Amway MLM amidst scams and bad publicity
About two centuries ago, the idea of multi-level marketing was conceived. Gradually, MLM became a common term for people wanting to have their own business minus spending a fortune and stressing out on paperwork. One of the big names in MLM and direct selling is Amway. For some time now, “MLM” has been almost synonymous to “scam”. 52 year-old Amway is not exempted from this accusation.
Often referred to as “pyramid scam”, the stigma, as expected, continue to alarm people. In fact, the number of searches for “pyramid scams”, which is 49,500 monthly global searches, is almost 67% more compared to “mlm business opportunities”, which comes to over 33,000 monthly searches.
Lawsuits Filed Against Amway
In 1985, in response to the request of the attorney of Rick Setzer, a former Amway Diamond and ADA board member, to receive a copy of the lawsuits filed against Amway and its founders from 1975 to 1985, Amway attorneys said:
“The request imposes an undue burden in that the number of lawsuits filed against Amway Corporation and/or Richard DeVos and/or Jay Van Andel for the past ten years represents literally thousands of lawsuits, with the file on each lawsuit varying from several pages to entire rooms filled with documentation.”
The point is there are plenty of them. Below are just a few of the legal cases that put Amway in the bad light.
In 1979, FTC investigation said that Amway business practices did not qualify as a pyramid scam. They were, however, guilty of exaggerating the income that their representatives actually earned.
Canada filed a case against Amway for tax evasion and customs fraud in 1983, where the latter pleaded guilty. According to Rich DeVos, this may be their greatest moral or spiritual challenge.
Amway was accused of “objectionable practices” in 2007 by the UK DTI. On the condition that the company discloses their full earnings and publish it publicly, among other conditions, the case against Amway was dismissed in 2008.
Correcting the Mistakes
In 2008, searches on “pyramid scams” spiked and continued to increase in 2009. Although the figures are not dramatic, 2010 to present shows a decrease in numbers. FTC reports say that although there was an increase in the number of complaints concerning fraud between 2008 and 2009, the total consumer fraud loses decreased by almost $100 million. Over the years, governments of different countries have been more vigilant towards illegal MLM practices.
Amway has also done its part, which is especially evident in their Business Reference Guide. In fine print at the bottom of the pages discussing the compensation plan, you’ll read these:
“The average gross monthly income earned by “active” IBOs was %115 US.”
“Approximately 66%of all IBOs of record were found to be active.”
“Based on an independent survey during 2001, “Active” means an IBO attempted to make a retail sale or presented the Amway Global Independent Business Owner Compensation Plan, or received bonus money, or attended a company or IBO meeting in 2001. “Gross Income” means the amount received from retail sales, minus the cost of goods sold, plus the amount of Performance Bonus retained. There may be significant business expenses, mostly discretionary, that may be greater in relation to income in the first years of operation.”
While it is possible that Amway still has piles of lawsuits filed against them, the company remains to be one of the top MLMs in the world; but like in any kind of transactions, be sure that you’ve done your research well.