Amway tells court of company overhaul after wind-up claim

by louabbott on November 29, 2007

Times Online, UK – Published November 29, 2007

The group told the Companies Court yesterday that the changes were part of a global review of its business, which has a sales force of three million in 80 countries and a turnover of $6.4 billion (£3.2 billion).

David Chivers, QC, on behalf of the company, said yesterday that Amway was a lawful multilevel marketing group and not an illegal “snowballing” or “money circulation” scheme that relied solely on funds from its members. “In a multilevel marketing scheme, the promoter is providing a good for sale and paying money to the participants who themselves, or down-line, have effected a sale,” he said.

The Government investigation claims to have shown that only 10 per cent of Amway’s agents make any profit and only 6 per cent sell a single item of the group’s products. It claims that the company overstates potential earnings and that its main activity is encouraging agents to recruit other people to its sales force.

Mr Chivers told the court that Amway favoured publishing the earnings of its members and had given an assurance to the court and the Government that it would not recruit any further agents until its earnings data are published. Amway’s own rules say that promotional material should state that income can only be achieved by the sale of products to end clients and that the company does not pay simply for recruiting further agents, Mr Chivers said. They also state that spending on training material should be a reasonable proportion of the agent’s sales.

If potential recruits had been provided misleading information by a “sponsoring” organisation, they would also have received Amway documents containing statutory warnings “which make it absolutely clear that this is a business where, if you are to succeed, you have to work hard”, he said.

Read the entire article at Times Online

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