Friday, 28 August 2015

Hyderabad High Court posts Amway quash petition to Tuesday

The High Court at Hyderabad on Friday posted to Tuesday next the quash petition filed by Amway India with the plea that CID has no locus standi to investigate the criminal cases filed against the company. The petition appealed to the High Court to quash the FIRs (First Information Report) filed in various police stations.
The Amway India filed the writ petition in the High Court challenging the locus standi of the Crime Investigation Department to investigate the criminal case filed against him. It may be recalled that the same company filed a writ petition last year demanding transfer of all criminal cases filed against the company to a single investigating agency as criminal cases were filed at various parts of the two States.
The single judge bench presided by Justice B Siva Sankar Rao reminded that it was Amway India who asked for transfer of the criminal cases to a single agency for investigation. He said that their counsel was present in the court and everyone agreed to the proposal when the cases were transferred to the CID. “How could they contest now that CID was not the single agency to investigate the criminal case,” he wondered. The judge said that the argument of the Amway India was not tenable. Expressing readiness to hear their argument further, the judge posted the hearing to Tuesday next. 

Tuesday, 11 August 2015

Amway subsidiary under fire over 'misleading' recruitment

A direct sales company has been accused of misleading young adults as it aggressively 
attempts to recruit new sellers.
A subsidiary of Amway, which has thousands of sellers across Australia selling health, 
beauty and home goods, hosted a series of information sessions in Melbourne recently, 
telling young people that they would be given free mentorship but failing to mention it 
was for Amway.
One of those young people who was invited to a recent recruitment meeting in Doncaster, 
Liam, told Fairfax Media that the "very secretive" session was misleading and he felt let 
down by those involved.
"It was never mentioned that Amway was part of this. It seemed to be geared to people in 
my age group; that was most of whom turned up."
"My impression of this group is that they tried to hide that it's actually Amway," he 
said.
Liam, who is studying business at university and works at a supermarket, said he was 
approached by a regular customer who asked if he was interested in being mentored. He 
said the long-time customer did not mention direct selling would be involved.
Liam said the meeting was run by a representative of Team Mak and Gen*E Group. Neither 
company mentions Amway on its websites or that direct selling is the business. Instead, 
they emphasis group holidays overseas, conferences and motivation quotes.
Team Mak is an official subsidiary of Amway Australia. There are dozens of such 
subsidiaries, or "Independent Business Owners", around the world, which have been 
established by successful sellers, who can earn a commission on new recruits and their 
sales.
On its website, Team Mak says it is an "association of people, using proven business, 
mentoring and training resources to help people achieve a greater level of financial 
freedom and more time to enjoy their lives".
Team Mak director Peter McKenna said he was concerned to hear about Liam's experience, 
adding that anyone within the company whose conduct was misleading would be retrained.
"We teach a transparent process where people are shown a video before they are even 
invited to a meeting. The video reveals the relationship between Team Mak and Amway," he 
said.
Amway Australia distanced itself from the recruitment drive, with its general manager 
Michial​ Coldwell saying that type of approach was "totally unacceptable".
"There have been occasions over time where Amway has found that distributors have 
attempted to prospect on a "look and see" basis rather than by using the business 
opportunity or brand as a first instance approach," he said. "That strategy is not 
encouraged by Amway."
Coldwell said Amway's rules of conduct specifically preclude "misleading prospective 
distributors into believing that the approach is anything other than for the purpose of
either the sale of Amway products or the offer of an Amway business opportunity".
"Our rules of conduct are very strict in the conditions they place on our Independent
Business Owners, and we have a demonstrable track record of enforcing those rules."
According to the Direct Sellers Association of Australia, combined sales through direct 
selling reached $1.5 billion in 2013, with more than 32,000 people part-time and 7700 
people full-time workers. One-quarter are involved in complementary healthcare products, 
followed by cosmetics and household goods.
Direct Selling Association of Australia executive director John Holloway said the 
industry had changed dramatically in the past 30 years.
"From time to time, you're going to get people who rely on practices of the past and I'd 
be amazed if Amway put up with it," he said.
"Legitimate direct selling derives from the sale of product, not the recruitment of 
people."

