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Penal Code |
17.461. Pyramid promotional scheme
(a) In this section:
(1) "Compensation" means payment of money, a
financial benefit, or another thing of value. The term does not include payment based on
sale of a product to a person, including a participant, who purchases the product for
actual use or consumption.
(2) "Consideration" means the payment of cash or
the purchase of a product. The term does not include:
(A) a purchase of a product furnished at cost to be used in
making a sale and not for resale;
(B) a purchase of a product subject to a repurchase
agreement that complies with Subsection (b); or
(C) time and effort spent in pursuit of a sale or in a
recruiting activity.
(3) "Participate" means to contribute money into
a pyramid promotional scheme without promoting, organizing, or operating the scheme.
(4) "Product" means a good, a service, or
intangible property of any kind.
(5) "Promoting a pyramid promotional scheme"
means:
(A) inducing or attempting to induce one or more other
persons to participate in
a pyramid promotional scheme; or
(B) assisting another person in inducing or attempting to
induce one or more other persons to participate in a pyramid promotional scheme, including
by providing references.
(6) "Pyramid promotional scheme" means a plan or
operation by which a person gives consideration for the opportunity to receive
compensation that is derived primarily from a person's introduction of other persons to
participate in the plan or operation rather than from the sale of a product by a person
introduced into the plan or operation.
(b) To qualify as a repurchase agreement for the purposes
of Subsection (a)(2)(B), an agreement must be an enforceable agreement by the seller to
repurchase, on written request of the purchaser and not later than the first anniversary
of the purchaser's date of purchase, all unencumbered products that are in an unused,
commercially resalable condition at a price not less than 90 percent of the amount
actually paid by the purchaser for the products being returned, less any consideration
received by the purchaser for purchase of the products being returned. A
product that is no longer marketed by the seller is considered resalable if the product is
otherwise in an unused, commercially resalable condition and is returned to the seller not
later than the first anniversary of the purchaser's date of purchase, except that the
product is not considered resalable if before the purchaser purchased the product it was
clearly disclosed to the purchaser that the product was sold as a nonreturnable,
discontinued, seasonal, or special promotion item.
(c) A person commits an offense if the person contrives,
prepares, establishes, operates, advertises, sells, or promotes a pyramid promotional
scheme. An offense under this subsection is a state jail felony.
(d) It is not a defense to prosecution for an offense under
this section that the pyramid promotional scheme involved both a franchise to sell a
product and the authority to sell additional franchises if the emphasis of the scheme is
on the sale of additional franchises.
(Added by L.1995, chap. 463(2), eff. 9/1/95.)