Sunday, 27 December 2009

Amway pyramid is crumbling

Here is the summary prepared by Pyramid Scheme Alert for 2009 reproduced to inform our readers.
Thirty years ago, Amway narrowly escaped an FTC prosecution to shut it down for pyramid fraud. Since then, it has been a rogue corporation on a global rampage, fleecing tens of millions with its hallmark "endless chain" income promise. Amway is the largest multi-level marketing (MLM) scheme in the world, and the prototype of nearly all the others. Signs compellingly point toward its end time and threaten the future of all other "endless chain" fraudsters. In the latest developments, the publication of Eric Scheibeler's first-person account of business opportunity fraud at Amway, Merchants of Deception has prompted Pyramid Scheme Alert to ask the Direct Selling Association to investigate its largest member. The DSA has referred it to its "Code of Ethics Administrator" who in turn wrote that he has referred to it Amway's own "Code of Ethics Administrator." Referencing the material in Merchants of Deception, Pyramid Scheme Alert also asked the US Attorney General, Eric Holder, to open an investigation. Some highlights of Amway's long rap sheet are summarized:
· Amway received a huge fine for tax fraud in Canada, the largest ever levied at that time.
· CBS 60 Minutes and NBC Dateline have done devastating exposés of Amway-related deception in recruitment and income promises.
·One state in India has brought criminal fraud case against Amway.
· Prosecutors in England came within a hair of driving Amway out of the UK. A judge decided to allow it to continue to operate, but he imposed two fatal restrictions on it: lowered prices and no more "tools" business. Price gouging and foisting phony "motivation" CDs and seminars on new recruits to fund the "Top Guns" are pillars of Amway's model.
·In the USA, Amway was prosecuted by the State of Wisconsin that found that 99% of all distributors were losing money. This is exactly the same loss rate the UK officials calculated that English consumers suffered every year for 30 years!
·In North America today Amway is the target of large class action cases brought by distributors in the US, charging that Amway is a fraud. A second similar case has been brought in Canada.
·Despite threats and lawsuits, consumers have published multiple websites detailing deception, false income claims, bogus testimonials, and massive consumer losses.
·Amway's extensive political lobbying and influence-buying, especially its close ties to the Bush Administration, and the conflicts of interest with FTC officials have been exposed.
·Amway is in multiple litigations to stop its distributors from moving to other MLMs. The MLM scheme, Monavie, has pulled away thousands of former Amway distributors, including a number of top gun recruiters.
·Some of Amway's former "top gun" distributors have gone public and admitted in court cases that Amway is an illegal pyramid scheme, with a near 100% dropout rate, and that less than 5% of its products are ever retailed. This means that Amway's profits come directly and almost totally from the lost investments of the salespeople, not from sales to the public. They also admit that the high incomes and lavish lifestyles of the upline that are paraded in front of new recruits to demonstrate that Amway "works" are in fact a fraud. The money actually comes from selling the recruits "motivation and training" tools, not from earning commissions on Amway sales.
·Amway's multi-tiered business model has now been banned in China, closing off its last geographic market to continue the pyramid expansion.
Amway has taken extreme, evasive maneuvers, to cloud the truth and throw regulators, the media and consumer activists off its track.
·It has massively recruited outside the USA where regulations in some countries don't exist, are poorly enforced, or will not outlaw a US-based scheme for political reasons.
·It has also aggressively attacked whistle blowers with lawsuits. It has sued even small-time distributors who dared to leave and try to work for other MLMs.
·Amway changed its name to Quixtar, which it said was a a subsidiary of another new name, "Alticor." Many consumers unwittingly joined the "new" company not realizing it was still just Amway.
·Now, in yet another evasive maneuver, the company has yet another new name, Amway Global, and is running TV ads claiming to be "household name" and a "direct seller." In fact virtually no consumers buy Amway products other than the salespeople, and those purchases are not driven by demand or even brand awareness but rather are tied to Amway's misleading income promises.
Despite the diversions, escapes and disguises, the truth keeps doggedly following Amway. Now, the most famous Amway whistle blower - Eric Scheibeler - survived Amway's lawsuits and has told his inside story in a full length book, which is attracting media attention.
Based on the revelations in Scheibeler's book, Pyramid Scheme Alert has sent formal requests to the president of the Direct Selling and its Ethics Division asking for an investigation of Amway. The DSA has responded that it is taking the matter up with Amway.
A formal request has also been sent to the Attorney General, Eric Holder, asking for federal inquiry into the facts and allegations in the book. FTC officials have also been asked to investigate.Pyramid Scheme Alert will maintain its "Amway Watch" in 2010, and will report on responses of the Department of Justice, Federal Trade Commission, legal actions in India, enforcement in England, class action suits in the USA and Canada, the Direct Selling Association's actions, and media investigations.


