- The FTC and the state of Washington announced a $225 million settlement with Amway Corp. and two of its affiliates, World Wide Group LLC (WWG) and Leadership Team Development Inc. (LTD), resolving allegations that the companies use unfair and deceptive tactics to recruit members to their direct selling and multilevel marketing opportunity. Amway offers a money-making opportunity that it claims gives individuals, referred to as Independent Business Owners (IBOs), the chance to own and operate their own business selling a variety of consumer products ranging from nutritional supplements to energy drinks to health and beauty products. In the complaint, the FTC and Washington allege that Amway and two of its affiliates, WWG and LTD, use a variety of deceptive and unfair tactics, including misrepresentations about likely earnings, to incentivize and pressure IBOs to buy Amway products they don’t want that end up being difficult to sell.
- The complaint alleges that Amway and its affiliates deceptively instruct IBOs to falsely report selling products that they in fact did not sell to create the appearance that the Amway opportunity revolves around selling products rather than attempting to recruit new IBOs to purchase Amway products. The proposed order settling the allegations imposes a $225 million judgment, nearly all of which will go to IBOs recruited by WWG and LTD who lost money. In addition, the proposed order requires Amway, WWG, and LTD to change their practices, including requiring IBOs to sell to others at least 70% of the products they purchase from Amway each month.
- Additionally, it requires recruiters to receive substantially reduced compensation if the IBOs they recruit buy products but do not resell them; IBOs need to report all of their customer sales promptly, including the actual sales price, and Amway will send receipts to all of an IBO’s customers. Amway must terminate IBOs who fake sales or teach others to do so, and Amway’s sales records will be audited regularly by an independent outside auditor. Lastly, IBOs will be required to receive training on these rules and others before being allowed to recruit, and Amway must require approved providers, including WWG and LTD, not to charge new IBOs for any training or services during their first year.