Is Amway A Scam?

[xjx388]

I'd note though the extreme skepticism to all of Amway's claims except one - when it comes to their use of the term "business owner", where you prefer their marketing screed over, for example the IRS or court statements.

No. You have it wrong. I am extremely skeptical of Amway's claims of "business ownership." That's what I've spent most of this thread saying. It is not, in actuality, a real "business opportunity," precisely because no one makes any money at it. Therefore, Amway is selling nothing but a pipe dream. I am directly attacking their "marketing screed."

So if they are lying about the opportunity and they are lying about the products what are we left with? One big lie!

You see, Amway can't openly admit that most people start an IBO simply as a buyers club. These people don't know anything about how an actual business operates and the IRS makes it clear that they are not actual businesses when they try to claim business expenses. But if Amway openly admits this, then they are basically admitting that they are a pyramid scheme according to the definition set forth in In re Amway. If Amway is a buyers club, this means that no one is following the 10 customer rule or 70% rule. In other words, the "business opportunity" is an artifice to avoid the wrath of the FTC.

 

[xjx388]

Why do you think people like myself (I'm registered with Amway in the UK) who don't even have 5 customers and €150 in over a year (and haven't attempted to) should be making money?

I don't. You haven't demonstrated that most people are like you. Since Amway sells itself as a business opportunity and people aren't allowed to market it as a buyer's club, I tend to think that most people expect to make a little money selling Amway and signing people up as IBOs. I suspect that most people do put some effort into selling product and sponsoring people but quickly find that they can't. I know for a fact that a large percentage of these people are told that "can't" means "won't," sold motivational tapes and seminars to "help" them and are thus sucked into the AMOs (or whatever they call them now).

How do I know this is common? I have the evidence of numerous Tax Court cases where people try to deduct "business expenses" from something that doesn't qualify as a business. I have the many testimonials online. I have personal experience with a group in Texas.

It tells us you believe success in a business opportunity should not include hard work over time.

Wrong. I believe a business opportunity should reward the hard work of most people who enter it. If I save my money and open a McDonald's, I will be successful if I work hard at it. If I use my expertise and passion to open a doctor's office, I will be successful if I work hard at it. But if I start an IBO, the numbers prove that I will not be successful no matter how hard I work at it.

It tells us you believe that people with small goals, who achieve them, are "failures".

Wrong again. I don't consider them failures . . . I consider them largely nonexistent. You have yet to show evidence that these people even exist. You are making an assumption based on your own motivations. I'd wager that most people who get a Microsoft Resellers certificate actually plan to sell Microsoft stuff. Just because you don't doesn't mean everyone else thinks like you do.

ETA: I have a friend who got suckered into selling Primerica. She is very earnest in this pursuit; her goal is to make $500/month to supplement her two-income family. She's been at it for about three months and hasn't seen a dime. She is strongly considering dropping it. She made that much simply waiting tables, which was her second job before she got suckered. She feels stupid, but doesn't want to admit that the "friend" that got her involved in Primerica may have led her astray. She blames herself. I wager that most people who start Amway are more like her than you.

 

[marplots]

The number of failures alone isn't enough to make the claim scam or "not a business opportunity." I say this because I participate in an online freelance brokered site with hundreds of thousands signed up, but barely 10% making any money at all. The failure rate is tremendous, but it's still an opportunity.

The critical difference between the site I pull about $15G a year from and Amway is that my income is not based on what others do to try and get ahead. I leach no money off anyone else's efforts. The concept of a downline is inherently one of victimization of those beneath you on the pyramid. It is not the same as a wholesale chain, it is fundamentally leveraging the false hopes of others to your advantage.

This is where the evil is and this evil is not diluted by the amount of good (if any) brought into the mix.

 

[marplots]

ETA: I have a friend who got suckered into selling Primerica. She is very earnest in this pursuit; her goal is to make $500/month to supplement her two-income family. She's been at it for about three months and hasn't seen a dime. She is strongly considering dropping it. She made that much simply waiting tables, which was her second job before she got suckered. She feels stupid, but doesn't want to admit that the "friend" that got her involved in Primerica may have led her astray. She blames herself. I wager that most people who start Amway are more like her than you.

