The Commerce Commission has warned Endeavour International Ltd that the company's retirement savings scheme, the Endeavour Plan, risks breaching the Fair Trading Act because it includes pyramid selling.

Endeavour Plan is made up of two parts. One is promoted as a unit trust and the other as a multi-level marketing scheme.

Commission Fair Trading Manager Rachel Leamy said that the part of the plan known as the Active Investor Pool, is in the Commission's opinion, pyramid selling. Pyramid selling is prohibited by the Fair Trading Act.

Promotional material for the Endeavour Plan states that every complete "network" of the Active Investor Pool has 12 levels allowing for 8,190 positions. Once a network is filled to 12 levels, investors can receive up to $7,371 per month.

However, for each of the 8,190 positions to be able to earn $7,371 per month, they would each need to fill 12 levels of 8,190 positions. This would result in more than 67 million positions having to be filled.

"With all the current publicity about the need to save for retirement, promoting the pyramid selling option of the Endeavour Plan as a retirement plan was particularly unfair," Ms Leamy said.

"The vast majority of people in pyramid selling schemes lose out. There just aren't enough people to keep them going.

"Sometimes promoters even say the scheme is 'legal' and has been 'approved by the Commerce Commission'. All pyramid selling is illegal in New Zealand, and the Commission never endorses or approves any business schemes."

Ms Leamy said Endeavour International does not appear to have gone beyond distributing promotional material and selling information booklets about the Endeavour Plan. People who have bought booklets can have their money refunded.

Endeavour International has been warned that if it continues to promote the scheme in its current form, then the Commission would have to consider taking court action to stop the Endeavour Plan.

The Commission cannot impose penalties, but it and anyone else - be they a competitor or a customer - can take court action and courts can impose fines of up to $100,000 and a wide range of injunctions and orders.

Commission had two other significant concerns about the promotion of the scheme:

· Potential investors could have been misled to believe that the Endeavour Plan was set up in accordance with the Unit Trust Act, when several requirements of that Act had not been complied with.

· The Endeavour Plan brochure falsely stated that Guardian Trust and BZW & Barclay were the fund managers for the Plan. Neither company was in place as the Plan's fund manager.

After the Commerce Commission began its investigation, a complaint was made to the Securities Commission about these two issues. The Securities Commission investigated, and, using its powers under the Securities Act, has issued a prohibition order preventing the promotion of the Endeavour Plan.

Media contact: Fair Trading Manger Rachel Leamy

Phone work (04) 498 0908, cellphone 021 662 773, home (04) 386 3110

Communications Officer Vincent Cholewa

Phone work (04) 498 0920, home (04) 479 1432