Ohio v. Howard

Is a pyramid scheme a consumer or business transaction for purposes of the Ohio Consumer Sales Practices Act?

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The Ohio Court of Appeals held that the Consumer Sales Practices Act regulates the operation of a pyramid scheme even if some people refer to the scheme as a business opportunity. Howard operated a pure pyramid scheme called the Circle of Eight. At a recruitment event, she convinced a couple to pay $1500 each to join her "circle", for the chance to earn substantial profits. On appeal Howard claimed that she should not have been prosecuted under the Consumer Sales Practices Act because the Circle of Eight was a business opportunity, not a consumer transaction as defined in the statute. The Court of Appeals disagreed, deciding that when defining a consumer transaction the court should look to the parties, not the good being exchanged. Because the couple that was defrauded were not professional gamblers or investors, they were consumers and it was a consumer transaction under the statute.

Case and case summary are also available online at: http://www.mlmlegal.com/legal-cases/Ohio_v_Howard.php

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Published In: MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates

Reference Info:State, 6th Circuit, Ohio | United States

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