Pyramid Systems

Any schemes based on the so-called pyramid system (Snowball, Hydra, Gella, Multiplex systems, etc.) are considered lottery-like undertakings and are therefore prohibited (art. 43, Lottery Ordinance, LV, in conjunction with art. 1 Swiss Lottery Act, LG). An illegal (pyramid) scheme is deemed to be in operation if participants can only obtain goods, prizes or any other gains if they manage to persuade others to join by concluding similar transactions (art. 43, item 1, Swiss Lottery Ordinance, LV).

Participants in such schemes must usually pay an entry fee and potential participants are often promised high earnings against minimal contribution (entry fee and recruitment of new participants). New participants cannot, however, assess market saturation and the number of members already involved. If they are unable to recruit new members, they will incur the cost of the entry fee, which in itself is not subject to prosecution, while being unable to make expected earnings.

On 2 September, 2009, a resolution to amend the Swiss Act Against Unfair Competition (UWG) was adopted; the new Act will most likely come into force in summer 2011 and will include the prohibition of organising pyramid systems. From the date of inception of the new art. 3, section r of the UWG, many pyramid systems currently operating on the margins of the law will become illegal. Any pyramid systems will thenceforth be in the jurisdiction of the State Secretariat for Economic Affairs, SECO.

New Art. 3 of the Swiss Act Against Unfair Competition (UWG)
Unfairness shall have occurred in particular where a person
 …
litera r: promises to supply goods, pay premiums or provide any other services under conditions that chiefly require the buyer or customer to recruit other individuals rather than sell or use the goods or services.

Cantonal prosecutors investigate and adjudicate any violations according to art. 47 of the Swiss Lottery Act (LG). While Comlot does not have the power to prosecute, it will report to the prosecutor any violations of Swiss law.