Wait. Isn't Primerica a buyer's club? Cause I hear that makes it all better.

 

[xjx388]

The number of failures alone isn't enough to make the claim scam or "not a business opportunity." I say this because I participate in an online freelance brokered site with hundreds of thousands signed up, but barely 10% making any money at all. The failure rate is tremendous, but it's still an opportunity.

The critical difference between the site I pull about $15G a year from and Amway is that my income is not based on what others do to try and get ahead. I leach no money off anyone else's efforts. The concept of a downline is inherently one of victimization of those beneath you on the pyramid. It is not the same as a wholesale chain, it is fundamentally leveraging the false hopes of others to your advantage.

This is where the evil is and this evil is not diluted by the amount of good (if any) brought into the mix.

This is a good point, I think. The stock market isn't "evil" because a lot of people lose their shirts when the market tanks. But Ponzi schemes like Bernie Madoff's are evil because they depend on gaining people's confidence despite the fact that there is nothing but fluff underlying the scheme. That's why these things are called "confidence tricks" or "cons." Amway is not far removed from this.

 

[icerat]

No. You have it wrong. I am extremely skeptical of Amway's claims of "business ownership."

And yet you insist on analysing statistics with the assumption that all IBOs are operating businesses, contrary to the findings of BERR, FTC, and common sense

That's what I've spent most of this thread saying. It is not, in actuality, a real "business opportunity," precisely because no one makes any money at it.

And here you claim "no one makes any money at it" despite yourself citing sources which shows some people make millions.

But if Amway openly admits this, then they are basically admitting that they are a pyramid scheme according to the definition set forth in In re Amway.

Utter BS. Here is the definition from FTC vs Amway -

The Commission had described the essential features of an illegal pyramid scheme:
Such schemes are characterized by the payment by participants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to sale of the product to ultimate users.

The FTC went on to conclude this does not apply to Amway.

The commission in FTC vs Amway was very clear that it understood a lot of volume was from personal consumption, and it's not hidden. Quixtar (and many other MLMs) even pointed it out to the FTC in their response to their proposed business opportunity rule a few years ago -

Many customers become distributors in order to purchase products at wholesale prices. These distributors typically do not sponsor other distributors or engage in other business building activities. These distributors may receive ovenides on their personal purchases but are, in reality, consumers rather than business-builders

FTC vs Amway, findings -

In fiscal 1973/*74 the average BV for each distributor was about $33 a month. (CX 517*F, Z*95) Much of this amount is consumed by the distributors themselves rather than resold. The distributors obtain Amway products with about a 30% discount off the retail price. Many of them consume large amounts of the products every month
...
The average Amway distributor sells far less than $200 a month. (Finding 137) The vast majority of Amway distributors are in the business part*-time. Only one in four sponsors other distributors, and many apparently are distributors in order to buy Amway products** at about a 30% discount **which they consume.

In the FTC report on it's proposed business opportunity rule -

many commenters point out that MLM participants use their membership to purchase products at a discount for their own personal consumption.
(one of the sources they reference was Quixtar)

In a 2004 official FTC advisory -

Much has been made of the personal, or internal, consumption issue in recent years. In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme

If Amway is a buyers club, this means that no one is following the 10 customer rule or 70% rule.

Your insistence in maintaining this false dichotomy of buyers club or business opportunity is past irritating and evidence of the bankruptcy of your argument.

In other words, the "business opportunity" is an artifice to avoid the wrath of the FTC.

Oh yeah, poor old FTC has had the wall pulled over their eyes.

 

[icerat]

The concept of a downline is inherently one of victimization of those beneath you on the pyramid.

how?

It is not the same as a wholesale chain, it is fundamentally leveraging the false hopes of others to your advantage.

how?

(I note that your conclusion includes an assumption of "false hope".)

I note (again) FTC vs Amway, findings of the commissioner -

The Amway system does not create the potential for massive deception present in a pyramid distribution scheme which relies primarily on the profits to be made from recruiting new distributors rather than from ultimate sales to consumers. Unlike the pyramid companies, Amway and its distributors do not make money unless products are sold to consumers. The inherent potential for deception is not present in the Amway plan. In the full context of the plan, it does not have an unlawful capacity to deceive.

