The Federal Court in Perth has declared that a company incorporated in the USA, 1Cellnet LLC, participated in a pyramid selling scheme involving discounted telephone calls, known as the 1Cellnet scheme, in contravention of the Trade Practices Act 1974.
The court also declared that Mr Bruce Pallister and Mr Shaun Mellet were knowingly concerned in that contravention.
Justice Nicholson found that the 1Cellnet scheme contravened section 65AAC of the Trade Practices Act 1974. This order now successfully concludes the proceedings commenced by the Australian Competition and Consumer Commission in August 2004 against 1Cellnet LLC, Unified Interactive Pty Ltd, Mr Pallister and Mr Mellet.
Earlier court orders included injunctions restraining 1Cellnet LLC and Unified Interactive Pty Ltd from establishing, promoting, taking part in or otherwise participating in, or inducing any person to establish, promote, take part or participate in the 1Cellnet Scheme, or any similar scheme identically structured. Similar injunctions have been imposed on Mr Pallister and Mr Mellet.
In addition to the declarations and injunctions Mr Pallister and Mr Mellet are required to publish notices in various newspapers across Australia, attend a trade practices law seminar and pay the ACCC's costs.
The 1Cellnet scheme involved participants making a payment to 1Cellnet with a promise that they would be able to earn income from the 1Cellnet Global Bonus Points scheme. The court declared that the payment was induced by the prospect held out to new participants that they would be entitled to payments in relation to the introduction to the 1Cellnet scheme of further members.
The 1Cellnet scheme was promoted throughout Australia and overseas from about October 2003 on the Internet and at public meetings in capital cities across Australia. The promotion claimed that the 1Cellnet scheme was able to deliver to members a worldwide business that could generate extensive income, without the member leaving his or her home.
In handing down his earlier decision against 1Cellnet LLC, Justice Nicholson noted that injunctions were necessary due to evidence that after the ACCC began its action against 1Cellnet LLC, a person attempting to log on to the 1Cellnet website was being redirected to the website of Cell Wireless Corporation at www.cellwireless.com. Justice Nicholson accepted the ACCC's allegations that Cell Wireless Corporation, who promotes the Cell Wireless Scheme, was substantially similar to the 1Cellnet Scheme.
"The Australian Competition and Consumer Commission is pleased with the Federal Court findings, which support the ACCC's vigorous stance in applying the Act to prevent or stop pyramid selling", ACCC Chairman, Mr Graeme Samuel, said today.
"The promotion of pyramid schemes on the Internet in particular, has been of growing concern to the ACCC and other consumer protection agencies throughout the world", he said.
"Modern technology allows pyramid recruiters to promote illegal schemes via direct access to consumers worldwide.
"This case is part of the ACCC's work to address consumer protection issues on a global basis", Mr Samuel said. "Despite 1Cellnet LLC being a USA based company, the scheme was originally developed in Australia and then marketed outside of Australia to people in many other countries. It is in Australia's national interest to take action against these schemes as the reputation of our legitimate businesses can be damaged by Australian companies and individuals promoting illegal schemes overseas".