Guideline launched to facilitate identification of pyramid schemes

The guideline will facilitate investigation and identification of pyramid schemes so as to curtail and prevent their operation in the country

With online business becoming rampant in the country, the Office of Consumer Protection (OCP) under the Ministry of Economic Affairs has come up with the pyramid scheme identification guideline, 2021.

The guideline is developed with the objective to understand the intricacies and identify pyramid schemes and enable relevant officials to investigate and identify such a scheme unambiguously and effectively.

Pyramid schemes are packaged to appear like legitimate businesses, such as Multi-Level Marketing (MLM) or direct marketing, but really are scams targeting vulnerable groups of people. Pyramid schemes are illegal in Bhutan.

The guideline will facilitate investigation and identification of pyramid schemes so as to curtail and prevent their operation in the country.

As per Section 38 (xiii) of the Consumer Protection Rules and Regulations (CPRR), 2015, business entities are refrained from establishing, operating or promoting a pyramid promotional scheme, where a consumer receives compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.

Chief Program Officer under the department of consumer protection, Jigme Dorji said that this guideline was developed to aid identification and investigation of pyramid schemes if and when they are found or reported.

The Guideline was approved by the Consumer Board and Competition Council (CBCC).

He said that it will help the OCP investigate and determine swiftly and confidently if a scheme is a pyramid scheme or not and take action. In particular, it will guide the inspectors to follow prescribed planning, investigation and reporting steps. 

He mentioned that in the absence of a formal definition and defining characteristics of a pyramid scheme in Bhutan and a standard protocol for its identification and investigation, it was challenging for the OCP to carry out its work efficiently.

โ€œPyramid schemes are complex schemes designed to appear like regular legitimate businesses,โ€ he said.

The OCP also states that the literature suggests that pyramid scheme business is pervasive in nature, whereby members are tempted to be a part of such schemes due to the misguided notion of making easy money.

โ€œSuch a scheme exploits personal relationships for sales and further recruitment of members and usually targets easily impressionable groups such as youth, housewives, villagers and those who have not received school education,โ€ the OCP states.

Meanwhile, the OCP had dealt with four cases of pyramid promotion schemes, in the past, namely; On-passive, Crowd-1, Magnessia and Oriens. 

The OCP investigated and closed down the operation of the schemes including cancellation of business licenses on which they were used to operate these schemes. The public were also notified through mass media not to engage in these businesses.

Dechen Dolkar from Thimphu