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Amway
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Amway Corp. (short for "American Way") is an
American multi-level marketing (MLM)
company that sells health, beauty, and home
care products.[2][3][4] The company was
founded in 1959 by Jay Van Andel and Richard
DeVos and is based in Ada, Michigan.[5]
Amway and its sister companies under Alticor
reported sales of $8.9 billion in 2019.[1] It is the
largest multi-level marketing company in the
world by revenue.[6] It conducts business
through a number of affiliated companies in
more than a hundred countries and territories.
Amway Corp.
Headquarters in Ada, Michigan
Company type Private
Industry Multi-level marketing
Founded November 9, 1959; 66
years ago
Founder Richard DeVos
Jay Van Andel
Headquarters Ada, Michigan, United
States
Area served Worldwide
Key people Steve Van Andel (co-
chairman)
Doug DeVos (co-
chairman)
Milind Pant (CEO)
Products Cleaning agents · skin
care · personal care ·
cosmetics · dietary
supplements · protein
supplements ·
beverages · cookware ·
water purifiers · air
purifiers
Brands Amway Home, Glister,
G&H, Nutrilite, Artistry,
AmwayQueen, eSpring,
Atmosphere, XS Energy
Revenue US$ 8.1 billion (2022)[1]
Number of employees 15,000+[1]
Parent Alticor
Website [Link]
.com
Amway has been investigated in various
countries and by institutions such as the US
Federal Trade Commission (FTC) for alleged
pyramid scheme practices. The company has
paid tens of millions of dollars to settle these
suits.[7][8][9][10][11][12] In 1983, Amway admitted
to defrauding the Canadian government of
customs duties and taxes by falsely
undervaluing goods it imported into the
country over a period of 15 years; it had to pay
a fine.[13] Between 2007 and 2008, Amway
was found guilty of illegal business practices in
India, a ruling upheld by the Supreme Court of
India and followed in 2021 by India's
Enforcement Directorate attaching company
and bank assets, identifying Amway's business
model as a pyramid fraud and its product
offerings a masquerade.[14][15][16]
History
Founding
Amway Japan head office
Amway Vietnam (Hồ Chí Minh
City)
Jay Van Andel and Richard DeVos had been
friends since school days and business
partners in various endeavors, including a
hamburger stand, an air charter service, and a
sailing business. In 1949, they were introduced
to the Nutrilite Products Corporation[17] by Van
Andel's second cousin Neil Maaskant. DeVos
and Van Andel signed up to become
distributors for Nutrilite food supplements in
August.[18][page needed] They sold their first box
the next day for $19.50, but lost interest for the
next two weeks. They traveled to Chicago to
attend a Nutrilite seminar soon afterward, at
the urging of Maaskant, who had become their
sponsor. They watched promotional filmstrips
and listened to talks by company
representatives and successful distributors,
then they decided to pursue the Nutrilite
business. They sold their second box of
supplements on their return trip to Michigan,
and rapidly proceeded to develop the business
further.[18][page needed]
Earlier in 1949, DeVos and Van Andel had
formed the Ja-Ri Corporation (abbreviated
from their respective first names) to import
wooden goods from South American countries.
After the Chicago seminar, they turned Ja-Ri
into a Nutrilite distributorship instead.[19] In
addition to profits on each product sold,
Nutrilite offered commissions on sales made
by new distributors introduced to the company
by existing distributors—a system known as
multi-level marketing or network marketing. By
1958, DeVos and Van Andel had built an
organization of more than 5,000 distributors.
However, they and some of their top
distributors formed the American Way
Association, or Amway, in April 1959 in
response to concerns about the stability of
Nutrilite and in order to represent the
distributors and look for additional products to
market.[20]
Their first product was called Frisk, an organic
cleaner developed by a scientist in Ohio.
DeVos and Van Andel bought the rights to
manufacture and distribute Frisk, and later
changed the name to LOC (Liquid Organic
Cleaner).[21] They subsequently formed the
Amway Sales Corporation to procure and
inventory products and to handle sales and
marketing plans, and the Amway Services
Corporation to handle insurance and other
benefits for distributors.[22] In 1960, they
purchased a 50% share in Atco Manufacturing
Company in Detroit, the original manufacturers
of LOC, and changed its name to Amway
Manufacturing Corporation.[23] In 1964, the
Amway Sales Corporation, Amway Services
Corporation, and Amway Manufacturing
Corporation merged to form the Amway
Corporation.[24]
Amway bought a controlling interest in Nutrilite
in 1972[25] and full ownership in 1994.