 

[Joecool]

how?



how?

(I note that your conclusion includes an assumption of "false hope".)

I note (again) FTC vs Amway, findings of the commissioner -

The Amway system does not create the potential for massive deception present in a pyramid distribution scheme which relies primarily on the profits to be made from recruiting new distributors rather than from ultimate sales to consumers. Unlike the pyramid companies, Amway and its distributors do not make money unless products are sold to consumers. The inherent potential for deception is not present in the Amway plan. In the full context of the plan, it does not have an unlawful capacity to deceive.

From Wikipedia:

In a 1979 ruling,[15][77] the Federal Trade Commission found that Amway does not qualify as a pyramid scheme because distributors were not paid to recruit people and had to sell products to get bonus checks, and the company was committed to buying back its distributors' excess inventory.[78]

The FTC did, however, find Amway "guilty of price-fixing and making exaggerated income claims";[79] 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.[80][

 

[Chupacabras]

So if I had 100 oranges, and I told you I had 100 oranges, and you said I had 50 apples, that would make what I said false?

But that's not what happened. Amway said "we have this much money and this many people" and then you said it wasn't true at all.

... you instead insist it's all about "chance".

But I didn't say "all". Just this business model against a paid job. Just that and no more.

Evasion noted, responding with questions, not answers.

Almo made my day by pointing to that thread he started in 2008. Its fun to "see" me! BTW, Icerat's take on the very same arguments is different.

Oh well.

 

[icerat]

But that's not what happened. Amway said "we have this much money and this many people" and then you said it wasn't true at all.

I said no such thing. What I said was it's wrong to assume all of those people are working hard trying to generate significant incomes

But I didn't say "all". Just this business model against a paid job. Just that and no more.

Here's a hint - if I use "it's all" in the context of this discussion, "it" refers to the business model.

Almo made my day by pointing to that thread he started in 2008. Its fun to "see" me! BTW, Icerat's take on the very same arguments is different

I doubt it's changed much, but I've learned stuff in the last 3 years, have you?

 

[jadebox]

Deleted ....

This game is getting tedious. It's no fun any more.

-- Roger

 

[xjx388]

And yet you insist on analysing statistics with the assumption that all IBOs are operating businesses, contrary to the findings of BERR, FTC, and common sense

I'm going on the only assumption I can logically make, since Amway forbids marketing it as a Buyers Club and because Amway requires people to run it as a business. Again, just because YOU run it as a discount club doesn't mean that this is the way most people who start an IBO run it.

The facts show (all those tax court cases) that a great deal of people think of it as a business and try to run it as such based on their limited knowledge and get busted by the IRS for trying to deduct business expenses. This is evidence that Amway is not ACTUALLY selling a business opportunity and it knows this.

And here you claim "no one makes any money at it" despite yourself citing sources which shows some people make millions.

OK, fine, I will correct myself: A select few people at the top of the pyramid are making millions, another few are making thousands under them and the vast majority are making nothing.

Utter BS. Here is the definition from FTC vs Amway -

The Commission had described the essential features of an illegal pyramid scheme:
Such schemes are characterized by the payment by participants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to sale of the product to ultimate users.

The FTC went on to conclude this does not apply to Amway.

So Amway is not an illegal pyramid scheme. I never said it was. I do say that it is a legal pyramid scheme. An example of what I mean: Loan sharks are illegal lenders. Payday loan companies are legal lenders. But I wouldn't recommend that any one ever actually go to a payday loan company no matter how much they needed money. Payday loans take advantage of people by charging them extremely high interest rates -but not illegal interest rates. They stay just under the legal limit. In short, payday loans are legalized scams. So are title loans. So are pawn shops.

The commission in FTC vs Amway was very clear that it understood a lot of volume was from personal consumption, and it's not hidden...

<snipperoni>

Much has been made of the personal, or internal, consumption issue in recent years. In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme

Your insistence in maintaining this false dichotomy of buyers club or business opportunity is past irritating and evidence of the bankruptcy of your argument.