Tuesday, 7 July 2015

5 Reasons Herbalife’s Survey Won’t Save It from Prosecution

Bonnie Patten (TruthInAdvertising.org) 
Deconstructing Herbalife's defense that a survey found most people join for discounts
 
In the recent Bostick v. Herbalife class-action case, which settled in California federal court in May, Herbalife’s primary defense as to why it isn’t a pyramid scheme was a static 2013 survey estimating that approximately 73% of its members joined the company to receive a wholesale price on products. In other words, Herbalife, a Los Angeles-based multi-level marketing company that is also under investigation by federal officials, believes it can shield itself from prosecution by claiming that a majority of people join only to receive lower prices on its dietary supplements and weight-loss products, not to earn money. The Bostick court opined that “this evidence seriously undermines Plaintiffs’ endless chain scheme claim, as it suggests most members did not join ‘for the chance to receive compensation’ for recruiting new members.” But here are five reasons why this defense simply won’t work. 
 
1. Follow the money. Determining whether an MLM is a pyramid scheme or not by analyzing people’s motivation for joining an organization is of little to no value. As Koscot, a cosmetics MLM that the FTC deemed an illegal “entrepreneurial chain” in one of its first pyramid scheme actions, and its progeny have made clear, the real issue is what the company motivates its distributors to do – that is, whether the company focuses on paying distributors for recruitment rather than retail sales. And this is not an analysis that can be isolated to one particular moment in time. Quite to the contrary, in determining whether or not an organization is operating a pyramid scheme, the data must be reviewed over time to see if there is a common pattern and practice of ongoing reward for recruitment with little evidence of sustained consumer demand. See Omnitrition, 79 F.3d at 782 (citing Koscot, 86 F.T.C. at 1181) (“The promise of lucrative rewards for recruiting others tends to induce participants to focus on the recruitment side of the business at the expense of their retail marketing efforts, making it unlikely that meaningful opportunities for retail sales will occur.”)
2. Totally irrelevant. Assuming Herbalife’s survey is accurate (which is a big assumption), it simply means that its business can be divided into two primary segments: its retail discount programme and its distributor programme. That 73% joined Herbalife at one moment in time for a retail discount doesn’t mean that the 27% engaged in direct sales for Herbalife are not involved in a pyramid scheme. And as Bostick made clear, those involved in the distributor programme purchased a disproportionately larger amount of products than did the discount buyers. See FTC v. Burnlounge, Inc., 753 F.3d 878, at 881 (“The evidence at trial showed that BurnLounge’s business had two primary aspects – its Retailer programme and its Mogul programme. . . The Mogul programme was the only aspect of BurnLounge that the district court found to be a pyramid; accordingly, this opinion focuses on the Mogul programme.”)
3. Prosecutors don’t care. There are two prongs to determining whether a company is operating a pyramid scheme: (1) the right to sell a product, and (2) the right to receive rewards, which are unrelated to sale of the product to the ultimate user, in return for recruiting other participants into the programme. The primary reason why someone says they joined Herbalife is of little consequence in determining whether Herbalife’s focus is on recruitment with rewards rather than sales of merchandise. Which is to say that why someone joins a business doesn’t obviate the fact that the business may still be a fraud. (See Webster v. Omnitrition International, Inc., 79 F.3d 776, 782 (9th 1996) in which the court found that MLM Omnitrition was a pyramid scheme because “[t]he mere structure of the scheme suggests that Omnitrition’s focus was in promoting the programme rather than selling the product.”)
4. Identity crisis. While Herbalife is a multi-level marketing company, for purposes of its pyramid scheme defense it relies on static survey evidence that 73% of its members actually consider it more of a buyers’ club (a la Costco). The argument goes like this: internal consumption by the majority of Herbalife members amounts to sales to the ultimate users so any rewards paid on these sales are related to the sales of products to ultimate users and have nothing to do with recruitment or illegal schemes or the like. But here’s the problem with this argument, there has been and always will be internal consumption in MLMs – it is a constant that can be wholly eliminated from determining if a company is a pyramid scheme because it does not (and never will) answer the question of how an MLM’s bonus structure operates in practice. Moreover, such static survey information fails to capture the true life cycle of these discount customers, who generally quickly become inactive and no longer make any purchases. (See FTC v. Burnlounge, Inc., 753 F.3d 878 at 887, which found that “[i]n practice, the rewards BurnLounge paid for package sales were not tied to the consumer demand for the merchandise in the packages; they were paid to Moguls for recruiting new participants. . . . Rewards for recruiting were ‘unrelated’ to sales to ultimate users because BurnLounge incentivised recruiting participants, not product sales.”)
5. Devil’s in the detail. The January 2013 distributor research survey that Herbalife holds up as its golden goose to defend itself against pyramid scheme allegations is largely a mystery as Herbalife keeps the document behind its corporate veil. And while it may not be worth the paper that it is written on, in the end it really doesn’t matter because it cannot prove that Herbalife is or is not a pyramid scheme.
 