International expansion
Amway expanded to Australia in 1971, to parts
of Europe in 1973, to parts of Asia in 1974, to
Japan in 1979, to Latin America in 1985, to
Thailand in 1987, to China in 1995,[26] to Africa
in 1997, to India and Scandinavia in 1998, to
Ukraine in 2003, to Russia in 2005,[27] and to
Vietnam in 2008.[28]
In 2014, a Russian loyalty card program called
"Alfa-Amway" was created when Amway joined
with Alfa-Bank.[29]
Amway was ranked by Forbes as the 42nd-
largest privately held company in the United
States in 2018,[30] and as the number one
largest company on the Direct Selling News
Global 100 list in 2018.[31]
Quixtar
Main article: Amway North America
The founders of the Amway corporation
established a new holding company in 1999,
named Alticor, and launched three new
companies: a sister (and separate) Internet-
focused company named Quixtar, Access
Business Group, and Pyxis Innovations. Pyxis,
later replaced by Fulton Innovation, pursued
research and development and Access
Business Group handled manufacturing and
logistics for Amway, Quixtar, and third-party
clients.[32]
The main difference was that each
"Independent Business Owner" (IBO) could
order directly from Amway on the Internet,
rather than from their upline "direct
distributor", and have products shipped
directly to their home. The Amway name
continued being used in the rest of the world.
Virtually all Amway distributors in North
America switched to Quixtar, prompting Alticor
to close Amway North America after 2001. In
June 2007, it was announced that the Quixtar
brand would be phased out over an eighteen–
to twenty-four–month period in favor of a
unified Amway brand (Amway Global)
worldwide.[33]
Global markets
Brands
Ditto Delivery
Business model
Sports sponsorships
Politics and culture
Pyramid scheme allegations
Robert Carroll, of the Skeptic's Dictionary, has
described Amway as a "legal pyramid
scheme", and has said that the quasi-religious
devotion of its affiliates is used by the
company to conceal poor performance rates
by distributors.[108]
FTC investigation
Main article: In re Amway Corp.
In a 1979 ruling,[24][109] the Federal Trade
Commission found that Amway did not fit the
definition of a pyramid scheme because (a)
distributors were not paid to recruit people, (b)
it did not require distributors to buy a large
stock of unmoving inventory, (c) distributors
were required to maintain retail sales (at least
10 per month), and (d) the company and all
distributors were required to accept returns of
excess inventory from down-level distributors.
[110][111]
The FTC did, however, find Amway "guilty of
price-fixing and making exaggerated income
claims";[112] the company was ordered to stop
retail price fixing and allocating customers
among distributors and was prohibited from
misrepresenting the amount of profit, earnings
or sales its distributors are likely to achieve
with the business. Amway was ordered to
accompany any such statements with the
actual averages per distributor, pointing out
that more than half of the distributors do not
make any money, with the average distributor
making less than $100 per month. The order
was violated with a 1986 ad campaign,
resulting in a $100,000 fine.[113][114]
Studies of independent consumer watchdog
agencies have shown that between 990 and
999 of 1000 participants in MLMs that use
Amway-type pay plans in fact lose money.[115]
[116]
According to The Skeptic's Dictionary, "In
the United States, the Federal Trade
Commission requires Amway to label its
products with the message that 54% of
Amway recruits make nothing and the rest earn
on average $65 a month."[117]
Amway India
In September 2006, following a public
complaint, Andhra Pradesh and Telangana
state police (CID) initiated raids and seizures
against Amway distributors in the state, and
submitted a petition against them, claiming the
company violated the Prize Chits and Money
Circulation Schemes (Banning) Act.[118] They
shut down all corporate offices associated with
the Amway organization including the offices
of some Amway distributors. The enforcement
said that the business model of the company is
illegal.[9][119] The Reserve Bank of India (RBI)
had notified the police that Amway in India may
be violating certain laws regarding a "money
circulation scheme" and the IB Times article
writes that "some say ... Amway is really more
about making money from recruiting people to
become distributors, as opposed to selling
products".[9] In 2008, the state government of
Andhra Pradesh enacted a ban on Amway
media advertisements.[118]
On August 6, 2011, Kerala Police sealed the
offices of Amway at Kozhikode, Kannur, Kochi,
Kottayam, Thrissur, Kollam and
Thiruvananthapuram following complaints.[10]
[120][121]
In November 2012, the Economic
Offences Wing of Kerala Police conducted
searches at the offices of Amway at
Kozhikode, Thrissur and Kannur as part of its
crackdown on money chain activities and
closed down the firm's warehouses at these
centres. Products valued at 21.4 million rupees
(about US$400,000 at the time) were also
seized.[122] Later, Area manager of Amway, P.