If Amway was solely a way to get Amway products at a discount (you join, you get 30% off; i.e., a buyer's club) that would be just fine. But one of the papers you quoted says this:

The purchase of goods and services within such a system [a buyers club] can, therefore, be distinguished from a pyramid scheme on two grounds. First, purchases by the club's members can actually reduce costs for everyone (the goal of the club in the first place). Second, the purchase of goods and services is not merely incidental to the right to participate in a money-making venture, but rather the very reason participants join the program. Therefore, the plan does not simply transfer money from winners to losers, having the majority of participants with financial losses.

Amway sells itself as a business opportunity, which explicitly makes it a money-making venture. Purchasing Amway products for personal use is therefore merely incidental to the right to participate in a money-making venture. Most people join to make money but they don't want to sell, they are told to just buy for themselves and recruit others to do the same. That is the actual model for the vast majority of people, which is why the vast majority don't make money. So if Amway allowed people to run it this way, it would be found to be an illegal pyramid. As it stands, Amway has all the right words and policies to make it legal, but it is still run as if it was an illegal pyramid scheme. Which is why I say it's a legal pyramid scheme.

 

[Joecool]

Amway sells itself as a business opportunity, which explicitly makes it a money-making venture. Purchasing Amway products for personal use is therefore merely incidental to the right to participate in a money-making venture. Most people join to make money but they don't want to sell, they are told to just buy for themselves and recruit others to do the same. That is the actual model for the vast majority of people, which is why the vast majority don't make money. So if Amway allowed people to run it this way, it would be found to be an illegal pyramid. As it stands, Amway has all the right words and policies to make it legal, but it is still run as if it was an illegal pyramid scheme. Which is why I say it's a legal pyramid scheme.

Amway (or their representatives) does sell itself as a business opportunity. Icerat can claim all he wants that "most" IBOs are actually duscount buyers, but how do we distinguish the two? For one, there are meetings going on all over the US, along with one on one person to person meetings, for the purpose of recruiting others into the Amway business. In the various meetings I witnessed and have heard about from others, it was pitched as a big business opportunity. Just change your buying habits and you can make it big.

There was NO MENTION of joining Amway to make a hundred bucks a month or joining just to get a discount on products. Now I am not saying these people don't exist, but it is very evident that Amway is not pitched that way.

In fact, the folks who join just to buy Amway stuff are benign. The REAL SCAM is getting the hopes and dreams of young and/or aspiring people up, and then telling them that "tools are optional, but so is success", and then selling them these tools that produce insignificant results. It's basically a bait and switch scam. You sell hopes and dreams via the Amway business, but the real money is made selling tools to build the Amway business. Since the tools have a higher margin that Amway products, anyone can conclude that there is more profit in tools than in laundry detergent.

The fact that Icerat doesn't see this makes me believe that he doesn't want to see this or he is somehow getting benefits to deflect the facts.

 

[icerat]

I'm going on the only assumption I can logically make, since Amway forbids marketing it as a Buyers Club and because Amway requires people to run it as a business.

Amway does not require people to run it as a business. Your error there has already been pointed out to you.

Again, just because YOU run it as a discount club doesn't mean that this is the way most people who start an IBO run it.

No, it doesn't. But the FTC case, BERR case, Quixtar's own statements, Amway Japan's distributor survey, DSA surveys, Quixtar statistics presented in TEAM vs Quixtar etc etc all suggest it is.

The facts show (all those tax court cases)

There are very few tax court cases. Certainly not enough to extrapolate to millions. In any case they support the assertion of people not treating it as a business.

OK, fine, I will correct myself: A select few people at the top of the pyramid are making millions, another few are making thousands under them and the vast majority are making nothing.

Again you just demonstrate ignorance. If you drew out the worldwide line of sponsorship, none of the top 10 (probably none of the top 100), are anywhere near "the top".

What you are describing is a pyramid scheme. Amway is not a pyramid scheme. You can join tomorrow and make more than anyone "above" you. This isn't even difficult to work out yourself if you bothered to study the compensation plan.

So Amway is not an illegal pyramid scheme. I never said it was. I do say that it is a legal pyramid scheme.

There is no such thing. Pyramid schemes are, by definition, illegal.

