Reseller running pyramid scheme

The Federal Court of Australia has found the local arm of a global telecommunications reseller -- the Australian Communications Network (ACN) -- to be guilty of running a pyramid-selling scheme.

Pyramid schemes are illegal in Australia under section s65AAD of the Trade Practices Act 1974.

ACN, an Australian version of the American Communications Network, appeared in Australia late last year and was promoted to potential resellers via free advertising websites such as Cracker.com.au.

It describes itself as “one of the world’s leading direct sellers” on its website, claiming 40 percent annualised growth and $500 million in sales globally.

ACN onsells fixed and mobile telecommunications services to an unlimited number of people as a “business opportunity” with “low risk” and “unlimited” potential income. It also planned to offer internet services, the website said.

The court ruling follows proceedings begun by the Australian Competition and Consumer Commission (ACCC) in November in the Federal Court in Adelaide, under Justice Brad Selway.

ACN charged its “independent representatives” $548.90 to resell telecommunications services to consumers and recruit other “independent representatives”.

“Justice Selway found that the $548.90 constituted a participation payment, and that the customer acquisition bonuses and downline commissions are recruitment payments within the meaning of the ACT,” the ACCC said in a statement.

ACN had “participated in, promoted and induced or attempted to induce” people to take part in a pyramid scheme. Further, ACN director Martin Paech had knowingly "aided and abetted” the scheme, the ACCC said.

“However, Justice Selway also found that the situation might be different if the payment was less than $548.90,” the ACCC added.

No mention was made of ACN representative Keith Janke and Gibbschade directors Jonathan Gibbs and Christine Schade, who had related proceedings brought against them by the ACCC in November.

Court orders were yet to be made at time of going to press.