Ordinance on pyramid scams to be reviewed

PUBLISHED : Thursday, 19 November, 2009, 12:00am
UPDATED : Thursday, 19 November, 2009, 12:00am

The government has pledged to review a law covering pyramid schemes after lawmakers called for prompt action to plug loopholes.

Rita Lau Ng Wai-lan, secretary for commerce and economic development, told the Legislative Council yesterday that the Pyramid Selling Prohibition Ordinance would be examined in the near future.

Police have received seven allegations of pyramid scams over the past two years.

Four cases, involving 157 victims and HK$8.78 million, resulted in the arrest of 21 people. Three cases were not pursued.

Another 148 complaints relating to the tactics of marketing firms and agents were reported in the same period, but only eight cases were substantiated, involving 14 victims and HK$2.28 million.

Eleven people had been arrested for withholding goods or helping others to use false documents to borrow money.

Pyramid schemes involve an illegal business model that rewards participants primarily by enrolling others into the scheme, rather than selling products or services.

'We will see if there are inadequacies in the existing ordinance, such as its coverage, definitions and penalties,' Lau said, adding that it would be compared to similar laws in other jurisdictions.

She said the way pyramid selling was done changed rapidly, and if there were to be any law amendments they must not affect legitimate businesses.

Lau would not commit to a timetable for the study, but promised it would come 'as soon as possible'.

Lawmaker Wong Kwok-hing said he had received a number of complaints over the past few months, mostly related to Digital Crown Holdings (Hong Kong) Limited (DCHL), which sold Lampe Berger fragrance products.

In September, three self-employed men allegedly involved in the pyramid sales scam were arrested for conspiracy to defraud at the company's Causeway Bay base.

Wong said the pyramid selling law did not apply to any company that required their distributors to set up individual companies, as the business-to-business relationship did not fulfil the definition of 'scheme' under the law.

He said the government should learn from Macau about implementing tougher laws. The Lampe Berger office in Macau was forced to shut down after a new law took effect there in June last year.

DCHL did not reply to enquiries yesterday.

Lawmaker Fred Li Wah-ming said the law review could not be delayed, and called for a timetable for the study. 'There are many cases with youngsters being tricked to borrow large sums of money to engage in the scheme, and parents have told me it is just like they are being brainwashed,' he said.