Pyramid scheme operators to be fined RO 5,000

The Ministry of Commerce, Industry and Investment Promotion (MoCIIP) has reiterated warnings surrounding multi-level marketing schemes – also known as pyramid schemes – while also urging the general public to beware the risks associated with such scams.

In a post on Tuesday, the Ministry referred to the proliferation of examples of multi-level marketing schemes being promoted on social media in recent times. Some of these fraudulent scams are even promoted from overseas, it said.

Citing Article 2 Ministerial Decision 105/2021, the Ministry stated: “It is prohibited to sell, buy, trade, advertise or promote any commodity, product or service through network marketing or multi-level marketing fraud by any electronic or non-electronic means.”

Offenders can attract a fine of RO 5,000, which is doubled if the violation is repeated, the Ministry said. 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.

Experts have described pyramid marketing or pyramid scheme fraud as an unsustainable business model whose goal is to collect money from the largest number of participants, while the largest beneficiary is the person at the top of the pyramid.

It begins with a person or company at the top of the pyramid whose work is summarised in persuading the person to participate or contribute a sum of money with a promise to give him services or a symbolic profit if he can convince others to participate after him.

With the aim that the higher the levels of subscribers, the more the first gets more commissions and each participant persuaded after him to participate. In return for the promise of large commissions, he must include new subscribers to the scheme. The scam focuses on the process of engaging and linking it to sales, regardless of the quality of the product itself.

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.