If Amway was solely a way to get Amway products at a discount (you join, you get 30% off; i.e., a buyer's club) that would be just fine. But one of the papers you quoted says this:

No idea what your point is. What's the "but"? Why does it have to be *solely* a way to get a discount? You do realise I can join CostCo, a buyers club, and recruit people to resell the products at a markup? Does that mean CostCo is no longer a buyer's club?

Amway sells itself as a business opportunity, which explicitly makes it a money-making venture. Purchasing Amway products for personal use is therefore merely incidental to the right to participate in a money-making venture.

Rubbish. CostCo advertises itself as a members club, doesn't stop me reselling their stuff. What matter with regard Amway is motive for purchase, as the FTC staff advisory made clear.

I'd note that Amway also does an awful lot of product marketing, way way more than it does promoting itself as a business opportunity.

Most people join to make money but they don't want to sell, they are told to just buy for themselves and recruit others to do the same.

False. The organisation I affliated with is the largest in the world and explicitly teaches the need for retail sales. In the UK you can't even sponsor without having established at least 5 customers and €150 in retail customer sales, and you won't get paid a bonus unless you maintain this. In the US you need to have a minimum of 50PV of registered volume from customers in order to earn a bonus. Similar rules and requirements exist around the world. In the past in the US (and still in some countries) it was the job of the direct/platinum to enforce this, which made for easy abuse, and some did. An entire group got kicked out of Amway US partially due to this problem a few years ago. With the advent of internet tracking IBOs have to go out of their way to provide false information and defraud Amway if they do this. I have an IBOship in the US. It regularly generates enough volume to qualify for bonuses if I had enough qualifying customer volume there. I dont', so I don't get any bonuses.

That is the actual model for the vast majority of people, which is why the vast majority don't make money.

More assertions backed by no sources and contradicted by sources provided.

As the stats I've already provided show, only around 1 in 8 ever sponsor anyone and you really need to sponsor two to make any money this way. If you do not sponsor (wholesale sales) and do not retail (retail sales) there is no way to make money.

Only 9% actively retail (BERR vs Amway UK). Only 12.9% sponsor (TEAM vs Quixtar).

60% of volume comes from people not actively retailing (BERR vs Amway UK).

Yet you insist all these people, like myself, that are ordering products for themselves, renewing their membership, but neither sponsoring nor retailing are running businesses. Uhuh.

So if Amway allowed people to run it this way, it would be found to be an illegal pyramid.

Your head is going to explode if you keep this up. The FTC letter you yourself quoted above explicitly says otherwise, something you choose to ignore. IMO (and Amway's) it's not a smart way to run a business, but it doesn't make it a pyramid.

As it stands, Amway has all the right words and policies to make it legal, but it is still run as if it was an illegal pyramid scheme. Which is why I say it's a legal pyramid scheme.

So it's a legal illegal scheme. Yeah, that makes sense.

The sine qua non of a pyramid scheme is being paid for recruiting (Webster v Omnitrition). For you to establish Amway is a pyramid scheme (which means it's illegal) you need to establish that product sales are merely a cover for payment for recruiting. Good luck with that.

 

[marplots]

To be fair, I'd like to point out that tools (at least the inspirational tapes) have a kind of value beyond their ability to generate income. I went through dozens and found them entertaining and motivating. I didn't pay for them, so there's that, but they were at least as interesting as some talk radio stations or good old fashioned fire-and-brimstone preaching.

I remember reading somewhere that the best predictor of whether someone would buy a self-help book was if they had purchased a self-help book in the last six months. This makes me think there's an odd kind of value beyond any real world results.

As soon as I could no longer listen for free, I quit listening. For me, there wasn't enough value.

Then there's probably some kick people get by feeling they are part of a highly motivated, hard-charging entrepreneurial team... some social value. I didn't get this because I wasn't attracted to the most successful I saw -- in fact, they repelled me.

I just wanted to point out that while I've been using money as the sole measurement, there are other things to consider.

