I received in the post a letter originating from a David Rhodes (no
secret there) which basically acts in this way - it goes to 200
people, with a name at the top. These 200 then send £10 to the name at
the top, delete that name and mail 200 people with the previously
second name now at the top. The recipients of these then mail £10 to
that person and put the next name top. There are 6 names on the list
and the recipient who sends on puts their own name 6th.

Is this legal ?

They say the 200 names should come from telephone directories etc ?
How come mine has fallen twice ? Is it likely they lied, and instead
people take mailing lists from Amazon or someone who would sell them ?

What about the Mailing Preference Service ? Are you breaking the law
sending to someone registered with them,  or does that only apply to
corporates ?

Are they breaking the law sending this to me ?
Would I be breaking the law sending it on (if I could be bothered !) ?

wolvies

It appears that there are several laws that could be applied here.
Whether, in fact, these laws would actually be brought to bear against
those who pass the letter along is doubful.

Pyramid schemes are illegal in the UK under Statutory Instrument 1997,
No. 30, of the Trading Schemes Regulations 1997:

Her Majesty's Stationery Office
http://www.hmso.gov.uk/si/si1997/97003001.htm

In addition, a chain letter may be in violation of the Lotteries and
Amusement Act of 1974 and/or the Malicious Communications Act of 1988:

"...chain letters inviting participants to send money are probably
illegal under the Lotteries and Amusements Act of 1974."

BBC News
http://news.bbc.co.uk/1/hi/business/1298197.stm

"Under the Malicious Communications Act of 1988, senders of chain
letters can be prosecuted. And when a new Euro law comes into force,
legal action can be taken across borders."

Hold the Front Page
http://www.holdthefrontpage.co.uk/campaigns/000811glos.shtml

Below are excerpts from several online sources discussing chain
letters, and the David/Dave Rhodes letter in particular:

"Some individuals on the Information Superhighway have informed the
author that in the United Kingdom, ANY form of multi-level plan at all
is illegal! Even legitimate multi-level marketing methods like Amway,
NSA or Shaklee, which are legal in North America - are forbidden in
the U.K.!

...Perhaps the most well-known form of the classic chain letter is the
one that's been floating around the Information Superhighway - the
Internet. This one identifies a Dave Rhodes as the originator of the
plan."

TOTSE: Bad Ideas
http://www.totse.com/en/bad_ideas/scams_and_rip_offs/brkchain.html

"Have you noticed that 'David Rhodes' and 'Sally Brooker' seem to be
fading towards, while 'Jason Clifford' is becoming the norm?... He has
made, he says, '£654,000 to date and am on target to make my first £1
million within the next few months'.

...The statement 'This is a legitimate business opportunity - a
perfectly legal money plan' is as false as everything else in the
letter. Money plans are not legal! And chain letters are illegal
lotteries - the trouble is today that the government seems to be
unaware of laws passed in 1997 to make 'money plans' illegal, and the
police force today have no time, money or energy to chase those who
promote this kind of illegal lottery."

Home Business World
http://www.home-business-world.co.uk/magazine/homebusinessworldwide/articles/scam_watch.htm

"Make.Money.Fast chain letters
Chain letters work (if that's the right word) by persuading the victim
to send a copy of the letter to several new recipients, and to send
something else (usually money) to the people named in the letter. By
adding their name to the bottom of the list, the victim hopes to
eventually get some money back from other people further down the
chain. This is usually a forlorn hope, as I will show.

The classic Make.Money.Fast letter consists of several sections: 

"Hi, my name is Dave Rhodes..." 
The suggestion that you're missing out on some easy money. 
Several testimonials from "satisfied investors". 
A list of names and addresses. 
Instructions to send money to some, or all, of the people on the list.
Instructions to forward the letter to as many people as possible,
modifying the list of names by removing the top entry and putting your
own at the bottom.
An assurance that the whole thing is perfectly legal. 
The exact details vary slightly. Often the victim will be sending
money to people as "payment for reports" or with the instruction
"please add me to your mailing list" (why?)

The letter will be very insistent that the scheme is perfectly legal,
and will often quote section numbers of the "Postal Lottery Laws" as
if they confirmed the legality of the scheme. In fact the section
numbers are from the U.S. Code, and are the very ones that outlaw
chain letters! Look at what the U.S. Code has to say about postal
lotteries ( 18 USC sec 1302 ), mail fraud ( 18 USC sec 1341 ), or wire
fraud ( 18 USC sec 1343 ) for example. Also check out the United
States Postal Inspector's office Chain Letter Page for more details.

"But I'm in the UK (Australia, Sweden...)"
It's still illegal. In fact it's illegal in practically every country
with an Internet connection."

ZedToo: How to Avoid Spam
http://www.zedtoo.demon.co.uk/no-spam/mmf.html#MMF

Here's an interesting article from the Guardian about a search for the
elusive "Dave Rhodes":

Guardian Unlimited
http://money.guardian.co.uk/Print/0,3858,4635633,00.html

A look at the mathematics of the situation:

"The Dave Rhodes chain letter is a famous example of electronic chain
letter which has appeared several times on the Internet. It has a list
of 10 people and suggests you forward the letter to to bulletin boards
(not people)! A twist with this letter is that you start to receive
money when you get to position 5 on the list. Just assume for this
analysis that only the person who posted the message you read was
honest (that is, just making copies and passing it along - not in on
the beginning). Let's see how the generations go until you could see
some results:
 Copies in	  Your
generation	position

        10	   --
       100	   10
     1,000	    9
    10,000	    8
   100,000	    7
 1,000,000	    6
10,000,000	    5

So by the time you could get any money out of this, the message would
have appeared on over 11 million bulletin boards! Do you think there
are that many? Even if we were only talking people, that would be a
healthy number. There aren't enough people in the US (let alone
bulletin boards) to maintain two more generations."

Rutgers University
http://www.cs.rutgers.edu/~watrous/chain-letters.html

Of all the sites I encountered while researching this matter, the most
impressive collection of useful info (and a large list of links) was
found on the Rutgers site linked above. I highly recommend reading
this page in its entirety.

Search terms used:

"chain letter" + "david rhodes"
"chain letter" + "dave rhodes"
"chain letter" + "legality" + "uk"
"chain letter" + "illegal" + "uk"
"chain letter" + "law" + "uk"
"pyramid scheme(s)" + "legality" + "uk"
"pyramid scheme(s)" + "illegal" + "uk"
"pyramid scheme(s)" + "law" + "uk"

Please keep in mind that Google Answers is not a source of
authoritative legal advice; the material above is intended for
informational purposes only, and should not be viewed as a substitute
for the services of a legal professional.

Thanks for an interesting question. If anything is unclear, or if a
link does not function, please request clarification; I'll be glad to
offer further assistance before you rate my answer.

Best wishes,
pinkfreud

Hey, excellent answer !!! I wonder which poor misguided soul sent it
to me...presumably different from the one who previously did. I guess
occasionally someone somewhere receives a tenner, but it sounds worse
than the Lottery for hope and rather more illegal, lol. Thanks as
always !

Thank you very much for the five-star rating and the nice tip! I'm
glad to have been able to help. My sweet, trusting grandmother lost a
lot of money over the years "investing" in chain letters, so I'm
always interesting in discouraging this sort of thing.

~pinkfreud