Gold Coast company Worldplay Services Pty Ltd breached the Trade Practices Act 1974 by participating in an international online pyramid selling scheme, the Federal Court found today.
Its director, Mr Greg Kennedy, was found to be knowingly concerned in the contravention.
The Australian Competition and Consumer Commission alleged, and the court found, that World Games Inc, which operated internationally using a website, was an illegal pyramid scheme. The ACCC alleged that people became members in the hope that they would receive rewards when they signed up others to the scheme.
Worldplay Services provided administrative, IT support and member support services, among other services, to the scheme.
The scheme is fragmented, with a company in the British Virgin Islands having overall control, and service companies contributing to the scheme operating from Britain, Gibraltar, the Netherlands Antilles and Australia. Consumers recruited into the scheme came from a number of countries, including Canada, the United Kingdom and Norway.
"This finding by the court clearly shows that the new pyramid selling provisions of the Act will have effect no matter how fragmented the scheme to avoid jurisdiction", ACCC Chairman, Mr Graeme Samuel, said today. "If you are an Australian company taking part in a pyramid scheme you will be caught by the Act.
"The ACCC was concerned that in the WGI scheme an Australian company was being used to affect foreign consumers. The clear message from this is that you are caught by the Act, and the ACCC will pursue you, if you try to operate an illegal pyramid scheme from Australia that affects foreign consumers. Australia will not be a haven for the operation of these schemes".
Commenting on the conduct in his judgment, Justice Paul Finn of the Federal Court said: ”Though this proceeding has raised a number of issues of statutory construction, it has raised only one matter of real substance. This is whether Australia can be used wholly or partially as a haven for operators of internet based pyramid selling schemes in circumstances in which members of the Australian public are unable to gain internet access to such schemes through Australian internet service providers. My conclusion is that it cannot".
Mr Samuel said the matter also involved the cooperation of a number of overseas regulatory bodies, and proceedings continue in other jurisdictions regarding this scheme. The Royal Canadian Mounted Police has taken criminal proceedings against Canadian participants.
Justice Finn declared that Worldplay Services Pty Ltd has contravened the pyramid selling provisions and that Mr Kennedy was knowingly concerned, and a party to, the contravention.
Justice Finn also made orders restraining Worldplay Services Pty Ltd from taking part in the World Games scheme or other similar schemes and restraining Greg Kennedy from being knowingly concerned in the participation of Worldplay Services Pty Ltd in the World Games scheme or other similar schemes. The respondents were ordered to pay the ACCC's costs.