The Federal Trade Commission is seeking to force multilevel marketing company Amway to pay $225 million to resolve allegations that it and two affiliated training groups used deceptive tactics to recruit people and pressure them into buying products they struggled to sell.
Amway markets itself as a business opportunity in which individuals, whom the company dubs as independent business owners, can make money by selling consumer products ranging from nutritional supplements and energy drinks to health and beauty products.
But the FTC and Washington allege that Amway and two of its affiliates, World Wide Group and Leadership Team Development, misled recruits about how much money they could make and encouraged them to buy Amway products even when they did not want or need them.
Rather than emphasizing sales to outside customers, the FTC alleges that Amway’s training groups encouraged sellers to purchase a set number of products each month to generate points that could help determine their bonuses.
“Selling to customers is not rewarded, not taught by leaders and difficult,” one of Amway’s highest-ranking executives wrote in a 2019 presentation, according to court filings.
Another Amway leader told members during a 2023 training session that “we’re rich because we’ve always used our own products.”
The FTC said more than three-quarters of Amway’s products have been sold to its own independent business owners in recent years. Most Amway sellers eventually stop pursuing the business after finding that the cost of buying Amway products and participating in training exceeds the bonuses they receive, the court filings alleged.
The FTC also said recruiters have targeted young adults with promises of financial independence, early retirement, and the ability to leave traditional jobs. Prospective recruits were sometimes told they could achieve those goals simply by following a system developed by successful Amway leaders.
In some cases, the FTC said, recruits were not initially told they were being pitched an Amway business opportunity. Instead, they were told they had the chance to be mentored by a wealthy couple who had supposedly retired in their 20s or 30s.
The agency cited examples of recruiters telling prospective independent business owners that they had “connected with a couple” who had walked away from their jobs in their 20s and 30s and agreed to “take us under their wing.”
The costs of participating could also add up. Membership fees, messaging services, and tickets to major WWG events alone can cost someone more than $2,100 a year, according to the FTC, while travel and other expenses can push the total higher.
“Amway rejects the agencies’ assertion that the company’s sales data is not accurate,” an Amway spokesperson told the Washington Examiner. “In fact, Amway and the FTC have agreed to rely on our sales data to continue tracking and substantiating IBO customer sales.“
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Under the proposed settlement, Amway and its affiliates would have to change how independent business owners are compensated and trained. IBOs would have to sell at least 70% of the products they purchase from Amway each month, while recruiters would receive less compensation when recruits buy products without reselling them.
The FTC and Washington state filed the complaint and proposed settlement in federal court in Washington.