The Federal Court has declared a United States web-based company, Skybiz.Com Inc, breached the pyramid selling and other consumer protection provisions of the Trade Practices Act 1974.
The orders follow Australian Competition and Consumer Commission action. The orders restrain SkyBiz from repeating the conduct and require it to disclose to the ACCC the names and contact details of Australian residents who took part in the scheme.
When the ACCC instituted proceedings against SkyBiz.Com Inc, it alleged that between September 1999 and August 2000 SkyBiz operated and promoted the "Skybiz 2000 Home Based Business Scheme" using a pyramid selling scheme.
The ACCC alleged participants paid SkyBiz US$100 for a website in order to take part in the scheme. The ACCC alleged SkyBiz claimed participants could then earn monetary payments by introducing new consumers into the scheme and that the Skybiz scheme could be operated as an e-commerce business.
In settlement, SkyBiz.Com Inc consented to orders which declared:
- the Skybiz scheme, operated by SkyBiz.Com Inc, was a pyramid selling scheme
- SkyBiz.Com Inc represented that the Skybiz scheme could be used to engage in e-commerce when, in fact, it could not
- SkyBiz.Com Inc attempted to induce people to take part in the Skybiz scheme by representing that those who joined would later receive money if they introduced new consumers into the Skybiz scheme, contingent on those new consumers recruiting further consumers, thereby engaging in referral selling which is prohibited under the Act
- SkyBiz.Com Inc represented that the Skybiz scheme would be a profitable business for all persons who took part and could be carried on at, or from, their home, when in fact, this was not the case, thereby making false or misleading representations
- SkyBiz.Com Inc attempted to induce persons to take part in the Skybiz scheme by representing that those who joined would later receive payments.
"Although the Internet is an excellent way for Australian consumers to purchase goods and services from overseas businesses, consumers must be aware that both legitimate and unscrupulous operators have an Internet presence", Acting ACCC Chairman, Mr Sitesh Bhojani, said.
"The ACCC will vigorously pursue traders who breach the Trade Practices Act wherever they may be located and whatever medium they use ".
"The ACCC's action was greatly assisted by the excellent relationships and level of cooperation it has built with its international counterparts. In particular, the Federal Trade Commission in the United States of America was instrumental in assisting the ACCC in bringing this action. The FTC also has on-going proceedings against SkyBiz.Com Inc in the US District Court.
"The ACCC has regularly communicated with its consumer protection enforcement counterparts from Canada, Japan, New Zealand and India, which have followed the ACCC's case against Skybiz with great interest.
"The information sharing that took place in Skybiz demonstrates the effectiveness of cooperation between consumer protection enforcement agencies.
"In particular the International Marketing Supervision Network* has been central to international cooperation by consumer protection law enforcement agencies. As global business has expanded so to have the cooperative efforts of consumer protection bodies worldwide".
This action by the ACCC follows an earlier court action in which the Federal Court, Perth handed down orders by consent on 22 August 2001, which declared Mr Kevin Ryan, a Western Australian promoter of the Skybiz 2000 scheme, had breached the pyramid selling scheme prohibition section of the Act.
* The International Marketing Supervision Network is an organisation made up of more than 30 consumer protection agencies worldwide. The ACCC is the President of the IMSN in 2002/2003. It has hosted a meeting of the network in Sydney this week to plan multi-lateral action against unscrupulous businesses engaged in cross-border transactions for both goods and services contrary to consumer protection and fair trading laws.