Pyramid Scheme Alert (PSA) provides current and historical news items that are of interest to our members and visitors. None of the reports or commentaries is intended to imply that any of the referenced companies have been charged or convicted as illegal pyramid schemes.
Amway Offices Raided in India
Offices of Amway (now called Quixtar in North America) were raided by police in nine different cities in the state of Andhra Pradesh, the largest in southern India. Police and government officials said that Amway violated laws against "endless chain" fraud and deception. More than 80,000 Amway distributors were affected in the region. Despite legal challenges from Amway, Indian officials tell Pyramid Scheme Alert that Amway offices in the state of Andhra Pradesh remain closed down.
Specifically, the Criminal Investigation Division in Andhra Pradesh charged that Amway violates India's Prize Chits and Money Circulation Schemes Banning Act. This law covers endless chain and pyramid schemes.
Amway's program, which induces each person to pay money (sign-up fees and product purchases) and then to seek money from the fees and expenses of an endless chain of others who are recruited, violates the law, the Indian police charge.
Pyramid Scheme Alert has asked the FTC to reopen the case that it previously brought against Amway in which the FTC had charged that Amway operated a pyramid scheme. An Administrative Law Judge in 1979 ruled that Amway could continue to operate in the US, based on Amway's claims that its business was primarily based on retail sales (sales by Amway sales people (to IBOS) to actual end-user customers). Amway claimed that the business was not based on each salesperson making money from the investments of other salespersons.
PSA has noted the obvious fact that Amway's business has virtually stopped retail selling. Some of Amway's top recruiters now aggressively promote the "buy from your own store and then recruit others who do the same" business model. Amway itself has disclosed that only 18% of its products are ever purchased by anyone other than Amway's own sales people. More than 80% of all goods are never retailed. This "non-retailing" model is will result in 99% of all distributors (IBOs) losing money. This is because 99% will always be in the losing positions at the lower levels of the Amway hierarchy. The FTC has prosecuted nearly 20 other MLMs for running recruitment schemes, rather than retail selling.
For a full and graphic picture of how Amway operates in India especially if you live in India read WITH SOAP IN THEIR HANDS & HOPE IN THEIR HEARTS by Ramjee Chandran from The Bangalore Monthly Magazine in July, 1998. Chandran characterizes Amway as a cause of "economic evil" and describes the pitiful scene of uninformed and low income Indians investing their life savings in the "non-retailing" sales scheme in which 99% are doomed to lose.
In 2004, two revealing articles on MLM fraud published by Pyramid Scheme Alert were reprinted by The Institute of Chartered Financial Analysts of India in its prestigious business journal, Marketing Mastermind. The articles address the deception employed by MLM recruiters and how the "non-retail" model functions as a disguised pyramid scheme. The Institute of Chartered Financial Analysts is based in the state of Andhra Pradesh where Amway's offices were recently raided and closed down.
In 2005, PSA's President spoke at a seminar in Sri Lanka of Central Bankers from five South Asian countries, including India. The representatives from India reported many complaints against Amway but also said various states differed in regulation and that, despite complaints and largescale losses among consumers, the courts were allowing Amway to operate.
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