Antitrust & competition law

Pyramid sales

Pyramid sales schemes are considered in Poland as unfair practices following implementation of provision of EU Directive 2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market. In addition to above pyramid promotional schemes are considered as practices violating collective consumer interests as per article 24 section 2 point 3 of Act on Protection of Consumers and Competition. Depending on the circumstances and level of transparency of the scheme they might be qualified as a criminal offense and subject to criminal liability.

Definition of Pyramid Scheme
Definition of pyramid promotional scheme in Poland is no different then in other EU countries as article 7 point 14 of Polish Act on Combating Unfair Practices is a direct translation of point 14 of Annex I of the EU Directive 2005/29/EC. It defines pyramid promotional scheme as a:
scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.
Key elements to be qualified as Pyramid Scheme:
– one of the parties is a consumer,
– the consumer give a consideration,
– the consideration opens an opportunity to receive a compensation
– compensation is derived mainly from introduction of other consumers to the scheme

Penalties and risks
Pyramid promotion scheme is considered as practice violating collective consumer interests, so it may be investigated by Consumer Protection Authority (UOKiK) and punished by penalty of up to 10 % of the turnover. Pyramid promotion scheme organizer is also exposed to claims of third parties who may request e.g. damages.

Author team leader DKP Legal Michał Dudkowiak
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