How Canada And The U.S. Prohibit Pyramid Schemes Differently

The U.S. and Canada prohibit product-based pyramid marketing schemes in different ways. This short article is intended to give multi-level marketing businesses a better understanding of the important legal asymmetries between the two countries.

The Canadian Competition Act specifically defines multi-level marketing ("MLM") plans and prohibits pyramid schemes.

The Competition Act¹ at s. 55(1) defines "multi-level marketing plan" as "a plan for the supply of a product whereby a participant in the plan receives compensation for the supply of the product to another participant in the plan who, in turn, receives compensation for the supply of the same or another product to other participants in the plan." The Competition Act then provides that MLMs are legitimate, provided that the business follows the specific requirements under subsections 55(2) to (2.1).