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Amway Wins U.K. Case Over Pyramid-Scheme Allegation (Update1)
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By James Lumley Jan. 29 (Bloomberg) -- A London court refused to order the closure of Amway Corp.’s U.K. unit, rejecting government claims that the company’s business model was a pyramid scheme. Business Secretary Peter Mandelson sought a winding-up order for the company, claiming that its business model violated U.K. laws on pyramid trading. The Court of Appeal in London ruled today that a lower court correctly refused to order the closure. Amway distributes home-care products through members of the public who can earn bonuses by recruiting others as sales agents, the judgment said. Amway, based in Ada, Michigan, has annual U.K. revenue of about 13 million pounds ($18 million). It has been operating unprofitably recently, the court said. Amway said in a statement that it was pleased the court validated its current business model. The company has been in Britain for 35 years, according to its Web site. “It means the uncertainty that was hanging over us has been removed,” the company said. “It means that from now on w e can say categorically that the accusations that were made against Amway have been dealt w ith.” At a hearing in December, Mark Cunningham QC, a lawyer for the government, said Amway’s business model was “inherently objectionable.” He claimed the company was running a “get-richquick” pyramid-sales scheme. Lawyers for Amw ay said in court documents that the government is complaining about an old business model that has been changed. Today’s judgment upholds a ruling in May, w hen a lower court ruled that the government hadn’t proved its case. The case is Secretary of State for Business, Enterprise & Regulatory Reform v. Amw ay (UK) Ltd., A2/2008/1584(A), High Court (London). To contact the reporter on this story: James Lumley in London at jlumley1@bloomberg.net. Last Updated: January 29, 2009 09:49 EST

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