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House passes new Pyramid Promotional Scheme Act

Pictures of money via Flickr | CC BY 2.0

The Michigan House of Representatives has passed the new Pyramid Promotional Scheme Act.

A four-bill package of legislation defining and punishing pyramid schemes has passed the Michigan House.

The chamber voted Tuesday to clarify that a pyramid scheme is any plan that primarily compensates individuals for recruiting others and not through actual product sales. The punishment for intentionally promoting the schemes would be a felony with up to seven years in prison or a fine of up to $10,000. Pyramid schemes already are illegal under state and federal laws.

The new classification more obviously sets distinctions between pyramid schemes and traditional direct selling companies such as Amway, which testified in support of the bill. The legislation exempts operations that repurchase unsold inventory from participants at no less than 90 percent of the original cost.

The bill now heads to the Senate.