M. Rajkumar, who was arrested following
searches was remanded in judicial custody for
14 days.[123]
On May 27, 2013, Crime Branch officials of
Kerala Police arrested William S. Pinckney,
Managing Director & CEO of Amway India
Enterprises along with two other directors of
the company from Kozhikode. The three were
arrested on charges of running a pyramid
scheme.[11][124] They were granted bail the
next day and the business was unaffected. On
June 8, 2013, Kozhikode Court lifted the freeze
on Amway offices in Kerala.[125] On May 26,
2014, Pinckney was arrested by Andhra
Pradesh police on the basis of a consumer
complaint that alleged unethical circulation of
money by Amway. He was subsequently
arrested in other criminal cases registered
against him in the state on allegations of
financial irregularities by the company.[126]
Pinckney was jailed for two months until being
released on bail.[126][127][128]
In 2017, a Chandigarh court framed charges,
under Section 420 of the Indian Penal Code
and the Prize Chits and Money Circulation
Scheme (Banning) Act, against two directors
of Amway India, William Scot Pinckney and
Prithvai Raj Bijlani. This was based on a
cheating case filed by eight complainants in
2002, following which the Economic Offences
Wing had filed chargesheet in 2012. A revision
plea moved by the two Amway officials against
the framed charges was dismissed in 2018.
[129][130]
In April 2022, the Enforcement Directorate
attached both movable and immovable assets
of Amway India worth ₹757 crore
(US$90 million) including the firm's factory in
Dindigul along with bank accounts under the
Prevention of Money Laundering Act (PMLA).
[131]
U.S. class action settlement
On November 3, 2010, Amway announced that
it had agreed to pay $56 million—$34 million in
cash and $22 million in products—to settle a
class action that had been filed in Federal
District Court in California in 2007.[8] The class
action, which had been brought against
Quixtar and several of its top-level distributors,
alleged fraud, racketeering, and that the
defendants operated as an illegal pyramid
scheme.
Amway, while noting that the settlement is not
an admission of wrongdoing or liability,
acknowledged that it had made changes to its
business operations as a result of the lawsuit.
The settlement is subject to approval by the
court, which was expected in early 2011.[8] The
economic value of the settlement, including
the changes Amway made to its business
model, totals $100 million.[132]
Lobbying for deregulation
The DeVoses supported an amendment to the
US House of Representatives' omnibus
Financial Services and General Government
Appropriations bill for fiscal year 2018 by US
Representative John Moolenaar that would
have limited the ability of the FTC to
investigate whether MLMs are pyramid
schemes.[133] The amendment would have
barred the Treasury Department, the Justice
Department, the Small Business
Administration, the Securities and Exchange
Commission, the FTC, or any other agencies
from using any monies to take enforcement
actions against pyramid operations for the
fiscal year.[134] It also adopted provisions from
H.R. 3409, the so-called "Anti-Pyramid
Scheme Promotion Act of 2016",[135] which
would blur the lines between legitimate MLM
activity and pyramid schemes established
under the original 1979 FTC case by deeming
sales made to people inside the company as
sales to an "ultimate user," thus erasing the
key distinction made in the ruling between
sales to actual consumers of a product and
sales made to members of the MLM network
as part of recruitment of members or to qualify
for commissions.[134][135][136] The amendment
was opposed by a coalition of consumer
interest groups including Consumer Action, the
Consumer Federation of America, Consumers
Union (the publisher of Consumer Reports
magazine), Consumer Watchdog, the National
Consumers League, and the United States
Public Interest Research Group (US PIRG),[135]
as well as Truth in Advertising ([Link]) in its
original incarnation.[136]
Other legal actions
Other issues
See also
References
Books
External links
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