Financial regulators in India have taken one of the most significant government actions against MLM in recent history. It will be examined by FTC and SEC in the USA and similar regulators around the world.
The Enforcement Directorate (ED), a federal law enforcement agency in India, has attached Amway assets worth $190 million. The attached assets represent about 40% of the company’s current annual revenue in India. About $90 million of the assets are cash from 36 bank accounts. The rest is buildings, real estate and inventory.
Apart from the large amount of money, the specific charge against Amway is extraordinary: money laundering, carried out as a pyramid scheme, disguised as “direct selling.”
According to the Indian regulators, Amway launched operations in India with a capitalization of $5.35 million. In 18 years it “remitted $714.7 million in the name of dividend, royalty and other payments to their investors and parent entities.” Amway took in revenue in India of about $7 billion since it opened operations in 2003. 28% of the total was paid to pyramid recruiters. (Personal Note: Previous studies of Amway by Pyramid Scheme Alert showed Amway paid about that percentage to its pyramid recruiters in the USA, which is considerably less than other MLMs pay for pyramid recruiting. The standard pyramid recruiting payments are 40% of revenue paid to entire “upline”, with 50% or more of that figure transferred directly to the top 1%)
From the regulatory agency report:
“A money-laundering investigation by the ED revealed that Amway is running a pyramid fraud in the guise of direct-selling multi-level marketing network. Without knowing the real facts, the common gullible public is induced to join as members of the company and purchase products at exorbitant prices and are thus, losing their hard earned money,”
The regulator charges also highlighted several of Amway’s most notorious recruiting operations and “tools” promoters in “laundering” money taken out of India.
“Britt Worldwide India Private Limited and “Network Twenty One Private Limited also played a major role in promoting pyramid scheme of Amway by conducting seminars for joining members under the guise of sale of goods by enrollment of members in chain system. The promoters are conducting mega conventions and flaunted their lavish lifestyle and used social media to lure gullible investors.”
An excellent (and appropriately skeptical) analysis of the effectiveness of regulatory action against Amway in India is offered by the India-based non-profit, Money Life Foundation. It is entitled, “Will Action on Amway Lead to a Crackdown on Thousands of Chain-money Schemes Operating with Impunity across India?”
So far, there has been almost no coverage of this in America. One report was published by CNBC but it is not clear it was shown in the USA.
-Robert L. Fitzpatrick