dtytrivedi said...

and by the way are u sure that all the data given are correct?

because i doubt it. Anyways for u guys it makes no sense u guys would love to reference if any thing written against amway.

the source is irrelevant for u guys.

shyam please, it hurts me to say that in ur profession u would be doing the same thing, showing the people a blog or website without knowing its credibility.

That's irrelevant that u are in favor or against amway, but ur source of information is not credible at all. It annoys me to say that a journalist and an advocate cites blogs and opinions for proving his point.

Tex said...

I doubt the DSA effort will lead to anything meaningful, as the experience I had with them is well documented on my blog.

I also recently posted a "Reader's Digest" version of the history of the Amway tool scam here: as well as a comment to a memo former Amway and current Mona Via LCK Orrin Woodward sent to Eric Scheibeler:

Legal Scan said...

Trivedi, you are entitled to doubt and it would be surprising if you don't. Instead of pointing out where the reports are wrong, you simply say they have no credibility. Isn't it true, China banned the business model of Amway. You are just denying or rejecting whatever is written against Amway because you support an illegal business model as an IBO. I can understand your stand. But a truth is a truth whatever you believe or doubt.

dtytrivedi said...

legal scan tell me when

the post said " China banned the business model of Amway"

what u are saying was true in the late 90's. After that amway was among the first to get the license in 2005 after 7 yrs. I would be more than happy to accept if u show me the web link incase that issue has happened recently.

Tex said...

Legal Scan,

China is Communist, hardly a country we should look up to for business model guidance. The major reason China outlawed the traditional MLM model is there were a LOT of scams going on in China as they were partially opening their economy in the 90s, so they clamped down on all of them, including traditional MLM, which is still practiced in nearly every other country on the planet. Case closed.

somebody said...

i agree with dtytrivedi in fact Tex is trying to over react on this issue. all the ref notified are very old ones and which have been cleared. as said the bonuses earned are for tools sales, i dont think that is the case. any BSM sales accounts for commission. to know or not to know Amway you have to first be an ABO (there is no cost for joining in india) this sums up everything. topic closed.

Cliffhanger said...

It's so silly. All of you.
Amway is silly. And I'll tell you why. Amway promises the chance for everyone to make Rs. 60,000 per month.
Based on a model of 21%, if the business volume is Rs. 6,00,000.

Clearly, lot of people sign up for this Amway business. Let's assume 1000 people.

Of which to make a business volume of Rs. 6,00,000, one would need about 225 distributors downstream. Hence splitting the 1000 amway members, we get four groups of 225 each. Each group is headed by 1 person. And so, that one person makes some money (21%.

As for the rest, you are promised money. Think about it. How much of these products can be sold ??

If one has to make money out of Amway, everyone has to quit their jobs and focus on consuming everything that Amway produces. And that would require time. And inclination. Not everyone wants to clean their dishes 5 times a day so that they can move on to consuming the next bottle of liquid detergent for the next month, just so the sales are still on.

It is silly. Think it through. People don't consume that much. You can't sell that much.
And those of you that want to make money by simply recruiting, you won't make money unless the people in your downline don't sell the products. You get a cut on how much they sell. If they don't sell, there won't be any money for you either. And the market doesn't sustain it. The only reason Amway is alive and not illegitimate is because it is still trying to keep up. Once the FTC or the Supreme Court of India or the CCI bans it, it's gone. And with it, your money.

225 people have to not make money for one person to make money. If you're thinking of joining Amway now, think twice. By now, the market would have stagnated.

All said and done, go home and do the math. There is no way that it is possible for one person to consume all of Amway's products in a month. And so you can't sell that stuff. And so, you have to consume on your own. And you will. Because they will promise you that if you hang in there, there will be millions coming your way. Lemme tell you this. Even if you do make a diamond or jewel or something like that, you don't make money unless your downstream makes money. And you don't get to return the products either. You'll have to buy and stock.

Goodluck and may logic rule your choices.

ddchandu said...

The AMWAY Market gets stagneted only when whole world's FMCG and Health Industry gets stagnetd... Its true and quiet Understandable