Full Federal court upholds ACN's appeal against pyramid selling decision

The Full Federal Court today upheld the appeal of Australian Communications Network Pty Ltd against an earlier judgment by Justice Selway that the scheme operated by ACN at that stage was a pyramid selling scheme in breach of the Trade Practices Act 1974.

The Full Court found that the payments the ACCC alleged were "recruitment payments", namely customer acquisition bonuses and residual override commissions, were not recruitment payments as defined under s.65AAD of the Act because if the recruiter does no more than recruit other participants there is no entitlement to any payment; the benefits the recruiter gets come from customers for telephone services and from ACN.

It set aside the orders and declarations made by Justice Mansfield on 20 July 2005 and ordered the ACCC to pay costs.

The ACCC is considering the judgment to decide if an application for special leave to appeal to the High Court is appropriate.

Background

On 15 November 2004 the ACCC instituted proceedings against Australian Communications Network Pty Ltd, a seller of telecommunications services, for alleged breaches of the pyramid selling scheme provisions of the Act.

On 23 March 2005 Justice Selway found that ACN participated in, promoted and induced or attempted to induce persons to take part in a pyramid selling scheme in contravention of section 65AAC of the Act, and that Mr Martin Paech, an ACN director, aided and abetted and was knowingly concerned in those contraventions.

The court also found that Mr Keith Janke and Mr Jonathon Gibbs, two ACN Independent Representatives, were knowingly concerned in and aided and abetted the contraventions, and Gibbschade Pty Ltd participated in the pyramid selling scheme, and attempted to induce other persons to participate in the scheme, in contravention of the Act.

On 20 July 2005 Justice Mansfield made a number of orders, including declarations and injunctions, and orders relating to corrective action.