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Referral selling 

Referral selling is when a consumer is persuaded to buy goods or services by promises of a rebate, commission or other benefit for supplying information that helps the trader sell to other consumers, and the consumer does not get the promised benefit unless some other event happens after the agreement is made.

Promising future commissions or rebates that depend on other events, such as subsequent sales is illegal in certain circumstances.

It is not referral selling for a supplier to promise a benefit for simply providing the names of consumers or helping the trader supply goods.

Example of referral selling

Bec wanted to join a gym but was worried about the cost. Before Bec signed up, the gym offered her a 25% rebate on a 12 month membership if she gave the gym the names and telephone numbers of five of her friends and those five friends took out a membership. This is illegal.

Bec thought that if she got the rebate, the gym membership would be a good deal. So she signed up, paid the full price up front and gave the gym the names and telephone numbers of five of her friends. However, Bec didn’t get the rebate as her friends didn’t join the gym.