WA, FTC reach $225M settlement with Amway for unfair and deceptive business practices

Amway Corp., one of the country's largest multi-level marketing (MLM) companies, and two of its affiliates will pay $225 million to resolve allegations by the Federal Trade Commission (FTC) and the state of Washington that the companies use unfair and deceptive tactics to recruit members to Amway's direct selling and MLM program.

This is the largest monetary recovery obtained in an FTC action against an MLM, nearly all of which will be used to provide relief to consumers harmed by the deceptive tactics of Amway and its affiliates, Spokane Valley-based World Wide Group and North Carolina-based Leadership Team Development. Thousands of Washingtonians may be eligible for compensation that the FTC will administer.

Amway pitches itself as a money-making opportunity for people to become "Independent Business Owners" selling premium-priced consumer products, including nutritional supplements, energy drinks, makeup, and skincare products. In their complaint, the FTC and Washington allege that Amway and its affiliates use a variety of deceptive and unfair tactics, including misrepresentations about likely earnings, to pressure participants to buy Amway products they don't want and that end up being difficult to sell.

"Amway and its affiliates profited by taking advantage of regular people's hopes and ambitions," Attorney General Nick Brown said. "This settlement will deliver relief for the many Washingtonians who joined Amway seeking to provide for themselves and their families, only to lose time and money and wind up with cabinets full of products they don't want or need."

The complaint also alleges Amway and its affiliates deceptively instruct participants to falsely report sales that did not occur to create the appearance that the Amway opportunity revolves around selling products rather than simply attempting to recruit new people into the operation to purchase Amway products.

Promised earnings

World Wide Group and Leadership Team Development are two of Amway's largest affiliates that recruit people to join Amway with claims they can earn more than $40,000 a year. The complaint alleges only about 1% earn that much and most who joined Amway's affiliates after 2020 spent more on Amway products and training than they received in income from the company.

Both affiliates sell training materials and services to participants that cost thousands of dollars a year and are marketed as being essential to participants' success in Amway. However, these trainings instruct participants to buy a set amount of products each month, regardless of whether they can resell them or want them for themselves, and focus their time on trying to recruit others to duplicate that behavior, according to the complaint.

As a result, Amway and its affiliates allegedly set up an unfair and unlawful system to pressure participants to purchase Amway products for reasons other than genuine demand for them. The prices of Amway products are high, making it more difficult to sell to the general public. For example, until recently, Amway sold a case of 24 bottles of water (16.9 oz) for $52, according to the complaint.

The proposed order settling the FTC and Washington's allegations imposes a $225 million judgment, nearly all of which will go to participants across the country who lost money after being recruited by Amway's affiliates.

In addition, the proposed order requires changes to the companies' practices, including:

• Participants will be required to resell at least 70% of the products they purchase from Amway each month to avoid stockpiling inventory and thereby artificially inflating Amway's sales.
• Recruiters will receive substantially reduced compensation if the people they recruit buy products but do not resell them.
• Participants must report all of their customer sales promptly, including the actual sales price, and Amway will send receipts to all participants' customers.
• Amway must terminate participants who fake sales or teach others to do so.
• Amway's sales records will be audited regularly by an independent outside auditor.
• Participants will be required to receive training on these rules and others prior to being allowed to recruit.
• Amway must require its affiliates, including the two named in the complaint, to not charge new recruits for any training or services during their first year.

The FTC and the state of Washington filed the complaint and proposed settlement in the U.S. District Court for the Western District of Washington.

In the complaint, Washington alleges that Amway and its affiliates violated the state's Consumer Protection Act by engaging in unfair or deceptive acts or practices that harmed Washington consumers.

Managing Assistant Attorney General Joe Kanada, Assistant Attorney General Ellie Page, and Paralegals Vick Walker and Heather Zamudio are handling the case for Washington.

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