NORTH CAROLINA GENERAL ASSEMBLY

1971 SESSION

 

 

CHAPTER 875

SENATE BILL 905

 

 

AN ACT TO PROHIBIT PYRAMID AND CHAIN SCHEMES.

 

The General Assembly of North Carolina enacts:

 

Section 1.  A new section, to be designated G.S. 14-291.2 is hereby enacted to read as follows:

"§ 14-291.2.  Pyramid and chain schemes prohibited. — (a) Any person who shall establish, promote, operate or participate in any pyramid distribution plan, program, device or scheme whereby a participant pays a valuable consideration for the opportunity or chance to receive a fee or compensation upon the introduction of other participants into the program, whether or not such opportunity or chance is received in conjunction with the purchase of merchandise, shall be deemed to have participated in a lottery and shall be punished as provided for in G.S. 14-290.

(b)        'Pyramid distribution plan' means any program utilizing a pyramid or chain process by which a participant gives a valuable consideration for the opportunity to receive compensation or things of value in return for inducing other persons to become participants in the program;

'Compensation' does not mean payment based on sales of goods or services to persons who are not participants in the scheme, and who are not purchasing in order to participate in the scheme; and

'Promotes' shall mean inducing one or more other persons to become a participant.

(c)        Any judge of the superior court shall have jurisdiction, upon petition by the Attorney General of North Carolina or Solicitor of the Superior Court, to enjoin, as an unfair or deceptive trade practice, the continuation of the scheme described in subsection (a); in such proceeding the court may assess a civil penalty against any defendant found to have engaged in the willful promotion of such a scheme with knowledge that such conduct violated this act, in an amount not to exceed two thousand dollars ($2,000) which shall be for the benefit of the General Fund of the State of North Carolina as reimbursement for expenses incurred in the institution and prosecution of the action; and the court may appoint a receiver to secure and distribute assets obtained by any defendant through participation in any such scheme.

(d)        Any contract hereafter created for which a part of the consideration consisted of the opportunity or chance to participate in a program described in subsection (a) is hereby declared to be contrary to public policy and therefore void and unenforceable."

Sec. 2.  This act shall become effective on October 1, 1971.

In the General Assembly read three times and ratified, this the 16th day of July, 1971.