 

[Joecool]

False. The organisation I affliated with is the largest in the world and explicitly teaches the need for retail sales. In the UK you can't even sponsor without having established at least 5 customers and €150 in retail customer sales, and you won't get paid a bonus unless you maintain this. In the US you need to have a minimum of 50PV of registered volume from customers in order to earn a bonus. Similar rules and requirements exist around the world. In the past in the US (and still in some countries) it was the job of the direct/platinum to enforce this, which made for easy abuse, and some did. An entire group got kicked out of Amway US partially due to this problem a few years ago. With the advent of internet tracking IBOs have to go out of their way to provide false information and defraud Amway if they do this. I have an IBOship in the US. It regularly generates enough volume to qualify for bonuses if I had enough qualifying customer volume there. I dont', so I don't get any bonuses.

In the US you need 50 PV to earn a bonus.

Amway: Did you have 50 PV
IBO: Yes
Amway: Okay you get a bonus

Amway doesn't enforce the 50 PV rule. An IBO as far as I know, just clicks a box to say they met the 50 PV rule. That's really difficult. In fact, when they had the ten customer, my sponsor told me to ignore it.

Is there any evidence to suggest that Network 21 IBOs have more sales to non IBOs? *crickets chirping*

 

[Joecool]

What you are describing is a pyramid scheme. Amway is not a pyramid scheme. You can join tomorrow and make more than anyone "above" you. This isn't even difficult to work out yourself if you bothered to study the compensation plan.

I call BULL on this one. While you can make more than your sponsor, it's because most people, by Icerat's own admission, do nothing or very little. Can Icerat name a single person who's joined and outearned one of the Crown Ambassador Kingpins like Britt, Dornan, or Yager? *crickets chirping*

The reason why diamonds seperate from their beloved "mentors" is because their beloved mentors don't give them a big enough cut from the tools profits. There are lawsuits over these issues and many instances of a diamond breaking away from their former groups.

 

[icerat]

To be fair, I'd like to point out that tools (at least the inspirational tapes) have a kind of value beyond their ability to generate income. I went through dozens and found them entertaining and motivating. I didn't pay for them, so there's that, but they were at least as interesting as some talk radio stations or good old fashioned fire-and-brimstone preaching.

Probably first worth pointing out that the vast majority of people who register with Amway don't buy any of this stuff, so anyone doing so is already in a minority.

Having said that, I entirely agree. There's also the social aspects - haven't time to dig it up now but there was an academic paper on this aspect of multilevel marketing. It concluded the social/group aspects provide non-monetary value. Over the past decade I've occasionally gone to a seminar purely because I felt I needed the "lift" from the positive atmosphere.

Then there's probably some kick people get by feeling they are part of a highly motivated, hard-charging entrepreneurial team... some social value. I didn't get this because I wasn't attracted to the most successful I saw -- in fact, they repelled me.

The first time I joined Amway was through my brother, and he was part of a group whose "leadership" I find "repellent" in many ways. Indeed if you analyse critical comments on the 'net and elsewhere (for example Stephen Butterfield's book) things like a lot of the religious, political, and over-materialistic proselytizing of some groups is off-putting for many/I] people.

The second time I joined was with a different group. Some leaders I admire greatly, others not so much. None repellent fortunately.

 

[xjx388]

Payday loan companies are legalized loansharks.

Amway is a legalized pyramid scheme.

Just because it's legal, doesnt mean it's good for you. The FTCs blessing does not make it a great idea. It has been well documented that Amway is a terrible business opportunity, is rife with upper-levels who take advantage of their downlines and has quite ordinary products. If this kind of stuff is for you, then go for it. But I submit that if it was as great as you maintain it is, you would be pursuing it instead of just buying a product here and there.

 

[kowalskil]

Amway the corporation by itself is not a scam. But the Amway opportunity, tied in with Amway Motivational Organizations (AMOs) are run like a scam.

People are often recruited by being told if they work hard for a short period of time (usually 2-5 years), they can become wealthy beyond their dreams, own mansions, yachts, sports cars - all paid ofr in cash!

How can one take such a promise seriously? Earning $100,000 per year, which is already fantastic for someone looking for a job, would not be sufficient for mansions, yachts, etc.

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Breach of rule 6 removed.

Replying to this modbox in thread will be off topic  Posted By: Cuddles