Friday, 26 June 2015

Bombay High Court allows FSSAI to recall Amway products

Nagpur: After Maggi, it's now the turn of network marketing major Amway Enterprises to 
withdraw its products from the market. The Nagpur bench of Bombay High Court on Wednesday 
directed Food Safety and Standard Authority of India (FSSAI) to go ahead with its action 
of recalling seven Amway products.
A division bench comprising justice Bhushan Gavai and justice Indira Jain tersely asked 
FSSAI what was preventing them from taking action when products were found unfit for 
consumption in their scientific studies. The court then adjourned hearing of PIL filed by 
social workers Sachin Khobragade and Jammu Anand through their counsel Nihal Singh Rathod 
by eight weeks.
Earlier, FSSAI filed an affidavit through senior counsel Mehmood Parasher and Rohan 
Malviya that as many as 37 products of the chain marketing major were put under the 
scanner. Of these, seven were found to contain more than permissible quantity of minerals 
and vitamins as per studies conducted by Indian Council of Medical Research (ICMR) and 
National Institute for Nutrition (NIN). All these products were found without mandatory 
licenses and no-objection certificates (NOC) or product approvals from the food 
authority.
Out of 37 products were under the scanner, seven including Nutrilite Natural B tablets, 
Calcium Magnesium D, Nutrilite Iron Folic tablets, Nutrilite Bio C, Positrim Vanilla, and 
Nutrilite Kids Drink in mixed fruit flavour had been rejected by the food authority. NOC 
of Nutrilite Salmon Omega 3, Nutrilite CH Balance and Nutrilite Fiber had expired, still 
they were being sold.
The main reason for rejection of NOC was that ingredients such as protein and minerals 
exceeded beyond permissible limit in the products. Some products contained protein powder 
that had been denied NOC, approval or license by FSSAI, whose product approval committee 
had rejected all such products. However, even after warnings, the company failed to
withdraw them from the market. The petitioners alleged that despite being directed by 
FSSAI to recall them, the company is still selling them openly in the market.
Citing provisions of Food Safety and Standards Act 2006, the petitioners prayed for 
directives to FSSAI to recall all Amway products which are being sold without valid 
license/approval/NOC, and investigations from an independent body into entire episode. 
They also demanded conducting audit of FSSAI.

AMWAY PRODUCTS WITH EXPIRED NOC
Nutrilite Salmon Omega 3
Nutrilite CH Balance
Nutrilite Fiber
PRODUCTS UNFIT FOR HUMANS
Nutrilite Natural B tablets - Excess vitamins
Nutrilite Calcium Magnesium-D - Excess minerals, vitamins
Nutrilite Iron Folic tablets - Excess minerals, vitamins
Nutrilite Bio C - Excess vitamins
Positrim Vanilla - Excess vitamins
Nutrilite Kids Drink in mixed fruit flavour - Can't be given without doctor's 
recommendation

http://timesofindia.indiatimes.com/city/nagpur/HC-allows-FSSAI-to-recall-Amway-
products/articleshow/47806874.cms
(With inputs from Ritika Singh)

