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.
From The Times, November 24, 2007
Amway Sales Group Facing
Government Closure Call
by David Brown, Adam Luck and Tom Bawden
The British subsidiary of the worlds biggest direct-selling group may be closed by the Government as a result of an investigation into its business practices, The Times has learnt.
Amway, which has 12,000 agents in Britain and worldwide sales of $6.4 billion (£3.1 billion), will face a High Court petition on Monday to wind up its activities. The group, which arrived in Britain in 1973, has been accused of being more interested in selling motivational books, tapes and seminars to its sales staff than pushing its merchandise.
The petition, brought on behalf of John Hutton, the Secretary of State for Business, Enterprise and Regulatory Reform, seeks to close the company in the public interest. Mr Huttons department said that a review of Amways activities had been carried out by the Companies Investigation Branch.
Although the company has sales of only £12.5 million in Britain, the legal action could seriously damage its reputation. Amway has a sales network of three million people that spans more than 80 countries.
Amway said that it had responded to the investigation by imposing a three-month moratorium on recruitment of distributors in the UK and a ban on the sale of tapes and literature not produced by the company.
Last month more than 4,000 of its sales staff attended a conference in Birmingham, where Mark Beiderwieden, managing director of Amway Europe, said: We will invest what it takes to remain in this market and build it to its fullest potential.
A spokesman for Amway (UK) said yesterday that the company was facing action on three grounds but denied that they included laws banning pyramid selling.
The Government has claimed that the sales people were persuaded to join Amway on the basis that it provides easy money or requires minimal effort. It also alleged that the businesss primary aim was to recruit staff rather than sell products.
In a memo to its salesforce this month, Steve Van Andel, Amways chairman and Doug DeVos, its president, said the company had worked tirelessly to address the Governments concerns.
-- A class action lawsuit has also been filed against Quixtar (Amway) by plaintiffs who are at the bottom of the Amway/Quixtar pyramid. These charges against Amway/Quixtar assert that there is no retail "direct selling" opportunity, only an endless chain recruitment program. The suit was brought by Boies, Schiller and Flexner.
-- Police officials in India raided offices of Amway in the largest state in the South of India. The police are charging that Amway is deceiving Indian citizens and causing large-scale financial losses by perpetrating a pyramid scheme.
-- China, the largest market in the world, has effectively shut Amway out of that country. The government of China allowed Amway to gain a licence but strictly prohibited Amway from using its pyramid recruitment pay plan. No Amway distributor can earn money from purchases of others in a downline. Without the false lure of the endless chain, Amway's sales will wither in China.
-- Amway founders and top guns have contributed millions to Republican congress members and to President Bush. This was rewarded in 2001 with Pres. Bush's appointment of Timothy Muris, an attorney that worked for Amway, as chairman of the FTC. Muris has since left the FTC and several key Amway protectors in Congress (e.g. Rich Santorum in PA and Tom Delay in TX) were defeated. Dick Devos, the son of Amway founder Richard Devos, ran for governor of Michigan but was defeated.
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