, 2026 at 12:23 AM UTC

The Anti‑Pyramid Promotional Scheme Act of 2018 amends the Federal Trade Commission Act to make pyramid promotional schemes illegal. It requires that compensation come mainly from sales to end users, not from recruiting new participants, and it adds consumer‑protective rules such as banning inventory loading. The law applies to anyone who runs, promotes, or participates in multi‑level marketing or similar plans, and gives the FTC new enforcement tools.

Key Provisions

  • Adds a new Section 5A that makes it unlawful to establish, operate, or promote any pyramid promotional scheme.
  • Prohibits plans that sell products or services outside permanent retail locations to independent salespeople unless they have a bona‑fide inventory repurchase agreement.
  • Bars “inventory loading,” where participants are pressured to buy more inventory than they can reasonably sell or use.
  • Defines key terms—including pyramid promotional scheme, inventory loading, bona‑fide inventory repurchase agreement, compensation, consideration, and ultimate user—to clarify what is prohibited.
  • Treats violations of the new prohibitions as violations of the FTC Act and confirms that federal and state authorities may still pursue other related violations.

Legislative Activity

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1 earlier action
SenateIntro Referral Latest Action

Read twice and referred to the Committee on Commerce, Science, and Transportation.

December 3, 2018

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SenateIntro Referral

Introduced in Senate

December 3, 2018

SenateIntro Referral

Read twice and referred to the Committee on Commerce, Science, and Transportation.

December 3, 2018

Floor Debate

24 members

What members said about S. 3 on the floor

8 Republicans15 Democrats1 Independent
James P. McGovern
Rep. James P. McGovernD-MA-2 · Jan 13, 2017

Mr. Speaker, I thank the gentleman from Georgia (Mr. Woodall) for yielding me the customary 30 minutes, and I yield myself such time as I may consume. (Mr. McGOVERN asked and was given permission to…

Rand Paul
Sen. Rand PaulR-KY · Jul 26, 2017

Mr. President, as a physician and an eye surgeon, I have seen ObamaCare up close, and it is not working for Americans. If you look across the country and say ``Is it working?'' you find that…

Ron Johnson
Sen. Ron JohnsonR-WI · Jul 26, 2017

Mr. President, I come to the floor today to speak to three amendments that I have either submitted or plan to submit on the matter before the Senate here today, the repeal and hopefully complete…

Ron Wyden
Sen. Ron WydenD-OR · Jul 26, 2017

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded. Madam President, on this matter of repealing the Affordable Care Act, soon the Senate is going to vote on just…

Rob Woodall
Rep. Rob WoodallR-GA-7 · Jan 13, 2017

Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 48 and ask for its immediate consideration. Mr. Speaker, for the purpose of debate only, I yield the customary 30…

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Michael B. Enzi
Sen. Michael B. EnziR-WY · Jul 26, 2017

Mr. President, I have 12 requests for committees to meet during today's session of the Senate. They do not have the approval of the Democratic leader; therefore, they will not be permitted to meet…

Benjamin L. Cardin
Sen. Benjamin L. CardinD-MD · Jul 26, 2017

Mr. President, I have listened very carefully to the majority leader and his requests that we come forward and bring amendments to the floor--all of our ideas about how we can improve our healthcare…

Thomas R. Carper
Sen. Thomas R. CarperD-DE · Jul 26, 2017

I am happy to yield. I was happy to yield. Good to see you. Mr. President, I want to say a few words about ObamaCare. If you ask most people in this country ``What is ObamaCare?'' my guess is, they…

Robert P. Casey Jr.
Sen. Robert P. Casey Jr.D-PA · Jul 26, 2017

Mr. President, I have a motion to commit at the desk. Mr. President, first, I thank my friend from Indiana, Senator Donnelly, for his remarks this afternoon and also for his efforts to help to…

John Cornyn
Sen. John CornynR-TX · Jul 26, 2017

Mr. President, I am advised we are not in a quorum call. Is that correct? Mr. President, yesterday we took a giant step toward delivering on our promise to the American people to provide relief from…

