Amway

Amway is an international multi-level marketing system comprised of a company called Amway Corporation and several surrounding but legally separate Amway Motivational Organizations (AMOs). Amway Corporation, a privately held company founded in 1959 by Jay Van Andel and Rich DeVos and based in Ada, Michigan[?], has annual sales of about $5 billion. It manufactures and sells personal care products and markets products from other companies.

In 1999 the founders of the Amway corporation launched a sister (and separate) internet-based company named Quixtar. Both Amway and Quixtar are owned by Alticor[?]. Quixtar took over the North American business of Amway in 2001.

The system

Anybody can become an Amway distributor; distributors may purchase products from Amway at a rate published as wholesale price. Up to 30% of these monthly purchases may be used for personal consumption, the rest has to be sold to others. If a distributor can convince a new participant to join the system, the distributor becomes the new person's sponsor, or upline. Amway distributors receive monthly payments based on the amount of sales their group generates; the group consists of all people sponsored by the distributor, and all people sponsored by those, and so on. It is not possible to join without a sponsor, and one has to purchase an "Amway Opportunity Kit" in order to become a distributor. Amway claims to have 3 million distributors worldwide, including 500,000 in the U.S. A very fast growing market is Japan with 1 million distributors.

The AMOs offer free motivational speeches for people who have not yet joined the Amway system and sell motivational seminars, tapes and literature to Amway distributors.

Amway employs a system of "levels" to reward successful distributors; higher level distributors act as mentors to newer distributors, organize regular meetings of their group and derive most of their profit from the sale of motivational tools to them.

Political causes

Amway Corporation actively and openly supports the US Republican Party and other right-wing causes. They also tout the environmental benefits of many of their products, and in June 1989 they were recognized by UNEP's Regional Office for North America for their contributions to the cause of the environment.

Criticism

While supporters of the system point out that Amway is an easy way to earn money on the side and that it makes sense to buy products for personal use "from your own business" wholesale, critics charge that even the wholesale prices published by Amway are often higher than retail prices elsewhere. Many of their products such as cleaning solutions are highly concentrated, and therefore may still be competitively priced when that is taken into account, and the manufacturer generally claims that their products are of higher quality than less-expensive similar products.

Like many multi-level marketing operations, Amway has been called a pyramid scheme. Critics point out that participating in the system is not free, that AMOs often emphasize the recruitment of new participants over selling products and that many distributors spend little time actually selling products to others. It is also alleged that the above-mentioned "70% rule" is not sufficiently emphasized to new recruits, and that few products are ever sold to people outside of the Amway organization.

Reports that AMOs target psychologically vulnerable people and that some distributors have become alienated from family and friends who did not support their activity are rejected by Amway supporters as exaggerated.

Legal rulings

In a 1979 ruling, the FTC found that Amway does not qualify as an illegal pyramid scheme since the main aim of the enterprise is the sale of product. It ordered Amway to change several business practices and prohibited the company from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve. Amway was ordered to accompany any such statements with the actual averages per distributor. Typically, more than half of the distributors do not make any money, with the average distributor making less than $100 per month. The order was violated with a 1986 ad campaign, resulting in a $100,000 fine.

In 1983, Amway pleaded guilty to tax evasion and customs fraud in Canada, resulting in a fine of 25 million Canadian dollars, the largest fine ever imposed in Canada.

External links and references

• Amway Corporation: http://www.amway.com/
• A site critical of Amway: http://www.getfacts.com/amway/
• FTC order: http://www.mlmlegal.com/amway