Court finds Australian Communications Network scheme is a pyramid selling scheme

23 March 2005

The Federal Court of Australia today found that the scheme operated by Australian Communications Network Pty Ltd is a pyramid selling scheme in breach of s65AAD of the Trade Practices Act 1974, following Australian Competition and Consumer Commission action.

In the ACN scheme, Independent Representatives pay ACN $548.90 (including GST) and sell telecommunications services to consumers. They also have the right to recruit other Independent Representatives. Those Independent Representatives can receive commissions from their personal customers as well as downline commissions from customers of Independent Representatives they have recruited. In addition, Customer Acquisition Bonuses are paid on the number of qualified Independent Representatives.

Justice Selway found that the $548.90 constituted a participation payment, and that the Customer Acquisition Bonuses and downline commissions are recruitment payments, within the meaning of the Act.

Justice Selway found that ACN participated in, promoted and induced or attempted to induce persons to take part in a pyramid scheme in contravention of section 65AAC of the Act and that Mr Paech, an ACN director, was knowingly concerned in and aided and abetted those contraventions. However, Justice Selway also found that the situation might be different if the participation payment was less than $548.90.

Justice Selway adjourned the matter to a date to be fixed for hearing submissions as to what orders the court might make.

Release number: 
MR 072/05
ACCC Infocentre: 

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