Charles E. Schumer
Sen. Charles E. SchumerD-NY · Jul 26, 2017

Mr. President, I ask unanimous consent that my speaking time be taken from leader time, not the debate time. Mr. President, as the Senate continues the debate on the Republican healthcare bill, it…

Lindsey Graham
Sen. Lindsey GrahamR-SC · Jul 26, 2017

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded. Mr. President, let me just tell my colleagues where I am coming from. Under the current system--ObamaCare as we…

Sheldon Whitehouse
Sen. Sheldon WhitehouseD-RI · Jul 26, 2017

Madam President, I appreciate the remarks of my friend. I would simply note that nothing he has said explains why you would want to strip hundreds of millions of dollars out of Medicaid or why you…

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Chris Van Hollen
Sen. Chris Van HollenD-MD · Jul 26, 2017

I thank the Presiding Officer, and I want to start by thanking my friend and our colleague, Senator Joe Donnelly, for standing up for Hoosiers and, in standing up for Hoosiers, standing up for all…

Mark R. Warner
Sen. Mark R. WarnerD-VA · Jul 26, 2017

Mr. President, first of all, I thank my friend, the Senator from Massachusetts, for her comments today and for her relentless willingness to take on this fight and so many other fights that are so…

Joe Donnelly
Sen. Joe DonnellyD-IN · Jul 26, 2017

Mr. President, I rise today to offer a motion that would protect Medicaid, the Medicaid expansion, and the Healthy Indiana Plan--known as HIP 2.0--in my home State of Indiana. I first want to thank…

Christopher Murphy
Sen. Christopher MurphyD-CT · Jul 26, 2017

Mr. President, no one should normalize what is happening on this Senate floor right now. We are all waiting for the white smoke to come out of Republican leadership offices so that the millions and…

Jack Reed
Sen. Jack ReedD-RI · Jul 26, 2017

Madam President, let me join the Democratic leader in expressing my dismay in what has been going on on the Senate floor with respect to healthcare. For over 7 years, my colleagues on the other side…

Dean Heller
Sen. Dean HellerR-NV · Jul 26, 2017

Mr. President, I rise today to talk about my amendment, Heller amendment No. 288. My amendment reinforces the important role Medicaid has played in my home State and in the States of many of my…

Al  Franken
Sen. Al Franken D-MN · Jul 26, 2017

Thank you, Madam President. Madam President, I rise this evening to speak in opposition to the Republican plan to dismantle our healthcare system. Their effort to repeal the Affordable Care Act and…

Bernard Sanders
Sen. Bernard SandersI-VT · Jul 26, 2017

Madam President, will my friend from Oregon yield for a question? Madam President, our friend from Oregon is pointing out that this legislation would impact virtually every American because, in one…

Maria Cantwell
Sen. Maria CantwellD-WA · Jul 26, 2017

Mr. President, I saw the remarks of the President of the United States in Youngstown, OH, and it has brought me to the floor this morning because the focus of some of his speech was on the economy…

Elizabeth Warren
Sen. Elizabeth WarrenD-MA · Jul 26, 2017

Mr. President, since the Republicans have announced that their top legislative priority in this Congress would be to rip away healthcare from millions of Americans, I have come down to the floor many…

John Thune
Sen. John ThuneR-SD · Jul 26, 2017

Madam President, I don't need to tell anyone why we are here. We are here because ObamaCare is fundamentally broken. That is clear. It is evident. Everybody knows that. A combination of soaring…

Bill Text

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Introduced in SenateIssued December 3, 2018

II

115th CONGRESS

2d Session

S. 3

IN THE SENATE OF THE UNITED STATES

December 3, 2018

Mr. Hatch introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation

A BILL

To amend the Federal Trade Commission Act to prohibit pyramid promotional schemes to ensure that compensation is not based upon recruitment of participants into a plan or operation, but instead based primarily on sales to individuals who use, resell, or consume the products or services sold, protect participants, prohibit inventory loading, and for other purposes.

1.

Short title

This Act may be cited as the Anti-Pyramid Promotional Scheme Act of 2018.

2.

