Amway: Difference between revisions

Important Notice: Please consider reading below article before, pursuing any association with Quixtar/Amway. Government documents

• Prepared Statement of Debra A. Valentine, General Counsel for the U.S. FTC, on "Pyramid Schemes"

Amway

File:Cy183.jpg
Company type	Private
Industry	Multi-level marketing
Founded	1959
Headquarters	Ada, Michigan
Key people	Steve Van Andel Doug DeVos Lynn Lyall
Number of employees	17,000
Website	www.amway.com

Amway is a multi-level marketing, or network marketing, company founded in 1959 by Jay Van Andel and Rich DeVos. The company's name is an abbreviation of "American Way."^[1] Based in Ada, Michigan, the company and family of companies under Alticor reported sales of $6.4 billion for the performance year ending August 31, 2005, marking the company’s sixth straight year of growth. Its product lines include personal care products, jewelry, Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics. Amway conducts business through a number of affiliated companies in more than ninety countries and territories around the world.^[2] In the United States and Canada it now operates as Quixtar.

The original intent of Amway's founders was to create a business using a novel means of product distribution that facilitates entrepreneurialism, understanding of economic management, and economic independence among its associates (i.e. distributors; the term currently in use is Independent Business Owners, or IBOs). Rich DeVos also wrote a book called Compassionate Capitalism while Jay Van Andel wrote a book entitled An Enterprising Life.

Some controversies have developed around their business models.

Ja-Ri Corporation was the original multi-level marketing distributorship for Nutrilite nutritional products, founded by Jay Van Andel, Richard DeVos and Michael Pacetti in 1949.^[3] Ja-Ri's name comes from the founders' first names, Jay and Richard. Friends since childhood, Van Andel and DeVos became business partners in endeavors such as a hamburger stand, air charter service, and a sailing business.

Ja-Ri was incorporated in 1959, and changed its name to "Amway" in 1963.^[4] All Amway and Quixtar distributors are "downline" to the founders. Their first product was the cleaner, L.O.C. In 1964 the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation, merged to form a single company.^[5]

Amway bought the Mutual Broadcasting System radio network in 1977 and sold it in 1985.

Amway expanded overseas to Australia in 1971, to Europe in 1973, to parts of Asia in 1974, to Japan in 1979, to Latin America in 1985, to China in 1995, to Africa in 1997, and to Russia in 2005. Amway India was established in 1995 and commenced commercial operations in 1998 ^[6].

The product line grew, with a new detergent SA8 added in 1960, and later the hair care range Satinique (1965) and Artistry(1968). Amway bought control of Nutrilite in 1972 and full ownership in 1994.

In the 1979 In re. Amway Corp. (93 F.T.C. 618) ruling,^[7] the Federal Trade Commission found that Amway does not qualify as an illegal pyramid scheme since the main aim of the enterprise is the sale of product and money is paid only for business volume, personal and group. It did, however, order Amway to change several business practices and prohibited the company 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. ^{[citation needed]}

Amway (and its American online incarnation, Quixtar) have been controversial due to allegations that these companies are pyramid schemes or cults, despite the 1979 FTC ruling^[5] that legitimized the Amway business. The case revealed that, as of 1979, most of the products sold by Amway were to the Independent Business Owners (IBOs) themselves for personal consumption rather than to retail consumers who weren't enrolled as IBOs. Buying products or directing clients to buy from Amway or Quixtar gives IBOs points and they are paid back on the number of points that they generate from personal consumption or from client volume. An existing IBO can sponsor others to get an IBO number so that they can help others divert their buying habit from other stores to Amway or Quixtar. Thus, the business grows as a greater number of people join the group. The share of profit is based on the volume that an IBO is responsible for each month, therefore an IBO may actually make more money per month than the IBO who sponsored them into the Business.

In 1983, Amway pleaded guilty to criminal tax evasion and customs fraud in Canada, resulting in a fine of $25 million CAD, the largest fine ever imposed in Canada. The company was fined another $45 million CAD in 1989 to settle a suit brought by Canada's trade office.^[8][9]

In a 1994 interview, Amway co-founder Rich DeVos stated that this incident had been his greatest "moral or spiritual challenge", first in "soul searching as to whether they had done anything wrong" and then for pleading guilty for technical reasons, despite believing they were innocent of the charges. DeVos stated he believed that the case had been motivated by "political reasons".^[10]

The Recording Industry Association of America (RIAA), as part of its anti-piracy efforts, sued Amway and several distributors in 1995. The RIAA alleged that copyrighted music was used on "highly profitable" training videotapes. Amway settled the case out of court for $9 million.^{[citation needed]} In a related lawsuit initiated by the distributors involved, the Court established that Mahaleel Lee Luster, who had been contracted to make the videotapes, had violated copyright without the knowledge of three of the five of those distributors.^[11]