Thursday, 18 June 2015

Raid on Amway outlet for selling banned baby food

HYDERABAD: In the wake of the controversy over Maggi noodles and cries for action against 
other such ready-to-eat food items, the State Commission for Protection of Child Rights 
(SCPCR) conducted a raid on the Amway outlet in Somajiguda here on June 15, 2015 for allegedly  selling baby food and drinks banned by the erstwhile united Andhra Pradesh government. 
On June 5, the SCPCR received a complaint from Shyam Sundar, secretary of Corporate 
Frauds Watch Society, against Amway, for allegedly selling products by issuing misleading 
advertisements. Almost 18 products banned by the food and safety department authorities 
were on display at the outlet, alleged SCPCR. 
Officials of the SCPCR said that the Supreme Court on December 2010 had cracked down on the company on misbranding charges and selling of unhealthy products. The SCPCR alleged that Amway continued to sell products not good for children flouting the apex court orders. Products such as protein powder, chewable multi-vitamin/mineral tablets, dietary supplements, kids' toothpaste, etc, hazardous to health, were being sold by Amway, the SCPCR officials said. 
"Several products banned by the SC are on display. As per SC orders, neither are these 
allowed to be sold nor put on display in their showroom or godown," said Achyutha Rao, 
member of SCPCR.
Rao confirmed that legal action would be taken against the company for flouting the SC 
order. A notice has also been sent to the principal secretary of health Suresh Chanda, he 
said. 
"We have received several complaints based on which we are planning to conduct raids on several upmarket food joints and outlets that are involved in such illegal activities. 
This is just the beginning," said Rao. 
Meanwhile, Amway denies the allegations put forth by the SCPCR. 
"Cases referred by the members of SCPCR were filed way back in 2007 in undivided AP and are currently sub-judice in the respective forums. We had no prior notice or intimation 
about this visit. We are not selling any product for which approval has been denied by 
FSSAI," said an Amway spokesperson. 
This is not the first time that Amway has been in the news for wrong reasons. Last year, 
the Hyderabad police had arrested Amway India's CEO, S Pinckney, following a consumer complaint against the direct-selling firm. In June 2006, Hyderabad police had shut down all offices of Amway citing illegal business model of the multi-level marketing firm.

http://timesofindia.indiatimes.com/city/hyderabad/Raid-on-Amway-outlet-for-selling-
banned-baby-food/articleshow/47682847.cms

Friday, 5 June 2015

Corporate Frauds Watch seeks action against Amway products too.




On the lines of action against Nestle product Maggi, Corporate Frauds Watch sought action against the misbranded and adulterated products of Amway India in the country. Amway has already been facing criminal charges in more than one State in India. Corporate Frauds Watch in a plea to the director of Institute of Preventive Medicine, Public Health Labs and Food (Health) Administration, Hyderabad sought against Amway.

To                                                                                        Date: 5/6/2015
The Director,
Institute of Preventive Medicine,
Public Health Labs & Food (Health) Admin,
Narayanaguda, Hyderabad-500029.

Respected Sir,

Sub:  Representation to initiate action against the misleading and misbranded products of M/s Amway India Pvt. Ltd, Somajiguda, Hyderabad in terms of FSSA, 2006– Regarding.

****

1.       I, M.V. Shyam Sundar, Secretary of Corporate Frauds watch Society, Hyderabad branch, humbly submit that the Corporate Frauds Watch Society is a registered civil society organisation striving to create awareness among general public against the frauds being committed in the corporate veil. 
2.       It came to our notice that M/s. Amway India Private Ltd, Somajiguda, Hyderabad has been selling products by issuing misleading advertisements. Apart from it, several criminal cases have been pending against the products of the M/s Amway India. Still Amway has been selling the same products with impunity which is detrimental to the health of general public.  Previously, also several products of the Amway were found to be misbranded, not food and adulterated in the united state of A.P.  The Food Safety authorities of several State Governments in India have also found during their tests that the products are not safe and initiated action against the M/s Amway India Enterprises.  Several people also brought to our notice that their health was affected after using the products of Amway.  But, no action has been initiated in Telangana and Andhra Pradesh against Amway though it is aggressively selling products in the two states.
3.       In the interest of health of general public, it is prayed that the esteemed officer may be pleased to launch enquiry by testing the products of Amway regarding its genuineness in terms of the Food Safety and Standards Act, 2006 and initiate action and save the health lakhs of innocent people.

