The Commerce Commission is warning people against joining a Web site sales scheme saying that it could be pyramid selling.
The commission says it has sent warning letters to people involved in SkyBiz 2000, a scheme in which people are invited to buy a home page on a portal (www.skybiz.com) and to then recruit other buyers. The original buyer receives a share of money paid by those people who subsequently join the scheme through their involvement.
The scheme, which came to New Zealand from Australia several months ago, was developed in 1998 by Nevada-based SkyBiz.com Inc.
Weekly recruitment meetings are being held in Auckland. One in Northcote last Wednesday attracted about 40 people.
Meeting organiser Geraldine Barnett denies that SkyBiz is a pyramid scheme and says she has not had a warning from the commission. Nor does she know of anyone who has.
She paid $280 for her Web site in June after hearing about SkyBiz through a friend. She claims to be earning $US1200 a month from SkyBiz.com Inc.
Barnett says for $280 a buyer receives an education package about Microsoft Windows, a 35MB site with unlimited pages, a second site in 22 languages and a site development kit.
"You can also set up a home-based business whereby SkyBiz pays you a commission when you join up other people."
She says it is not a pyramid scheme because it is selling a product. "It's no more than word-of-mouth advertising."
Barnett says she contacted the commission two months ago to check the legality of SkyBiz and was told that the commission was aware of it but was taking no action.
But commission spokesperson Vince Cholewa says the scheme could be pyramid or referral selling, which is illegal under section 24 of the Fair Trading Act. The commission is collecting information on SkyBiz and in the meantime has warned people against joining. However, it has not launched a full investigation.
Aucklander Dairne Burrett, who is below Barnett on the scheme, has earned $US500 from it. She says 60 people have signed up for the scheme as a result of her joining.
Burrett says that her main reason for joining the scheme was to make money and when she speaks to people about SkyBiz, half are interested in having a Web site and half want a passive income. She has been told it will take six years before the scheme reaches saturation point.
The Direct Selling Assocation also has concerns about SkyBiz. Chief executive Garth Wyllie says it is most likely to be a pyramid scheme or it could be in danger of being promoted as a pyramid scheme.
Last month the Australian Competition and Consumer Commission instituted proceedings in the Federal Court against a Perth resident who is a SkyBiz participant.
The ACCC is alleging a Mr Ryan contravened section 61(2) of the Trade Practices Act 1974 by attempting to induce others to become participants in the trading scheme, promoted by Skybiz.Com.Inc, and to pay Skybiz.Com Inc $US100 per web site in order to obtain the prospect of participating in the scheme. Section 61 of the act prohibits pyramid selling schemes.
According to information on the SkyBiz Web site, the organisation's president is James S Brown, whose past experience ". includes the distressing occurrence of being an officer in a previous company that was the subject of litigation by the Oklahoma Department of Securities.
"The department obtained a temporary restraining order against that company and its officers and directors based on allegations that company was violating the registration and anti-fraud provisions of the Oklahoma Business Opportunity Sales Act, which removed Jim from management and appointed a receiver for that company. Jim, who has never been sued or charged with anything more than a traffic ticket in the past, had relied on legal advice in order to try to operate in compliance with applicable laws and regulations that proved to be incorrect. That company filed bankruptcy."