Amway grew quickly in China starting from 1995. In 1998, after abuses of illegal pyramid schemes led to riots, the Chinese Government enacted a ban on all direct selling companies, including Amway.^[12] After negotiations, some companies like Amway, Avon, and Mary Kay continued to operate through a network of retail stores promoted by an independent sales force. Although multi-level payments were still banned, it is alleged that Amway didn't significantly alter its pay scheme, and justified them as payments for services. ^[13] China introduced new direct selling laws in December 2005, and in December 2006 Amway was one of the first companies to receive a license to resume direct sales. At the time they had a reported 180,000 sales representatives, 140 stores, and $2 billion in annual sales.^[14] Multi-level marketing (commissions on sales of new sales persons recruited) is still forbidden under the new laws.

On August 14 2007 the Supreme Court of India has order the Andhra state police to complete the investigate against Amway in 6 Months.The public interest petition alleges that the activities of the company violated laws related to drugs, income tax and sales tax. The state high court had declared that Amway's business scheme was an offence under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978.^[15]

In 1999 the founders of the Amway corporation launched a sister (and separate) Internet-based company named Quixtar. The Alticor corporation owns both Amway and Quixtar, plus several other concerns. Quixtar replaced the North American business of Amway in 2001, with Amway operating in the rest of the world; however, in June 2007 it was announced that the Quixtar brand would be phased out over a 18 to 24 month period in favor of a unified Amway brand worldwide.^[16]Amway's internet sales in Europe are conducted via their Amivo website. The Access Business Group was split off to handle manufacturing.

Later additions to the core product range included water filters and cookware.^[17] The eSpring water filter, introduced in 2000 and developed by Alticor, includes eCoupled wireless power induction technology. Alticor subsidiary Fulton Innovation introduced the technology in other consumer electronic products at the 2007 International Consumer Electronics Show. Companies licensing the technology include General Motors, Motorola and Visteon.^[18][19]

In December 2006, Alticor secured the naming rights for the 17,000-seat basketball arena in Orlando, Florida - home of the Orlando Magic which are owned by the family of Rich DeVos. The arena, formerly known as the TD Waterhouse Centre, is now called Amway Arena.

In 2007, following investigations that lasted more than a year, the Department of Trade and Industry (DTI) in UK issued petitions against Amway as well as two IBO organizations Britt World Wide and Network 21, and initiated civil court proceedings. DTI's objections include misrepresentation of the financial rewards expected from the Amway business, excessive promotion of BSMs (Business Support Materials like books, tapes, CDS, meetings, websites) and Amway's failure to prevent these abuses.

Subsequently, Amway imposed a ban on sale of BSM in UK that are not authorized and distributed by Amway. It further announced a 120 day moratorium on registration of new IBOs in UK, and a thorough review of its business practices globally ^{[20] [21]}.

Commentators have identified Amway as supporting the U.S. Republican Party,^[22] and its founders contributed $4,000,000 to a conservative 527 in the 2004 election cycle.^[23] Amway states that its business opportunity is open to people regardless of their religious and political beliefs [3].

Former Amway CEO Richard DeVos has been connected with the dominionist political movement in the U.S.^[24]

Multiple high-ranking Amway leaders, including Richard DeVos, Dexter Yager, and others are also owners and members of the board of Gospel Films, a producer of movies and books geared towards conservative Christians as well as co-owner (along with Salem Communications) of Gospel Communications^[25].^{[citation needed]}

One of Amway's most successful distributors, Dexter Yager, has attacked Democratic President Bill Clinton.^[26] and allowed Republican George W. Bush to send messages to thousands of downline distributors using Yager's voicemail system.^[27]

Doug Wead, who was a Special Assistant to former U.S. President George H. W. Bush, is a successful IBO who is a regular speaker at group rallies.^{[citation needed]}

Amway cofounder, the late Jay Van Andel (in 1980), and later his son Steve Van Andel (in 2001) were elected by the board of directors of the United States Chamber of Commerce as chairman of that organization. ^{[citation needed]}

In May 2005, former Amway President Dick DeVos, one of the wealthiest and largest charitable givers in Michigan, announced that he would run against Governor Jennifer Granholm in Michigan's 2006 gubernatorial election. DeVos, running as a Republican, won 42% of the popular vote, while Granholm won 56%.^{[citation needed]}

Amway touts the environmental benefits of many of its products, and in June 1989 the United Nations Environmental Program's Regional Office for North America recognized it for its contributions to the cause of the environment.^[28]

Several groups including those associated with the anti-cult movement have expressed concern that tactics of AMOs may constitute cult-like activity. Steven Hassan's Freedom of Mind Center lists the practices of AMOs as potentially abusive according to his "BITE" Model of mind control.^[29] Other similar organizations that have expressed concern with the activities of AMOs in practice include FACTnet,^[30] Cult Awareness and Information Centre (Australia),^[31] and others. The Rick Ross Institute keeps a collection of related material in its website.^[32]

