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Defining the Gray_Part IV

Defining the Gray_Part IV

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Published by kevin_thompson

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Published by: kevin_thompson on Mar 25, 2009
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05/10/2014

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P
YRAMID
S
CHEMES
:
 
Saving the network marketing industry bydefining the gray
byKevin Thompsonkevin@theadvocategroup.net
copyright of Advanced Advocates, LLC.
 
IV.
 
A
MWAY
:
IT TAKES A LICKIN
ANDKEEPS ON TICKIN
In King and Robinson’s book, they state, “Look at virtuallyany aspect of the rise and development of network marketing and you will see Amway’s fingerprint.”
In thelate 1970s, the Federal Trade Commission began looking atAmway’s business model to determine whether it wasoperating as an illegal pyramid scheme.
The case wasdecided in Amway’s favor and became the backbone of thenetwork marketing industry. The FTC determined Amwaywas not a pyramid scheme because they had policies in place that encouraged retail salesand prevented distributor abuse. These policies adopted by Amway became known as
 
 [Retail sales rules]  could go unenforced, or even if they were ostensibly enforced, could be circumvented  by distributors, who may have an incentive to ‘certify’ their sales in order to qualify for higher bonuses.
 
 
38
 
 
39
 
the
 Amway Safeguards.
 
The safeguards designed to encourage retail sales are asfollows:
a.
 
The Ten Customer Rule—The
 Amway
ten customer rule stated that“distributors may not receive a performance bonus unless theyprove a saleto each of ten different retail customers during each month.”
The judgefound Amway’s ten customer rule a sufficient policy towards encouragingretail sales to nonparticipants.b.
 
Seventy Percent Rule—The
 Amway
seventy percent rule requireddistributors to resell at least seventypercent of the products they purchasedeach month to bona fide customers.
The rule ensured that distributors didnot attempt to secure performance bonuses solely on the basis of personalpurchases.
 
Since
 Amway
, most network marketing companies have a form of these safeguards. Asevidenced by later opinions, these safeguards are worthless unless they are effectivelyenforced.
 
 If a network marketing company lacks effective policies requiring its sales

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