---
title: "Screen a recruitment reward against the pyramid description"
url: "https://ailawframework.com/practice/competition-and-consumer-law/screen-a-recruitment-scheme-against-the-pyramid-description/united-states"
type: "task_jurisdiction_version"
site: "AI Law Framework"
id: "A29-CO20261022-13-US"
practice_area: "Competition & Consumer Law (ACCC / ACL)"
tier: "yellow"
lawyer_review: "required"
jurisdictions: ["US"]
last_reviewed: "2026-10-22"
---

# Screen a recruitment reward against the pyramid description

> From the compensation plan, record what a participant pays, what right to sell a product the plan gives, what reward the plan pays for recruiting another participant, and whether the file says that reward depends on a…

Canonical page: https://ailawframework.com/practice/competition-and-consumer-law/screen-a-recruitment-scheme-against-the-pyramid-description/united-states  
Last reviewed: 2026-10-22

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

| Fact | Value |
| --- | --- |
| Practice area | [Competition & Consumer Law (ACCC / ACL)](https://ailawframework.com/practice/competition-and-consumer-law.md) |
| Human involvement | Yellow: Lawyer and AI draft together |
| How AI is used | From the compensation plan, record what a participant pays, what right to sell a product the plan gives, what reward the plan pays for recruiting another participant, and whether the file says that reward depends on a sale of the product to an ultimate user. Record who the file says buys the product. Do not decide that the plan is a pyramid scheme. |
| What the lawyer must review | The lawyer applies the FTC's multi-level marketing guidance and section 5 of the Federal Trade Commission Act. The guidance says an unlawful compensation structure, sometimes called a pyramid scheme, is described in the Commission's Koscot decision as an enterprise characterized by the payment by participants of money to the company in return for which they receive the right to sell a product and the right to receive, in return for recruiting other participants into the program, rewards which are unrelated to the sale of the product to ultimate users. The guidance says there is no percentage-based test. It says an MLM is not saved by paying rewards primarily for retail sales to ultimate users, or by paying rewards from revenue that primarily comes from those sales. It says the question depends on what the compensation plan incentivizes and on the rights the plan offers, and it quotes FTC v. BurnLounge for a focus on promoting the program rather than selling the products. The guidance says the Commission looks at, among other things, the behavior the plan incentivizes, the income expectations created by the marketing, and how participants are trained and compensated. Section 5(a)(1), 15 USC 45(a)(1), declares unfair or deceptive acts or practices in or affecting commerce unlawful. The lawyer decides whether the rewards are unrelated to sales to ultimate users. The guidance is not a statute that lists elements to tick. |
| Written for | United States |
| Applies to | [Screen a recruitment scheme against the pyramid description](https://ailawframework.com/practice/competition-and-consumer-law/screen-a-recruitment-scheme-against-the-pyramid-description.md) |

## Checking plan

- What the AI does: From the compensation plan, record what a participant pays, what right to sell a product the plan gives, what reward the plan pays for recruiting another participant, and whether the file says that reward depends on a sale of the product to an ultimate user. Record who the file says buys the product. Do not decide that the plan is a pyramid scheme.
- Basis: Checked against the linked sources on 22 October 2026. Confirm the current instrument before reliance.

## Notes

- The guidance says there is no percentage test. A plan is not cleared because most rewards, or most revenue, come from retail sales.
- The Koscot description is the description the FTC page quotes. The lawyer reads the plan against that description.

## Sources

- [FTC, Business guidance concerning multi-level marketing](https://www.ftc.gov/business-guidance/resources/business-guidance-concerning-multi-level-marketing) (checked 2026-10-22)
- [15 USC 45, Federal Trade Commission Act section 5](https://www.law.cornell.edu/uscode/text/15/45) (checked 2026-10-22)

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*