A Dateline NBC report from 2004 picked up the criticism against Amway's successor Quixtar and explicitly linked the two companies as being effectively one and the same.^[33]

One controversy that Amway was involved with was an urban legend that the (old) Procter & Gamble service mark is in fact a Satanic symbol or that the CEO of P&G is himself a practicing Satanist (in some variants of the urban legend, it is also claimed that the CEO of Procter & Gamble donated "satanic tithes" to the Church of Satan^[34]). Procter & Gamble alleged that several Amway distributors were behind a resurgence of the urban legend in the 1990s and sued several independent Amway distributors and the parent company for defamation and slander. After more than a decade of lawsuits in multiple states, by 2003 all allegations against Amway and Amway distributors had been dismissed, with the trial judge declaring "Throughout this and its related protracted and duplicative litigation, P&G has tried to evade the law of the case doctrine, and has squandered scarce judicial resources".^[35][36] However, in October 2005 a Utah appeals court reversed part of the decision dismissing the case against four Amway distributors, and remanded it to the earlier court for further proceedings.^[37] On 20 March 2007, Procter & Gamble was awarded 19.25 million dollars by a U.S. District Court jury in Salt Lake City, in the lawsuit filed against four Amway distributors in 1995.^[38][39]

• Michael Moore's 1989 documentary Roger & Me profiles a woman named Janet who quits as a feminist radio host after General Motors' closings of several factories in their hometown of Flint, Michigan send the town into an economic tailspin. The woman, whose husband is a GM auto worker who may soon lose his job, joins Amway as a saleswoman, and is seen demonstrating how she uses "color consulting" to analyze potential customers.
• Michael Douglas, acting as President Andy Shepherd in the movie The American President, responds to a T.V. clip of his rival Bob Rumson, portrayed by Richard Dreyfuss, who declares "My name is Bob Rumson, and I'm running for President!" by snidely saying "Sure glad he cleared that up, because that crowd was about to buy some Amway products!"
• Gil Gunderson, a recurrent character in hit TV show The Simpsons famous for being employed in several low-income and degrading jobs, such as erotic dancer or janitor, was shown in one episode as an Amway salesman.
• In the 2007 movie, Believe The Movie, after Tom Hawks' involvement in the failed Pyramid scheme of Believe International, he announces that Believe wasn't very good and that he has found something much better. He refers to his decision to join up with Amway by saying, "Have you ever heard of Amway?"
• The 1999 movie Go featured a bit of dialogue that has become famous: "You want us to sell Amway?!" "It's Confederated Products. It's a... It's a different company. It's a different quality of product."

• Ain't It Great: A Look Inside Amway published September 1, 2001 by Authorhouse; ISBN 0-75962503-4
• An Uncommon Freedom, the Amway Experience and Why It Grows published 1982 by Revell; ASIN B000HFJE1Y
• American Victory: The Real Story of Today's Amway published April, 1997 by Chapel & Croft Publishing; ISBN 0-96451716-7
• Amway: The Cult of Free Enterprise published December 1, 1985 by South End Press; ISBN 0-96487951-4
• Amway: The True Story of the Company That Transformed the Lives of Millions published September 1, 1999 by Berkley Publishing Group; ISBN 0-42517040-3
• Behind the Smoke and Mirrors: Amway Motivational Organizations published September 1, 1999 by Backstreet; ISBN 0-96710702-4
• Commitment to excellence: The remarkable Amway story published 1986 by Benjamin; ISBN 0-875021360
• Empire of Freedom: The Amway Story and What It Means to You published September 3,1997 by Prima Lifestyles; ISBN 0761510885
• The Possible Dream: A Candid Look At Amway published 1977 by Revell; ISBN 0800708571
• Promises to Keep: The Amway Phenomenon and How It Works published 1986 by Berkley Books; ISBN 0425098567

• Profiles of the American Dream : Rich DeVos and Jay Van Andel and the Remarkable Beginnings of Amway 1997 by PREMIERE FILMS; ASIN: B000OK0YRA

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• Amway Corporation
• Alticor Inc. (Amway & Quixtar Parent Company)
• Amway Japan Limited
• Amway India
• Amway Europe
• Amway Latin America
• Independent Business Owners Association International

• Alticor Inc.
• Yahoo! - Amway Corporation Company Profile

• "She Did It Amway" Mother Jones, September 1996
• "No Amway Christian" Augusta Free Press, February 4, 2005
• "With soap in their hands and hope in their hearts" Bangalore Magazine
• "Amway.com" Forbes, June 25, 2001
• "In pursuit of the almighty dollar" MSNBC Dateline, May 7, 2004
• Quixtar's response to the Dateline report
• "Amway II: The Kids Take Over", BusinessWeek, February 16, 1998