Referral selling is when you’re persuaded to buy goods or services with the promise of a rebate, commission or other benefit in exchange for supplying information that helps the business sell to other consumers. Promising future commissions or rebates that depend on other events is illegal in certain circumstances.
It’s 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 percent 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. But Bec didn’t get the rebate as her friends didn’t join the gym.