YRAMID

CHEMES

Saving the network marketing industry bydefining the gray

byKevin Thompsonkevin@theadvocategroup.net

IV.

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

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[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.

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the

Amway Safeguards.

The safeguards designed to encourage retail sales are asfollows:

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.