Lately, there have been a lot of Amway pyramid scheme claims flying around the internet. It begs the question, is Amway a Ponzi scheme? The short answer is NO, and I’ll explain why shortly. Before that, here’s an overview of the company to give you a clearer understanding of its origin, structure, and operations:
Amway Overview
| Company | Amway Corp. |
| Founders | Richard DeVos Sr and Jay Van Andel. |
| Website | amway.com. |
| Telephone Numbers | 1-800-253-6500(USA and MAC Islands), 1-800-265-5470(Canada), and 1-809-372-5587(Dominican Republic). |
| Operations | Multi-Level Marketing company dealing in a wide range of products including skin and personal care products, cleaning agents, dietary supplements, cookware, beverages, water purifiers, and air purifiers, |
| Market Jurisdictions | Global. |
| Headquarters | Ada, Michigan, USA. |
| Associated Brands | Amway Home, AmwayQueen, Artistry, Nutrilite, XS Energy, Atmosphere, G&H, and Glister. |
| Total Number of Employees Globally | Over 15,000. |
Before addressing the widespread Amway pyramid scheme rumors lately flying around the internet, here’s what you need to know about multi-level marketing companies:
Notably, these entities are not necessarily fraudulent as you’ve been made to believe.
There are legitimate MLM companies and illegitimate ones that are deceptive. Taking that into account, it’s important to know the distinction between the two types of entities.
1. Legitimate MLM Companies
These companies have the following characteristics:
- One they primarily focus on selling actual products or services rather than recruiting people.
- Two, they have a reasonable compensation structure where their members earn commissions based on their sales and the sales made by those they recruit.
- Three, are recognized as legitimate by the relevant regulatory authorities.
2. Illegitimate MLM Companies
On the contrary, unlawful multi-level marketing companies have certain characteristics as highlighted below:
- One, they primarily focus on recruiting members of the public as opposed to selling actual products or services.
- Two, they have an unsustainable compensation structure where the companies pay existing members, using the funds paid by new recruits, which is untenable in the long run. In other words, your earnings from these entities largely depend on how many individuals you recruit, not how many products or services you sell.
- Three, they push you to purchase their products or services at regular intervals regardless of your inventory levels, as a distributor. And sometimes, your eligibility for compensation and certain bonuses may be based on your product purchases.
- Five, they may require you to pay fees for “training”, “marketing materials”, and other so-called expenditures repeatedly.
- Six, they are not recognized as lawful by the relevant regulatory authority.
Why Amway Pyramid Scheme Claims Are Misleading
First, Amway is registered and licensed to operate in many countries including the USA, Canada, Dominican Republic, Malaysia, and India.
Second, unlike Ponzi schemes, the company doesn’t require registration fees.
Third, the company sells actual products, unlike pyramid schemes which mainly focus on recruiting members. It offers a range of commodities, including homecare, beauty, healthcare and nutritional supplements.
Fourth, having been in operation for over 60 years, the company has a long, great track record. Operating in many countries and territories globally, it has been recognized as the #1 direct selling company worldwide, thanks to its sales performance.
Fifth, the Federal Trade Commission (FTC) recognized it as a legitimate multi-level marketing entity, following a court verdict. Here’s more about the case:
In March 1975, the FTC accused Amway of operating as an illegal pyramid scheme that had violated its regulatory laws. In the case that went on for 4 years, the commission accused the company of engaging in severely unfair practices that it believed created an uneven playing field for its distributors. It claimed that Amway:
- Engaged in retail price fixing.
- Allocated customers among its distributors.
- Restricted distributors’ advertising strategies and source of supply as well as outlets through which they may resell.
- Misrepresented the information about its distributors’ potential income and profitability.
- Failed to disclose to its new distributors the substantial expenses that came as a result of dealing with their products. It also accused the company of failing to disclose to its new distributors that it already had too many existing distributors.
However, the court issued a verdict in 1979, ruling that Amway wasn’t a pyramid scheme, favoring the company. After this ruling, the FTC recognized the company as a legitimate multi-level marketing entity. However, the commission ordered Amway to stop engaging in these unethical practices. You can read more about the case in this section of the FTC’s website.
Lost Money To a Ponzi Scheme Or Any Other Scam?
If so, and you have evidence, you can report the company or individual to your regulatory authority. Proof of payment(s) alongside communication can be sufficient evidence for the authorities to take up your case. To do so and seek assistance, go to this page, or write to us at scamread@scamreader.info.
Final Thoughts
To sum up, Amway is not a pyramid scheme because the government considers it a lawful multi-level marketing entity. The Federal Trade Commission Consumer Advice asserts that pyramid schemes or Ponzi schemes are unlawful MLM companies. Therefore, I hope this clarification helps debunk the false Amway Ponzi scheme claims.