What makes Amway Controversial?An Amway MLM Review
Home-based business seems to be the trend nowadays. One of the most common home-based jobs is multi-level marketing (MLM). When you hear “MLM”, you think “Amway”.
Having encountered thousand of lawsuits filed against Amway and other huge MLM companies, it doesn’t come as a surprise that people are a bit skeptic or iffy about joining an MLM. The reality is, more often than not, they unfortunately bear the stigma “pyramid scam”.
FTC Case Against Amway
One of the controversies that Amway faced was the 1979 US Federal Trade Commission investigation. Although the FTC did not qualify Amway as a pyramid scheme, the MLM company was found guilty of exaggeration of income. To recruit downlines, Amway representatives allegedly claimed higher income than they actually did.
Today, Amway has the Business Reference Guide and the Rules of Conduct from the IBOAI (Independent Business Owners Association International) website. The Business Reference Guide is a helpful tool especially for those considering being an IBO. It contains Amway’s compensation plan, as well as some sample computations for bonuses. However, it still does not clearly state how much the start up cost would be to join Amway. The Rules of Conduct is a handbook for all IBOs and Sponsors. Any representative who violates the rule will jeopardize their MLM business.
In the Business Reference Guide, Amway includes a fine print on the compensation plan section stating 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.”
The Anti-Amway Say…
“Small” start up cost… then expenses balloon.
One ex-IBO reports that although he paid $140 (early 2000) for the sign-up fee and 4 websites, he ended up paying more along the way. He factors in travel expenses, meeting costs (you order something if you’re meeting a prospect in a coffee shop), and fees on training materials. For the next 3 months, he received from Amway one check for $6, one for $38, and another for $56 as his commissions. That’s a total of $100.
Inventory cost plus the space to store your products
Although Amway says it’s not a must, IBOs find it necessary to stock on products, which will be later on sold to consumers or downlines. With Amway products being pricey, previous IBOs say it’s not easy selling them, and it’s never easy getting Amway to buy them back as the contract states.
It’s a hundred-story MLM
Amway has about 23 levels in their MLM leadership positions. From their Business Reference guide, they state this:
“Approximately 66% of all IBOs of record were found to be active.”
An independent source reports that out of the active IBOs, only 2% become direct distributors. And from that 2%, only 1.7% reaches Diamond distributorship. If there are 3 million IBOs worldwide, only 674 will get to the Amway Diamond level throughout the world.