Yours faithfully,


(M.V. Syam Sundar)

Wednesday, 20 May 2015

Amway's Nutrilite in trouble

United States-based direct selling company Amway is in trouble as a lower court in Uttar 
Pradesh has pronounced that the company has been making false and misleading health 
claims for its vitamin supplement Nutrilite Daily and violating India's food law. 
United States-based direct selling company Amway is in trouble as a lower court in Uttar 
Pradesh has pronounced that the company has been making false and misleading health 
claims for its vitamin supplement Nutrilite Daily and violating India's food law.
Besides, the ruling could cast a shadow on the multinational company's flagship brand 
Nutrilite, under which it sells a range of products including vitamin supplements and 
protein powder.
After hearing a complaint filed by the food regulator, Food Safety and Standards 
Authority of India or FSSAI, the court said in a recent order that Amway has been
claiming that its product has exclusive natural extracts such as 'phytofactors plant 
compounds from Nutrilite's exclusive plant concentrates', without citing any scientific 
evidence to back it.
The court also slapped a penalty of Rs 10 lakh on the company. Amway said that it has 
already challenged the order in Food Safety Appellate Tribunal at Meerut and got a stay 
order.
The Greater Noida court also found Amway's claim - that its special coating called 
'Nutrilite exclusive nutria lock' makes it easier to swallow tablets - misleading and
without proof, and said that it fails to understand how the company's coating is 
exclusive and different from those used by several other drug making companies for the 
same purpose.
The judge also took note of the fact that FSSAI's product approval division has rejected 
applications for several other products under Nutrilite series such as Iron-Folic, 
Natural 'B' and Bio C, among others. The food regulator argued before the court that it 
has become a trend for many drug-making companies to project their medicinal products as 'food' to escape the tighter regulations under Drug and Cosmetics Act, and expensive and time consuming clinical trials mandated under it.
Leading brand consultants said the adverse impact of one subbrand has a negative rub-off  on other sub-brands under the umbrella brand. "An adverse event like this absolutely has the potential to make a dent in the brand image of the entire Nutrilite range of 
products, albeit not to the extent of damage faced by the brand of the product in 
question, Nutrilite Daily in this case," said Harish Bijoor, CEO of Harish Bijoor Consults Inc.
Amway said it doesn't think that the ruling will hit the brand image of Nutrilite in 
India.
"We have moved Food Safety Appellate Tribunal at Meerut challenging this order which 
questioned claims made through product merchandising literature of Nutrilite Daily. The 
Tribunal vide an order dated May 07, 2015 has stayed the order passed by ADM, Gautam Budh Nagar, Greater Noida. We are hopeful of getting a positive order in our appeal as we have adequate substantiation for all the claims made in the product merchandising literature of Nutrilite Daily," said an Amway spokesperson.
Claiming that Nutrilite is the world's No. 1 selling vitamins and dietary supplements 
brand, he added that all Nutrilite products globally comply with World Health 
Organisation and International guidelines like CODEX for vitamin and mineral content.
"The Nutrilite range has been manufactured and sold in India, after getting requisite 
licences under the food law, for more than a decade. Nutrilite Daily was launched in 
India in 2002 and we have lakhs of satisfied customers here," he said.
According to media reports published in March, of the over Rs 2,000 crore annual revenue that Amway clocks in India, the Nutrilite range of products accounts for 55%, beauty products portfolio contribute another 30% while the balance comes from the company's home care range.