Oman bans pyramid marketing activities

Stiff penalties: RO 5000 fine for offenders found engaging in, buying, selling, trading, advertising and promoting pyramid or network marketing schemes

Invoking the Commerce Law promulgated by Royal Decree 55/90, Qais bin Mohammad al Yousef, Minister of Commerce, Industry and Investment Promotion (MoCIIP), issued Ministerial Decision 105/2021 effectively prohibiting all pyramid-style marketing activities in the Sultanate.

Pyramid schemes typically funnel earnings from those on the lower levels of a marketing organization to the top and are often portrayed as fraudulent in many parts of the world.

Sunday’s announcement prohibits selling, advertising or promoting goods, products and services through pyramidal marketing activities.

Article 1 of the Ministerial Decision stipulates that in applying the provisions of this decision, network or pyramid marketing refers to any business method used by suppliers, advertisers or promoters to invite the consumer to encourage a list of other consumers to purchase a commodity or to get service in exchange for a benefit to be obtained by the first consumer. Under this scheme, all the targeted consumers are placed in a pyramidal hierarchy or grouped in networks, effectively channeling the bulk of the benefits to those at the upper levels of the pyramid or network.

Article 2 prohibits the purchase, sale, trade, advertisement or promotion of any good or service through pyramidal marketing activities via any electronic or non-electronic means.

Article 3 imposes an administrative fine of RO 5,000 on anyone who violates the provisions of this decision, and the fine shall be doubled in case of a repeat offence.

The decision comes into force on the day following its publishing in the Official Gazette.

Mubarak bin Mohammed al Dohani, Director General of Commerce at the Ministry, said: “Many countries have banned this type of commercial practices in order to reduce commercial fraud, maintain healthy competition between companies, and safeguard the interests of individuals innocently drawn into these activities.”

Such activities are regarded as fraudulent commercial transactions subject to criminal penalties under the Omani Commercial Law issued by Royal Decree 55/90 and the Omani Penal Law promulgated by Royal Decree 7/74, he said.

Additionally, pyramid schemes have harmful implications for the economy, as they are based on deception and fraud by amplifying the benefits associated with the product or service at the heart of the scheme, notably by attracting new customers on the false claim that they will earn huge profits. Often, new members are baited into joining the scheme by paying them an attractive amount upfront to get them to stay hooked.

Al Dohani explained that network or pyramid schemes typically start with an individual or a company sitting at the top of the pyramid, who then persuades others to join the network against the promise of rich rewards. Those rewards ultimately flow to the person or persons at the top of the pyramid.

As the process is driven by profit alone, there is no importance given to quality, standards or fair competition, leaving customers at the lower levels of the network or pyramid holding assets that are below par or substandard. They ultimately become collateral damage when the scheme eventually collapses. Those at the top of the scheme transfer their funds abroad, he added.