Amway, many folks have heard of it. It is widely thought of as the Amway Pyramid Scheme. This company gives Multi Level Marketing (MLM) and other companies using this model a bad name. Is Amway a pyramid scheme? Technically it isn’t. That doesn’t mean it isn’t a scam of the utmost proportions. Their own Independent Business Operators (IBOs) will tell you this. Some will anyway. I’d like to give you the low-down on this company so that you can be informed if you are approached to enlist in their army of IBOs.
Company Name: Amway Global (Formerly Quixtar North America)
Owners: Rich DeVos and Jay Van Andel
Parent Company: Alticor
Originally Created: 1959
What is Amway all About?
The company umbrella of Amway sells Nutritional Supplements, Hair and Skin care products, Makeup and personal products as well as a line of water purification systems. It would seem on the surface that this company is all about making life better for its customers. The product line is quite good. I used many of the cleaning products for years (left over from the stock I was forced to buy).
The way that these products are marketed is where the problem lies. Those that sell Amway products are stocking distributors and are termed IBOs or Independent Business Operators. Contractors for the company. The organization of these IBOs is into a convoluted system of Managers Upline and downline profits. Profits are passed up to the person that got you into the program. This means that in order to advance within the company payment ranks, you will need to sign people up as your downline.
It is a classic MLM organization.
MLM or multi-level marketing has its members sign-up people in the tier below them. Some of the profits from their “downline” are passed up the line. Some of these, in turn, are passed to the level above and so forth and so on. Sounds like a pyramid scheme to me. Apparently, until Quixtar was introduced in 1999, it was a legitimate model because the IBOs actually sold a product.
What was Quixtar?
Quixtar spun off from Amway in 1999. It had a huge launch, of which I was a part. They thought it was fun to give away these little tiny CDs promoting the business opportunity. I thought it was a bit hokey but the hype drained me of the buy-in cost anyway. The next morning, I had buyers remorse and tried to get my money back. It was a hundred dollar lesson into the company. I got off cheaply.
I had spent some time in high school with the evangelical movement, I recognized the signs. The hype was the same, the target was different in this case we were praying to the almighty dollar. As you can see in this video, Part 2 of 2. They were, in fact, scamming the constituency that they were bringing on board.
It took just 10 years for the truth to come out and in 2010, a class action suit was filed by a group of Independent Business Operators. Settlements have just been paid out in January of 2014 for the hardship cases. The awards are from $2000.00 to $10,000.00 depending on the losses proven by the IBOs. Of the 1900 cases submitted many were found to be fraudulent, 1213 were paid out and 224 were deemed to be unsubstantiated. Total pay out of this lawsuit was almost $886,000.
Is Amway a Pyramid Scheme?
The Federal Trade Commission has ruled, back in 1979 that Amway wasn’t a pyramid scheme. They provided qualifications that they used to make the determination.
- Do not require purchase of product inventory in order to become a distributor (the “Initial Investment Rule”).
- Ensures that distributors do not attempt to secure performance bonuses solely by buying products for themselves. (The “70% Rule” requires that distributors must resell at least 70% of the products they have purchased each month.
- Will buy back any unused marketable products from a distributor whose inventory is not moving or who wishes to leave the business (the Buyback Rule”).
Was Quixtar a Pyramid Scheme?
In 2010 a suit was filed in Portnoy vs. Amway. The company paid out a $56 million dollar settlement to settle a dispute that they were a pyramid scheme. So though the FTC originally ruled they were not a pyramid scheme, the more recent ruling indicates that they crossed the line. Payout for hardship claims was made early this year.
Is Amway Global a Scam?
Having seen the reports from the IBOs, I would be very cautious about getting involved with this company. The payout levels are convoluted and the reports that upper-level associates have made outrageous claims of earnings that don’t pan out for the lower levels just makes me leery of anything to do with this company.
Anytime a company has huge payouts of claims against them due to litigation, I would classify it as a scam.
The lawyers have gotten rich with all the litigation.
Product: Amway Global
Verdict: This is one of the biggest scams that are out there. Not only are the owners getting filthy rich off their IBOs but the promises the company makes to their sales team are not realized.
Final Rating: 20/100
A Good Alternative to Amway
Often the reason that people embrace the hype of the Amway promise is that they feel there is a way to get out of the daily rut that many are experiencing. They feel that if only there was a way to increase their earnings they could get out of the 9-5. Affiliate marketing is a new way that people can make an income online. There is a great potential for income with this business. Just think, there are almost 319 million people in just the US. Almost 80% of them are online. That is around 255 million users online in the US alone. Helping people online to find the products that they are looking for can be very profitable. Estimates are that there are roughly 2 billion people across the world online.
Wealthy Affiliate is an online community that teaches people to do affiliate marketing. There is a community of members that help people to understand the ins and outs. There are no upsells once you have joined the premium level, everything is open and available for the low price of $349/year. There are even discounts that are available at certain times of the year.
You can promote anything your heart desires. If you are experienced in Auto Repair, you can promote products around that subject. Have children, there are a huge number of parents that need help raising their youngsters.
Here is a chart that compares what you would find at Wealthy Affiliate vs. Amway.
Are you tech challenged, the tools at Wealthy Affiliate can get you through. If you have a problem, there is always someone in the live chat that will help. The membership at WA is international. We have members in every time zone in the world so, there is always someone there to help. Give us a look, I think you will be impressed with what you find.