Prohibition on pyramid promotional schemes; other requirements

The Federal Trade Commission Act (15 U.S.C. 41 et seq.) is amended by inserting after section 5 the following:

5A.
(a)

It shall be unlawful for any person to establish, operate, promote, or cause to be promoted a pyramid promotional scheme.

(b)

It shall be unlawful for any person to establish, operate, promote, or cause to be promoted any plan or operation which sells or solicits the sale of consumer products or services in the home or otherwise than in a permanent retail establishment, and which sells products or services directly or indirectly to independent salespeople for resale, to operate without a bona fide inventory repurchase agreement.

(c)

It shall be unlawful for any person to establish, operate, promote, or cause to be promoted a plan or operation which causes inventory loading.

(d)

Nothing in this Act may be construed to prohibit a plan or operation, or to define a plan or operation as a pyramid promotional scheme, based upon the fact that participants in the plan or operation give consideration in return for the right to receive compensation based upon purchases of goods or services or intangible property by participants for personal use, consumption, or resale so long as the plan or operation does not cause inventory loading and the plan or operation implements a bona fide inventory repurchase agreement.

(e)

A violation of subsection (a), (b), or (c) shall be treated as a violation under section 5.

.

3.

Definitions

Section 4 of the Federal Trade Commission Act (15 U.S.C. 44) is amended by adding at the end the following:

Bona fide inventory repurchase agreement means a program by which a plan or operation—

(1)

repurchases, on commercially reasonable terms, current and marketable inventory purchased and maintained by a participant for resale, upon request at the termination of the participant’s business relationship with the plan or operation; and

(2)

clearly communicates such terms in its recruiting literature, sales manual, or contracts with participants, including the manner in which the repurchase is to be exercised and disclosure of any inventory not eligible for repurchase under the program.

Commercially reasonable means, with respect to the terms of repurchase by a plan or operation of current and marketable inventory from a participant, that the inventory is repurchased not later than 12 months after the date of purchase at not less than 90 percent of the original net cost to the participant, less appropriate set-offs and legal claims, if any.

Compensation means the payment of any money, thing of value, or financial benefit.

Consideration

(1)

means the payment of money or another thing of value or the purchase of a product, good, service, or intangible property; and

(2)

does not include—

(A)

the purchase of a product or service furnished at cost to be used in making a sale and not for resale; or

(B)

any time and effort spent in pursuit of sales or recruiting activities.

Current and marketable

(1)

means, with respect to inventory, that the inventory—

(A)

in the case of consumable or durable goods, is unopened, unused, and within its commercially reasonable use or shelf-life period; and

(B)

in the case of services and intangible property, including internet sites, represents the unexpired portion of any contract or agreement; and

(2)

does not include inventory that has been clearly described by a plan or operation to a participant prior to purchase as discounted, seasonal, a special promotion item, or not subject to the plan or operation’s bona fide inventory repurchase agreement.

Inventory means both goods and services, including company-produced promotional material, sales aids, and sales kits that a plan or operation requires participants to purchase.

Inventory loading means a practice in which a plan or operation requires or encourages its participants to purchase inventory in an amount exceeding that which the participant can reasonably expect to use, consume, or resell to ultimate users.

Participant means a person who joins a plan or operation.

Pyramid promotional scheme means any plan or operation in which individuals pay consideration for the right to receive compensation that is primarily based upon recruiting other individuals into the plan or operation rather than related to the sale of products or services to ultimate users.

Ultimate user means, with respect to a product or service sold by a plan or operation, an individual who consumes or uses the product or service, whether or not the individual is a participant in the plan or operation.

.

4.

Limitations

(a)

Other violations of Federal law

Nothing in this Act or the amendments made by this Act shall be construed to limit the authority of any Federal official from proceeding against pyramid promotional schemes (as defined in section 4 of the Federal Trade Commission Act (15 U.S.C. 44)) for other violations of Federal law, including the Federal Trade Commission Act.

(b)

State law

Nothing in this Act or the amendments made by this Act prohibits an authorized State official from proceeding in a State court of competent jurisdiction on the basis of an alleged violation of any civil or criminal statute of such State.